Costs and expenses of purchasing real estate:

• The transfer tax is paid by buyer and is equal to 6 % or 7 % of purchase price (the tax rates depends on the Spanish autonomous region).
• Stamp duty tax is 1 %, however in some cases can be up to 2 %.
• Property registry fees can be up to 1 % of purchase price.
• If the seller is Non-resident in Spain, the buyer is obliged to withhold 3 % of the agreed price.

 

Property investors in Spain are responsible for taxes and fees indicated below:

Value Added Tax

VAT rate is 16 % in Spain. The reduced VAT rate of 7 % is applicable to the new houses. In Spain, VAT is not applicable in the Canary Islands, Ceuta and Melilla.

 

Corporate income tax

In Spain, the standard corporate income tax at a rate of 30 % is applied in tax periods commencing since January 2008. The rate of 32.5 % was applicable in tax periods that commenced in 2007.

 

Income Tax for Non-Residents  

Tax rates by type of income for Non-Residents without a permanent establishment in Spain:

• General (including royalties) – 24 %;
• Dividends – 18 %;
• Interest – 18 %;
• Capital gains – 18 %.

Rental income is classified as general income and is taxed at rate of 24 %.

Non-Residents with a permanent establishment in Spain are taxed at the same tax rate as companies resident in Spain. The tax rate since 1st January, 2008 is 30 %.

Non-Residents who own the property in Spain and do not rent out it still have to pay the tax, which is equal to 24 % of tax base (Tax base is 2 % of the cadastral value of the property or 1.1 %, if the cadastral value has been revised since 1st January, 1994).  

For example:

Cadastral value of the property – 100,000 EUR,
Tax base = 100,000 EUR X 1.1 % = 1100 EUR,
Tax = 1100 EUR X 24 % = 264 EUR.

 

Property tax

Owners of the real estate in Spain have to pay local property tax (IBI). IBI is a municipal tax, which has to be paid every year. The tax rate is up to 1.3 % of the cadastral value of the property.

 

Wealth tax

Wealth tax has been eliminated from 1st January 2008. The tax rate was from 0.2 % to 2.5 % of property value.

 

Inheritance and gift tax

Non-Resident beneficiaries and Non-resident taxpayers are subject to inheritance and gift tax. The tax depends on the value of the estate or gift and varies from 7.65 % to 34 %.

 

Double Taxation Prevention Treaties

Spain is a signatory to a Treaty for the Prevention of Double Taxation with many countries all over the world. A Double Taxation Prevention Treaty, in principle, enables offsetting tax paid in one of 2 countries against the tax payable in the other, in this way preventing double taxation.

 

Note: The information is for guidance only. It is recommended to use professional advice before taking practical tax decisions.