This report offers a brief explanation with special focus on the taxation of real estate, as it is one of the most important factors to take into consideration when investing in the south of Spain (Andalucía):
Tax implications on purchasing a property
Transfer Tax. In Andalucía, the government to reactivate the resales market has established a fixed rate of 7% of the purchase price until 31-12-2021.
After this date, transfer tax will be a graduating scale from 8% to 10%, depending on the purchase price:
– 8% tax is paid for the first 400.000 €;
– 9% is paid from 400.000 – 700.000 €;
– 10% is paid for the price above 700.000 €.
VAT + Stamp duty. VAT is 10%. This applies only to villas – apartments, or garage/s annexed to an apartment, where the vendor is a developer, in the acquisition of newly developed properties. If VAT applies, then transfer tax does not apply.
In the case of purchasing a plot of land to build a house, the tax to be paid is 21% VAT.
Stamp duty, the fixed rate is 1,2% of the purchase price until 31-12-2021. After this date, Stamp duty will be a fixed rate of 1,5%.
Reduced Transfer Tax. The reduced Transfer Tax is 2%, the Buyer has to acquire the property through Spanish Companies with a Real Estate corporate purpose with the following requirements:
- Is only for a resales properties.
- The property has to be always in the current assets of the Company, is completely forbidden by the Tax Office to rent out the property.
- The Spanish Company can make a full refurbishment and improvements in the property.
- The Spanish Company has to sell the property in 5 years from the date of the acquisition.
In case of investing through Spanish Companies, the standard tax rate 25%. Newly formed companies will have a tax rate of 15% for the first year they obtain profits, and for the subsequent year.
Tax every year as a non-resident
As a non-resident in Spain, you will pay non-resident income tax in Spain.
This is a presumed (derived) income, paid annually before the end of every year, assuming the property has not been rented, for the assets held in the previous year. It will depend on the number of days it has been held in that year. It is equivalent to 2% -or 1,1%, depending when the cadastral value has been last revised- of the cadastral value, at a rate of 19% for tax residents in the EU, Iceland and Norway. For those who are tax residents outside EU, Iceland and Norway, the tax is 24%.
In case you have rented the property, the tax to be paid will be:
– 19% of the net income, for tax residents in the EU, Iceland and Norway;
– 24% for tax residents outside of EU, Iceland and Norway (these will be taxed on gross income, as they cannot deduct expenses derived from renting the property)
In this case of rented properties, this tax has to be paid at the end of every quarter, before the 20th of the following month (i.e. 20th January, 20th April, 20th July and 20th October).
Wealth Tax. This tax applies also to non-residents in Spain, for assets held in Spain as at 31st December each year, and only for those who hold assets above 700.000 euros net per person (below that figure, there is no tax to pay).
Be aware that this is not only for property but for any asset in Spain, ie funds in banks etc, also count.
Council tax (“IBI”.) It is an annual payment –paid in September-, and it depends in the cadastral value of the property.
Rubbish collection fee. It is a small fee normally paid twice a year, and should not exceed 200 euros in total.
Tax implications on selling a property
Capital gains tax. Non-residents pay 19% capital gains tax on the profit made upon the sale of a property in Spain (deducting those taxes and expenses inherent to the purchase and the sale). the buyer has to withhold 3% of the purchase price, and pay it into the tax office within 30 days, on account of the capital gains tax of the vendor. If the vendor has not made a gain, or a lower gain than the amount withheld, he will have the right to claim the reimbursement to the tax office.
“Plusvalía municipal” tax. This is a tax paid by the vendor. It is a local tax, based in the increase of the land value. In case the vendor is non-resident in Spain, as the property responds of the payment of this tax by the vendor, it is advisable for the buyer to withhold it from the purchase price and pay it into the tax office on account of the seller.