Tax Guide
Property Taxes in Spain
Who pays taxes? When are taxes paid? What other costs do you have to face when buying, selling, or owning a property in Spain? We’ve prepared this information in the simplest and most accessible way for you, so you can review it when you’re ready to consider Spain your home.
01: Guide to taxes and buying a property in Spain
Any property price you see—whether in a brochure, on the internet, or anywhere else—is always the net price for the seller. Taxes and purchase costs must be calculated based on the final price agreed with the seller.
The main difference lies in whether you are buying a newly built property from a developer or a resale (second-hand) property.
Properties purchased from developers are subject to VAT (10%) and the stamp duty (1.2%) in addition to the purchase price. VAT must be paid on the day of signing at the notary.
Second-hand properties are only subject to the transfer tax (7%). The transfer tax can be paid up to 30 days after the notarization.
So, for now, we can already see a huge difference in taxes depending on whether you buy from a developer or from a private individual who lived in the house. For a €2 million purchase, the difference is exactly €100,000!
It’s also very important to clarify that sometimes private individuals can be registered as developers and sell a property with VAT applied. The key to knowing whether a property is subject to VAT is whether it is new or fully renovated, whether no one has lived in it before, and whether the owner is registered as a developer.
What are the other costs of buying a property in Spain?
The remaining costs are the same for both new and resale properties, and they include:
Legal fees. For a straightforward transaction, legal fees are typically 1% (+VAT) of the purchase price. If the purchase involves a high-value property or if you are a regular client, some law firms may slightly adjust their fees. Some buyers choose not to hire a lawyer in order to reduce their acquisition costs, as using a lawyer is not mandatory when buying property in Spain. However, we strongly recommend working with a lawyer. A good lawyer not only handles the transaction, but also conducts thorough due diligence before the purchase and provides valuable post-sale services.
Notary and land registry fees. These depend on a wide range of factors and are usually estimated approximately, with the final invoice provided only after the sale is completed. As a safe estimate, we would calculate around 0.25% of the purchase price for both combined. If the price exceeds €2 million, the percentage is typically lower — closer to 0.15%, or even 0.1% in some cases.
Bank fees for transferring funds to the seller or issuing bank drafts. Almost all purchases at the notary are made using bank drafts rather than wire transfers, and banks charge a fee for issuing these drafts or for making large transfers. This can vary greatly depending on the payment amount, the bank used, and your client profile.
Mortgage fees. If you decide to buy a property in Spain using bank financing, you might be surprised to learn that your only cost will be the property valuation. This ranges from €500 to over €2,000 depending on the size and appraised value of the property. The rest of the costs and taxes are paid by the bank.
What are the rules for buying a property in Spain?
When buying a property in Spain, there are no specific restrictions or rules that apply, whether you are a non-resident or a resident. However, it is important to have obtained a NIE number, open a bank account at a Spanish bank, and pay special attention to legal and tax due diligence beforehand.
02: Property taxes for homeowners in Spain
What annual taxes must be paid as a property owner in Spain?
In this section, we will cover the annual taxes that a property owner must pay after acquiring a property in Spain. Sometimes the information can be confusing, so we want to break it down clearly. These taxes and fees must be paid annually and are calculated based on the purchase price, the property’s location (municipality), its size, and its cadastral value.
To simplify, we will divide this information into two parts: first, the taxes related to the owner, and then, the taxes related to the property itself.
Taxes related to the owner of a property in Spain:
Taxes for non-residents
Only property owners who are non-residents in Spain must pay this tax. If you are a tax resident, you are not required to pay it. This tax must be paid regardless of whether you rent out the property or not. Simply owning property in Spain as a non-resident means you are obligated to pay this tax annually. We have found that many non-resident owners do not pay it, sometimes because they are unaware. The tax authorities do not consistently monitor these payments, so non-payment may not be detected until the property is sold. Although theoretically payment can be deferred, it will increase with interest and surcharges for late payment.
Wealth tax
In Spain, there is a wealth tax that affects individuals with a certain amount of assets. Although some autonomous communities have suspended this tax to encourage investment, the national government introduced the “Solidarity Tax,” which was initially temporary (only during 2022 and 2023). However, with the government’s reelection, it is very likely that this tax will be extended.
This tax applies to net wealth exceeding 3 million euros.
Only the net purchase value of the assets is considered.
The tax varies depending on whether the owner is a resident, non-resident, or if the purchase is made by a company. (Note: in the case of a resident, all assets worldwide are included, while for a non-resident only assets located in Spain are considered).
There is a tax exemption of €700,000 per person (if they are a tax resident in Spain).
In summary, the wealth tax only affects assets exceeding 3 million euros and follows a progressive structure with different brackets.
Taxes and expenses related to property in Spain
1. IBI (property tax)
Annual municipal tax based on the cadastral value of the property. It varies between €1,000 and €10,000.
2. Garbage collection fee
Tax for garbage collection, generally less than €400 per year.
3. Community fees
Costs for managing common areas, which range between €200 and €1,000 per year. Failure to pay can cause legal issues.
4. Other ongoing expenses
Fixed monthly costs for electricity and water, even if not consumed.
03: Taxes on the purchase of plots of land in Spain
Are the taxes different if you buy a plot of land compared to buying a villa or apartment in Spain?
You’d be surprised! We’ve already talked about the taxes when buying villas and apartments, and it’s natural to think it would be similar, but it isn’t. This is where many clients fail to find the correct information beforehand, and many deals fall through when clients back out after learning the facts.
The complication lies in the fact that taxes on the sale of a plot vary depending on who owns it. It also depends on who the buyer is. If you are a professional investor, as we assume, we won’t go into details about the differences—since you surely have enough lawyers and advisors! Still, we won’t discuss it here, as this information is aimed at new foreign buyers in Spain.
So, when you buy a plot for individual villas in Spain, before making an offer or booking a visit, ask your agent if the owner is a Spanish company or a private individual. If the agent doesn’t know the answer, that’s not a good sign, but you can always ask us! The difference can be huge. If the owner is an individual, the transfer tax will be 7%. If the owner is a Spanish company, 21% VAT plus 1.2% stamp duty tax will apply. The difference between the two cases is 15.2%. If the plot costs one million euros, that’s €152,000 more. If the price is three million euros, it could be €456,000 more in taxes, depending on who owns it.
Some frequently asked questions
I’m going to buy a plot in Spain, what do I need to know?
It all depends on the type of plot, whether it’s for individual villas, housing developments, commercial, rural, or others, and who the owner is. The most common is buying plots for individual villas. In this case, the villa may be subject to 7% or 22.2% taxes, depending on whether the seller is a Spanish company or a private individual. Taxes for the buyer, aside from the agreed price, are different.
How much do land or plots cost in Spain?
The price, of course, varies a lot. It depends primarily on the location and the views. Many other factors are essential when determining the price, such as privacy, size, slope or the need for retaining walls, access, and many more. Generally speaking, for Marbella, prices range from €400 to €1,200 per square meter, although there are exceptions that are cheaper and more expensive.
04: Taxes for non-residents and tax residents in Spain
Differences between taxes for non-residents and tax residents in Spain and how to know if you are a tax resident or not. And most importantly, can you become a tax resident of Spain without knowing it? Can it happen automatically?
Anyone who buys real estate in Spain, whether it’s a first or second home, is subject to different annual taxes depending on whether they are a tax resident in the country or not. Some factors play a decisive role in determining if you are a resident or non-resident, and therefore, what you will have to pay. Unfortunately, some clients don’t find the right information, especially beforehand, which can lead to unfortunate last-minute tax surprises.
Most of our clients who buy second homes in Spain are likely considered non-residents or non-tax residents of Spain, but do you know exactly what taxes you have to pay as such? Also, can you be considered a tax resident of Spain without even knowing it? And what could this mean for you? Let’s dive into it!
First of all, as a non-tax resident who owns property in Spain, you still have obligations to the tax office every year, which are:
Spanish tax for non-residents
Regardless of whether you rent out your property or not, you still have to pay this tax. Let’s assume you don’t rent it out; even though you’re not receiving income, in the eyes of the tax authorities, you are still benefiting from owning property in Spain. For that reason, you have to pay income tax. If you rent out your property, you will have to pay income tax on the rental income. The rate is 24%, except for residents of the EU, Iceland, and Norway, in which case it is 19%.
Spanish wealth tax
In Andalusia, this tax has been replaced by the Solidarity Tax, and it is based on the net value of your property (minus the mortgage, if applicable).
The tax applies to net wealth exceeding 3 million.
Initially, this tax was going to be temporary, applying only during 2022 and 2023. However, with the government’s re-election, it is very likely to be extended.
To give a brief overview, wealth is taxed on assets exceeding 3 million. This tax follows a progressive structure, with brackets shown in the table of the
SECTION 2.
Spanish municipal property tax
The tax is based on the cadastral value of the property, and the rate varies by region.
But what happens if you suddenly become a tax resident of Spain, and how can that happen?
If you have been living in Spain for six months (183 days) or more in a calendar year (not necessarily consecutively), or you have your main vital interests in Spain (for example, your family permanently lives in Spain or your main business and source of income is in Spain), you can be classified as a Spanish tax resident. Meeting just one of the above criteria should be enough.
Even if you exceed 183 days, but the country of your main source of income or the country where your spouse and minor children live and attend school is not Spain, you can prove that you are not a tax resident. So, not everything is 100% black or white.
And what effect can becoming a tax resident of Spain have?
You will no longer have to pay the Spanish tax for non-residents. You will still have to pay the wealth tax and the municipal property tax. As a Spanish resident, you will have to pay income tax on your worldwide income (minus what you have already paid in other countries) and, in addition, you must declare all your foreign assets valued over €50,000. The main drawback is that the Spanish personal income tax (IRPF) starts at 19% and progressively rises up to 47% on annual income exceeding €300,000.
Therefore, it is good to be careful with this, especially if you are thinking about buying a property in Marbella and spending a lot of time here. Of course, this is just general information; there are more things to study and consider; it’s a somewhat gray area and there are exceptions like the Beckham Law, but to be safe, it’s best to always consult with a professional advisor and preferably well in advance.
Some frequently asked questions
How much is the property tax for non-residents in Spain?
The way to calculate how much you must pay for the property tax as a non-resident is to find out the value of the property according to the cadastre, which can be found on your IBI receipt (green document, IBI stands for Impuesto de Bienes Inmuebles). Only 2% of the total cadastre value is subject to an annual tax of 24.75%. Therefore, the calculation should be = total cadastre value * 0.02 * 0.2475.
How much time do I have to pay property taxes in Marbella?
If you are a non-resident, the wealth tax and the non-resident tax declaration must be filed at any time between January 1st and December 31st of the current year and paid the following year. The municipal property tax is paid in August-September for the current year, and if you don’t pay it on time, you will receive a penalty that increases over time.
How much tax is paid in Marbella? How much does the income tax cost in Marbella?
Income tax is different depending on whether you are a non-resident or a tax resident in Spain. For non-residents, it is a fixed rate of 24%, except for residents of the EU, Iceland, and Norway, for whom it is 19%. For residents, the income tax rate starts at 19% and progressively increases up to 47% for incomes over €300,000.
05: Taxes and Expenses for a Seller When Selling a Property in Marbella
What are the taxes and expenses for a seller when selling a property in Spain?
What taxes and expenses are paid when selling a property?
Do you want to sell a property in Spain and aren’t sure what your expenses will be? It’s highly recommended to research this in advance. Before putting your property up for sale, sometimes even before buying a property—especially if it’s an investment—you’ll want to have all the information upfront!
Here is the complete list of taxes and expenses you must pay when selling a property in Spain:
Capital gain
Capital gains refer to the increase in the value of urban land over time. This local tax is imposed by municipalities and is calculated based on the cadastral value of the land and the number of years it has been owned, with a maximum period of 20 years.
Capital gain
The capital gains tax is based on the profit realized from the sale of an asset, such as real estate. The capital gain is calculated as the difference between the selling price and the acquisition cost, including expenses and taxes related to the transaction. This tax aims to capture the profit from the sale of investments or properties, reflecting the economic gain realized by the taxpayer.
Income tax
It is only payable if you have received income from the sale of your property, and a different tax rate applies depending on your residency status: 24% for non-residents, 19% for residents who are EU/EEA citizens, and 25% if you are selling a company. All expenses incurred during the purchase and sale process are taken into account—such as notary fees, registration, legal fees, purchase taxes, agent commissions, etc. Only the remaining difference is considered income. Additionally, certain renovations, depending on their nature, may also be deductible. Of course, you must have official invoices for each item.
Real estate agency fees
If you decide to use a professional real estate agency to sell your property in Marbella, you can always contact us. It’s not mandatory to use an agent, but working with the right one can increase your chances of selling and speed up the process. In Marbella, the agent’s fees in a sales process are always paid by the seller, never by the buyer, and are usually agreed upon in advance when the property is listed. It’s important to remember that the agent, like a lawyer or any other professional, must apply 21% VAT to the amount when issuing their invoice.
Lawyers’ fees
Again, it is not mandatory to use a lawyer during the sales process, but it is highly recommended. Even if the buyer hires a lawyer, it can help avoid potential headaches after the sale.
Mortgage cancellation fees
If you have a mortgage on the property, all costs and fees related to canceling the mortgage are paid by the seller. This may include the bank’s commission for early loan cancellation, as well as notary and registration fees for the cancellation.
3% withholding of the sale price
This is not a tax or a cost, but we believe it’s important to explain it for a clearer understanding. It only applies when the seller is a non-resident in Spain. By law, the buyer must withhold 3% of the purchase price at the notary and deposit this amount with the tax office, on behalf of the seller, after the signing of the deed. After the sale, the seller can contact the Spanish Tax Agency to request a refund of this amount to their bank account. The refund process may take approximately six months, and the money will eventually be deposited into the seller’s account, minus any unpaid taxes, if applicable. Typically, if you made a profit on the sale, the income tax will be directly deducted from the withheld amount. Lawyers usually handle this process. To apply for the refund, you must wait at least one month from the signing of the deed. After that month has passed, the seller has three months to submit the form to the Tax Agency to claim the refund.
Questions and answers:
Who withholds the 3% when a property is sold in Spain?
Normally, it is the buyer’s lawyer who withholds the 3% in their client’s account and is responsible for depositing the amount with the Spanish Tax Agency on behalf of the seller. They have up to 30 days to do this after the purchase is completed. The property, which now belongs to the buyer, serves as a guarantee that this process is properly completed.
Who pays the Plusvalía tax in Spain?
The seller always pays the Plusvalía tax. If you are a non-resident, the buyer will usually withhold this amount from the purchase price. It will be paid on your behalf after the completion of the sale.
How is a property sold in Spain?
The process begins with putting your property on the market, followed by choosing the right real estate agents if you decide to work with them. At the same time, it is highly advisable to start researching all the costs and taxes involved in the sale and to estimate the income tax. For this, you will already need to hire a lawyer to represent you throughout the sales process. All this information can help you determine the final asking price at which the property will be marketed. We recommend ensuring that your property is properly positioned online, and that all agents involved list it at the same asking price.
After receiving an offer for your property and completing the negotiation process, a reservation or private purchase contract should be prepared (we recommend using a lawyer at this stage). This will include the first deposit payment, which you will receive. The deposit is usually non-refundable unless an issue with the property is discovered later on.
The remaining payment is made at the notary’s office simultaneously with the signing of the deeds. The notary appointment usually takes place about two months after signing the reservation/private purchase contract under normal circumstances. If you have a mortgage on the property, it will be canceled on the same day as the notary appointment. The buyer’s funds, deducted from the purchase price, will be used to pay off the mortgage unless you prefer to cancel it in advance, although there is no particular reason to do so. During the sale process, it is important to stay informed about all taxes and expenses to be paid. A lawyer can assist you with this.
06: Taxes and costs for property owners when renting a property
Are you a property owner but don’t always use it and are thinking about renting it out?
As a general note, a property can be rented on a long-term or short-term basis, and the price can vary significantly; short-term rentals are usually much more expensive.
Taxes and expenses for property owners seeking to rent out their property in Spain
Income tax depends on whether you are a non-resident—19% (EU/EEA citizens) and 24% (non-EU/EEA citizens)—or a resident; in that case, the tax is progressive, ranging from 19% to 46%: the higher your income, the higher the tax rate.
The property transfer tax, or TPO, is another curious tax that no one pays, although theoretically it should be paid for long-term rentals. Once again, it is a negligible amount.
Agency fees: if you use a real estate agent to rent out your property, whether short-term or long-term, you will need to pay their fees, usually based on a ‘no win, no fee’ concept.
Some frequently asked questions
How can income tax be reduced?
If you own a rental property that generates income, you can include several deductions to reduce the taxable income, such as:
- Mortgage interest
- Property repair and maintenance costs
- IBI (property tax), fees, and other taxes
- Unpaid rent
- Community fees and other ordinary expenses
- Depreciation of the property
- Home insurance
- Home utilities such as water or electricity (if paid by the owner).
- Costs of formalizing the rental contract
- The 60% reduction for the main residence, which means that if your tenant is using the property as their permanent residence, 60% of your rental income is tax-exempt.
What tax do I have to pay on rental income?
If you are a non-resident, you must pay 19% (EU/EEA citizens) or 24% (non-EU/EEA citizens) on your net rental income. If you are a resident in Spain, your net income will be taxed progressively from 19% to 45%.
How can I avoid paying taxes on rental income?
You are required to pay taxes on the net rental income. It cannot be avoided, but you can reduce your net income by including all deductible costs related to the rental, and the list is quite extensive.
07: Taxes and costs for tenants when renting a property in Spain
It’s not all about paying taxes all the time! In this case, if you are a tenant looking to rent a property in Spain, we have good news for you.
No taxes or costs apply. The price you see online is the price you will pay, subject to negotiation. Real estate agent fees are generally paid by the owner, although in some cases—when the property is scarce on the market and several agents are involved—the agent may request a fee. You have the right to refuse, and you should be notified before confirming the viewing. Additionally, it’s a good idea to hire a lawyer, although you are not obligated to do so.
As a curiosity, there is a tax payable by the tenant on rental agreements called the property transfer tax, at an unusual rate of approximately €24 per €6,000, but nobody pays it. Theoretically, you could be fined, but it’s not significant since the amount is very small.
As a general note, especially when renting long-term, you may be asked for references (tax returns, bank statements, recommendation letters, links to online information, etc.) to approve an offer. It is highly recommended to provide the best possible references, as they can influence the owner to accept your proposal over a better offer from a client without references.
