TAXES AND YOUR SPANISH PROPERTY
They always seem to be in the news!! Organising taxes through an Overseas Arrangement may not be cricket as we know it, but as long as it falls within current legislation, most people logically are going to seek legal ways to reduce their tax bill.
Taxes on Overseas Property are different and they come into different categories.
In Spain, here are some of the taxes of which you need to be aware and also one or two other important pointers.
Before we get on to taxes themselves, NEVER buy your property in Spain by using CASH – either totally or in part. Firstly, it is against the law !! Secondly, despite what you will probably be told by the other party, you will only be helping them, not you – it will actually cost you more !! ( FOR MORE DETAILS OF THIS, PLEASE CONTACT US AND WE WILL EXPLAIN ).
Turning to Taxes themselves :
- Many people are unaware when they are setting their budget for their purchase that they will need to factor in extra costs to allow for purchase tax and associated fees.
Purchase Tax :
- On new property, this is charged at 10% on the purchase price and is called “IVA”.
- On re-sales, there are similar taxes, but instead of IVA these are called “Transfer taxes” and typically can be 7% or 8%. The percentage charged varies in different regions of Spain.Notary and Other Charges :
The purchase has to be transacted at a Notary’s Office and the registering of this purchase normally attracts charges/fees of a further 1% – 2%. Some of this is attributable to the Notary for their services and some of the other costs are general government requirements.
There is differentiation between the amounts levied on new or re-sale property.
If there is a mortgage involved in the purchase, this will constitute another document which will also carry notarial charges of around 1%. This will apply whether the property is new or re-sale.
Ongoing Costs :
IBI : This an annual charge levied through the Town Hall local to your property. It is basically a revaluation tax, worked out on a formula explained in the paperwork you will receive each year.
It is not a big cost, typically 150 – 200 euros BUT it does need to be paid on time each year to avoid penalty costs for late payment.
We normally recommend to our clients that we arrange for the paperwork formally to be sent to your Spanish lawyer, who will inform you when the request for payment is made and they will arrange payment on your behalf. This is to avoid the danger, especially when you are making only periodic visits to Spain, of the Town Hall sending the papers to your Spanish P.O. Box and these then remaining there untouched for a few weeks or months.
- RENTAL :The tax you will need to pay on any income generated from renting out your property. In a previous blog we explained what this entails but here is a reminder.
Depending on your residential status, you need to declare any rental income just as you would from foreign pension schemes or other foreign assets. If you are letting out a Spanish property you need to show this is your intention e.g. placing it with a letting company or agency or advertising privately.
N.B. Putting it on to the internet yourself still means you need to declare any rental income which is produced from it.
If you are planning to rent out your property for a period of more than one month in a year you are strongly recommended to seek legal advice to comply with any changes in Spanish Rental Law, with the obligations set out by the Autonomous Community in which your property is situated.
PLEASE NOTE THAT THESE ARE SOME OF THE TAXES/FEES/ COSTS, BOTH ONE-OFFS AND RECURRING, BUT FOR A FULL SUMMARY, PLEASE CHECK.
You May Also Enjoy
Selective Licensing Requirements
Autumn Budget 2025: Key advice for homeowners, buyers and landlords
Five real estate opportunities to watch in 2026
Are Rightmove fee increases set to outpace agent earnings
Breaking Property News 3/12/25
