Tax on Property in Spain: A Guide for Owners and Investors

Owning a property in Spain comes with various tax obligations, depending on whether the property is used as a primary residence, a holiday home, or a rental investment. Here is an overview of the main taxes and fees that owners and investors should be aware of.

1. Property Tax (Impuesto sobre Bienes Inmuebles - IBI)

IBI is a municipal property tax that all property owners in Spain must pay. It is calculated based on the cadastral value (valor catastral) of the property, which is determined by the authorities. The tax rate varies depending on the municipality but typically ranges between 0.4% and 1.1% of the cadastral value.

2. Non-Resident Income Tax (Impuesto sobre la Renta de No Residentes - IRNR)

If you are not a tax resident in Spain but own a property there, you must pay income tax even if you do not rent out the property. The tax is calculated as a percentage of the cadastral value:

• 1.1% of the value is taxed at 19% for EU/EEA citizens
• 1.1% of the value is taxed at 24% for non-EU/EEA citizens

If the property is rented out, rental income must be declared and taxed at the same rates. However, EU/EEA citizens can deduct certain expenses.

3. Income Tax for Residents (Impuesto sobre la Renta de las Personas Físicas - IRPF)

If you are a tax resident in Spain, you must pay regular income tax on any rental income. The tax rates are progressive and range from approximately 19% to 47%, depending on total annual income.

4. Capital Gains Tax (Impuesto sobre la Ganancia Patrimonial)

When selling a property in Spain, you must pay tax on any profit made. The tax rates are as follows:

• 19% on the first €6,000 of profit
• 21% on amounts between €6,000 and €50,000
• 23% on amounts between €50,000 and €200,000
• 26% on amounts over €200,000

If you are a Spanish tax resident and reinvest the sale proceeds in a new property, you may qualify for a tax exemption under certain conditions.

5. Wealth Tax (Impuesto sobre el Patrimonio)

Spain imposes a wealth tax on individuals with a net worth exceeding a certain threshold (usually €700,000 per person, though this varies by region). The tax rate ranges from 0.2% to 3.5% of total net wealth.

6. Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones - ISD)

Inheritance and gift tax rates depend on residence status, family relationships, and regional regulations. EU citizens may be subject to the same rules as Spanish nationals, often resulting in lower tax rates.

7. VAT (IVA) and Transfer Tax (ITP) on Property Purchases

When purchasing a newly built property, VAT (IVA) of 10% applies, along with a stamp duty (AJD) of 0.5%-1.5%.

For second-hand properties, instead of VAT, a transfer tax (ITP) applies, ranging from 6% to 10%, depending on the region.

Conclusion

Owning a property in Spain comes with multiple tax obligations that vary based on residence status, property use, and regional regulations. It is advisable to consult a tax expert or accountant to ensure compliance with tax laws and optimize your tax situation.