Owners Taxes

Local Taxes

There are two types of local taxes to pay on a property in Spain, the IBI (local property tax) and the Basura (refuse collection tax). Both can vary between regions depending on the local authority in that area.

Local property tax (Impuesto Sobre Bienes Inmuebles (IBI)

The IBI is the tax payable to the local town hall. It is based on a percentage of the valor catastral (cadastral value of the home) and can vary between 0.5 and 1 % depending on the local authority.

Local mains drainage and refuse collection tax (basura y alcantarillado)

The Basura tax is a fee payable for rubbish collection and drainage. The amount varies per local Town Hall (and tends not to exceed 200 euros) and is payable twice a year.

Personal Taxes

When owning a property in Spain there are several personal taxes you might need to pay, these can include income tax, capital gains tax and inheritance tax (the wealth tax has recently been abolished).

Income Tax (Impuesto sobre la Renta de las Personas Fisicas (IRPF)

When selling your property within one year of purchase the profit made will be considered income and not capital gains. When renting out your property you will have to pay tax over the rental income. Residents and non-residents pay different rates so its best to discuss your personal situation with a tax expert.

Deemed rental income tax (Rendimientos del capital inmobiliario)

Non-residents will need to pay a ¨deemed rental income¨ on their property. Even if you do not rent out your property you will be taxed on this. The town hall will charge a percentage on the valor catastral (cadastral value) this is normally round 0,5 %, again ask a local expert for the exact rates.

Sellers Taxes

Capital Gains Tax

When selling a property that has been owned for more than one year you will be liable to pay capital gains tax. The tax is payable over the difference between the amount you sell the property for and the purchase price when you bought the property. Off course you can add your buying costs and deduct your selling costs.

The tax rate is a 19% over the first € 6000 of profit and a 21 % for everything above that, this new rate came into effect on 1st January 2010. Before there was a flat rate of 18 % and non-residents were paying considerably more than residents (35% against 16%). A discrimination case was opened at the European Court where the outcome was Spain needed to equal taxes for residents and non-residents.

The authorities make the buyer retain a 3% of the total selling price to make sure that the tax gets paid, this was because in the past some foreigners would just leave without paying this tax. After the sale the seller can either ask for the difference back or they might have to pay the difference, depending on the difference between the tax calculation and the retention.

Residents may be able to avoid this tax by buying a new first residence within two years of the sale of the old residence.

Plusvalia

Plusvalia is paid to the Town Hall when selling a property. It is based on the particular area, on the surface of the land, on the valor catastral (cadastral value) and on the date of the previous title deed. The tax is actually payable on the increase in value of land and can vary greatly depending on the before mentioned factors. By law the vendor (seller) is obliged to pay this tax but it is common practice for the parties to negotiate on who is to assume this liability.

Buyers taxes

When buying a property you will need to pay Impuesto de Transferencia de Propiedad (Property Transfer Tax) or IVA. Both are 8%, although notes have to be made. The IVA has been reduced last year (temporary) to 4% and that has been maintained for 2012 and the ITP is only 8% for the first 400.000 of the purchase price, the following table applies;

Any amount up to 400.000,-: 8% transfer tax
Any amount between 400.000,- and 700.000,-: 9% transfer tax
Any amount over 700.000,-: 10% transfer tax

ITP is payable on resale properties and IVA on new build properties. A small stamp duty tax of around 1 % will need to be paid as well. In general the average buying costs should not exceed 10% when buying without a mortgage and should not exceed 13% when buying with a mortgage.

Other Taxes

Inheritance Tax

Your beneficiaries will become liable to pay the inheritance tax that is applicable in Spain (usually amounting to a figure between 15% and 50% of the value of the gift to each beneficiary) except in the case of the gift house (or half of a house) by a deceased spouse to his/her survivor (in the case only of the single main residence) where a tax discount of 95% is available. The duty is based upon the value of the property at the date of death.

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