Taxes and Fees

A variety of fees are payable when you buy a property in Spain, which together add around 10% to the purchase price. Fees payable by the buyer include the Notary's Fees, VAT (IVA) or transfer tax, property registration fee, legal fees, lawyer's fees plus the cost of utility connection and registration charges.

IVA (VAT) or Transfer Tax
Property buyers must pay a tax of 7% of the registered value. However if you are buying a store room, commercial premises or a new garage then the rate of IVA increases to 16% plus 0.5% stamp duty.

Capital Gains
If you sell a Spanish property more than one year after purchasing it, then you are liable to pay Spanish capital gains tax (GGT) on the difference between the amount that you sell the property for and the amount that you declared having purchased it for previously, minus any inflationary gain. As of January 1 2007 both resident and non-resident will be liable for Spanish CGT tax at 18%. Also you may have the option to ''roll'' the tax into another property provided that it is a single main residence. Currently, homeowners are liable for a "cautionary" retention tax of 3% when they come to sell their Spanish property. For example, when a non-resident sells their Spanish property their buyers pay 3% of the sales price (retention tax) directly to the Spanish tax authorities and will only receive 97% of the sales price. This retention tax is kept "on account" by the Spanish tax authorities until the non-residents capital gains tax is calculated. Once the capital gain is determined (i.e. the profit minus any inflationary considerations for the period that the property was owned) and the appropriate CGT is calculated, the Spanish tax authorities will deduct the retention tax from the CGT that is liable. If the CGT liable on the sale of the Spanish property is more than the 3% retention tax that is held "on account" then the non-resident has to pay the difference. If, however the CGT liable on the sale of the Spanish property is less than the 3% retention tax that is held "on account" then the non-resident is reimbursed the difference by the Spanish tax authorities. A Spanish property bought and sold in a quick timescale will gain virtually no capital gains tax relief.

Plusvalia
Is a tax levied by the local Town Hall based on the particular area where the property is located, on the surface area of the land, on the Catastral value and on the date of the previous title deed. This tax is essentially a tax on the increase in value of the land may range from a few approximately £12 to as much as £12,000 on larger properties with a large plot of land. By law the vendor (seller) is obliged to pay this tax. The Plus Valía (impuesto municipal sobre el incremento del valor de los terrenos) is a municipal tax on the increase in the value of the property since the last change of ownership. The law states that the vendor should pay the plus valía as he is the one that has made the profit. Plus valía can vary considerably depending on the amount of land a property occupies and the age of the property. It is low on modern properties such as apartments and townhouses in urbanisations, where land values have increased little since the properties were built and little land is involved. Plus valía is based on the official "rateable" value of land (valor catastral) which is officially revalued periodically for this purpose and is usually lower than the actual market price. You can find out how much the plus valía will be beforehand by enquiring at the local municipal office (recaudacion municipal). However some town halls as yet do not charge this tax; this is still the case in Jete and Otivar.

Legal Fees
Legal Fees for the conveyancing involved in a property sale are usually around 1% of the purchase price for an average property. The actual amount depends upon the work involved and there's usually a minimum fee, e.g. 900 Euros.

Notary Fees
The Notary who officiates at a sale is paid a fixed fee based on a sliding scale depending on the amount of land, the size of the building, the status of the mortgage, the price, the number of pages in the title deed, mortgage inscription, etc. It is usually around 0.2% of the declared purchase price and is payable at the office of public notary at the time of signing the deeds.

Registration Fee
The registration fee is also based on the declared price in the escritura and is approx 40 - 50% of the Notary Fee.

Tropicana Properties, having taken advice from its own office of Gestor (see Gestoria - solicitor) and from legal advisors, offers a simple guide to assist you in determining your fiscal responsibility as an owner of a property in Spain.

Local Taxes - there are two local property taxes which are both based on the property's theoretical rental value according to the local land registry, and are adjusted in line with inflation. The rates of tax will vary from region to region due to the varying rates of tax imposed by the regional and local governments.

Local property tax (Impuesto Sobre Bienes Inmuebles (IBI))
This is the main local property tax affecting owners of properties in Spain payable yearly to the Town Hall; it is usually in 2 installments per anum. The amount of the tax is calculated by reference to the valor catastral (official value of the property) registered in respect of all properties in Spain. The percentage charged varies from area to area, and is roughly 0.5% to 1%. Note that in many new build developments the IBI may not be calculated for the first year or two of occupation; and therefore remain unpaid. Payment is not, for the moment, back dated.

Local mains drainage and refuse collection tax (basura y alcantarillado)
This local tax payable by a property owner and is related to rubbish collection and drainage. The amount to pay varies from area to area, and should be paid to the local Town Hall every 3 or 6 months. This tax should be between €200 and €250 per year. Also, if your Spanish property has a garage entry you may be obliged to pay an annual contribution for that too if you wish to keep access and parking restricted - vado permanente.

Personal Taxes - as a non-resident property owner in Spain, you may be liable for income tax, value added tax wealth tax, capital gains tax and inheritance tax. Individual situations vary considerably and it is best to seek specialist advice from a tax consultant who has knowledge of the Spanish tax system.

Income Tax (Impuesto sobre la Renta de las Personas Fisicas (IRPF)
The income derived on property in Spain should be declared in Spain. If you sell your Spanish property within one year of purchasing it, then the profit you make is considered an income and not a capital gain, and you would have to pay Spanish income tax on any profit made. If you rent out your Spanish property, then you have a "rental income" from the spanish property and will have to pay Spanish income tax.
The rates of income tax payable by a resident and non-resident are being modified. An individual is considered a Spanish resident if they spend more than 183 days within a year in Spain. A non-resident is taxed at the standard rate of corporate tax. A resident is taxed in accordance to a sliding scale.
Note: The personal income tax law is undergoing significant amendments this year, many of which are still in the process of being passed by the Spanish Parliament. These amendments could slightly affect some of the contents of this article, and will also modify some aspects of the corporate tax law and the non-residents' income tax law.

Deemed rental income tax (Rendimientos del capital inmobiliario)
If you are non-resident a "deemed rental income" is levied by the Spanish tax authorities for urban real estate not rented out or used as a second residence. Therefore, if your Spanish property is not rented out or not your primary residence (i.e. a holiday home), you will be liable for the "deemed rental income tax" even if you do not let out your Spanish property. The local town hall will charge you according to the valor catastral (rateable value) of the Spanish property. They will assume you are making 2% of this value each year from letting your Spanish property and charge you 25% of that "income", which equates to a total of 0.5% of the valor catastral (rateable value) of the your Spanish property. For example, if you own a Spanish property with a valor catastral (rateable value) of €100,000 and you are not renting it out, you will still be liable for 25% of €2000, which equates to €500.

Wealth Tax (Patrimonial)
You will pay wealth tax (Patrimonial) at a percentage that depends on the value of your wealth (i.e. property plus savings in the bank, etc.). The wealth value associated to a property is based on what the declared value of the property was when you purchased it. For residents, the first €108,182 euro is not taxable. There is also a €150,253 exemption on main home for residents. This wealth tax increases on a sliding scale. The wealth tax sliding scale is "cumulative". For example, if you purchased a property for €300,000 then you would be liable for wealth tax every year according to the following calculation:
The first €167,129 at 0.2% is €334.26 plus the remaining €132,871 (€300,000 - €167,129) at 0.3% is €389.61. Therefore the wealth tax on a Spanish property worth €300,000 is €732.87.

Inheritance Taxation
Your beneficiaries will become liable to pay the somewhat horrendous death duties that are 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. It is therefore, very important, to as soon after completing your property purchase in Spain that you make a will protecting your asset(s) for you, your spouse and your family.

Special circumstances....
Buying "Off Plan"
When buying an uncompleted property "off plan", a reservation deposit, (from 3,000 Euros), usually secures a property for up to 2 weeks. If you pay a reservation fee this is usually lost if you back out of the purchase. If a property is still to be built or completed, payment is made in stages. The contract includes details such as the purchase price, the payment of a deposit, the schedule for payment of the balance or stage payments, any extras that you have agreed to purchase, and the intended date of completion. The normal stage payments, for example, are usually 10% on signing the contract, 30% within 30 days, 30% on the completion of the roof and the final 30% on completion. However each constructor will adapt the schedule of payments according to their planned construction timeframe. The completion of each stage should be verified by your own lawyer or your representative in Spain.
In this situation your only tax liability is with the constructor or promoter for the 7% VAT (IVA) plus 1% Stamp Duty, consequently you will not be expected to pay a further 7% VAT (IVA) at the signing of the registered deed at the Public Notary. The VAT (IVA) rate increases to 16% if you are purchasing store rooms, commercial premises or garage spaces separately from the dwelling. Plus valía is a tax levied by the local Town Hall based on the particular area in which the property is located, on the surface area of the land, on the catastral value and on the date of the previous title deed. This tax may range from a few hundred Euros to as much as several thousand on larger properties with a lot of land.
NOTE: That prior to actual completion and exchange you own a contract of "option to buy" and therefore no personal tax obligations are appropriate. However, it is important that the contract includes a transmission clause allowing you to re-sell the option without the permission of the builder/promoter. This is important if for personal circumstances you are no longer in a position to complete the purchase in your name, or wish to ascribe ownership to another family member, or to sell on to a third party.