How much does it cost to own a property in Spain?
Having a property in the country involves paying taxes.
The taxes are due in all cases; irrespective of whether the property is used often or kept empty.
The taxes paid will be different depending on the amount of time per year you are spending on the country.
The taxes paid will be different depending on the amount of time per year you are spending on the country.
Our firm is specialized in taking care of non-resident taxes and we will be pleased to advise you on any fiscal matter related to your Spanish investment.
The taxes paid will be different depending on the amount of time per year you are spending on the country.
Years of experience working side by side with foreign property owners have given us a deep understanding of those services that are wanted and needed the most. Time and time again, we have seen how difficult it can be for clients to struggle with seemingly insurmountable distance problems and language issues. In order to help, and for a very modest fee, MAM offers our clients a new, innovative retainer service, designed to give instant access to comprehensive assistance whenever help is needed. For more information, see SWEET HOME
Income tax.
Non-resident tax (building for private use)
PLEASE NOTE THAT IT IS VERY IMPORTANT YOU ARE UP TO DATE WITH THE PAYMENT OF BOTH STATE & LOCAL TAXES OTHERWISE YOU MAY FIND YOUR BANK ACCOUNT FROZEN DUE TO UNPAID TAX BILLS.
Income tax.
Non-resident tax (building for private use)
Any homeowners of an urban building in Spain, whether they use the property themselves or not, are liable to pay the Non-Resident Income tax, even if they are left unoccupied.
The payment is compulsory.
Although you may not receive any real income or rent from the property, the law presumes an income.
The Non-Resident tax is paid in arrears on a yearly basis.
This tax is prorated for the days you were owner of the property during the accrued year.
Your share in the ownership is also taken into account to calculate the Non-Resident tax.
Many Non-Residents are asking how the Spanish Tax Office is calculating the tax due if there is in fact no real income.
In general terms, the law presumes an income of 1, 1% or 2% of the Catastral value (you will find this on your rates Bill). The rate used will depends of the revisions made by the Town Hall.
Please, note that the catastral value may change every year depending on the decision of the Town Hall where the property is located or what it is stated in the National Budget Law.
You are then taxed at 19% of the resulting figure if you are residents in EU, Iceland and Norway and at 24% for the rest of the countries.
Taking into account all these facts, your solicitor will be able to determine which the accurate values which must be applied are.
The form called 210 is the form to be submitted for Non-residents income tax.
The term for payment goes from the 1st January to the 31st of December every year and the tax paid corresponds to the previous calendar year.
Income tax is operated on a self-assessment system. Payment must be made direct to the Tax Office.
There is no possibility of setting up a direct debit for the payment of this tax.
It is the owner’s obligation, through his solicitor, to fill in the tax return and take it to the Spanish Treasury.
Resident Tax
For tax purposes you are Resident in Spain when anyone of the following circumstances applies:
- You spend in the country more 183 days a year. In order to determine the permanence in Spanish territory, the Tax Office has stated that the occasional absences are included, except if the taxpayer proves their residency in another country. In the case of countries or territories labelled as tax havens, the Taxa Office can demand proof of stay in that tax haven over a period of 183 days within the calendar year.
- Your family is also living in Spain; if you have dependent not legally separated spouse and/or underage children who are usually resident in the country. This situation accepts evidence to the contrary.
- You have situated the main base or centre of your activities or economic activities, directly or indirectly, in Spain.
In those cases, you are obliged to submit in Spain your personal tax return including all the income from all over the world (regardless of the place where it is generated or paid).
A wrong idea is often spread out among expat residents: “my pension is already taxes at home so I don’t need to serve any tax return in Spain”
Nothing further from truth!
This matter is regulated in depth by DOUBLE TAXATION AGREEMENTS signed between Spain and different countries.
These agreements clearly establish that income tax must only be paid in the state of residence.
Who is obliged to make a tax return? All individuals resident in Spain are obliged to file an income tax return, except those who have received income only from (with some nuances): - Income from personal work equal to or less than €22,000 per year (if it comes from a single payer).
- Investment income and capital gains subject to withholding or payment on account, with a joint limit of €1600 per year.
- Real estate income attributed from treasury bills and subsidies for the acquisition of subsidised housing with a joint limit of €1,000 per year.
720 Form
Since 2012, all persons resident in Spain who own real estate, bank accounts or investments located abroad when their value exceeds €50,000 are obliged to file an informative tax return known as form 720.
The filling period of the form 720 going from the 1st January to the 31st of March of every year.
Is there an obligation to submit it when the ownership of a bank account, interests or building located abroad whose value at the end of the year exceeds 50000€ is shared, and whose ownership corresponds to several people? Yes. There is an obligation to declare when this limit is exceeded regardless of the number of holders. The total value should be declared, indicating the percentage of participation.
Once the Form 720 has been filed in relation to one or more of the reporting obligations set out therein, it will only have to be filed again when, in relation to one or more of these obligations, there is an increase in the overall limit established for each block of information of more than €20,000 with respect to what was determined in the last return.
In the event that the Form 720 is not filed and there is an obligation to file for all three reporting obligations (properties, accounts or investments), then the minimum penalty for non-filing would be 30,000€.
In case there is only an obligation to file it for only one of the reporting obligations (for example, if only one account is held abroad in excess of € 50,000 and is not reported), then the minimum penalty that could be imposed for non-filing is € 10,000.
100 Form
The tax return form to submit the personal income tax is called 100 Form.
In Spain, the fiscal year is the same as the calendar year and tax is paid in arrears.
The income tax return campaign is from May to June and unlike in other countries, you must complete and serve your own tax returns.
It is very important you ask your solicitor to check if you are obliged to serve your income tax return or if your income is too low, in which case you might well be exempt.
As Resident in Spain, you are obliged to declare all earnings, this includes:
- Pensions from your home country, with one exception: if the pension received is from local or central Government (Armed Services, Police, Firemen, Teachers…) it can only be taxed in the country of origin. A deduction for double taxation is applicable to all earnings which are taxed abroad so you are not going top ay twice on the same income.
- Dividends; If the dividends come from another country with which there is not an Agreement for the Avoidance of Double Taxation and are also taxed in the other country, the taxpayer may apply the international double tax credit provided for in Article 80 of Las 35/2006 of 28th November.
- Interest arising from bank deposits.
Rental Tax (Tax on rental income)
The Spanish rental law states three main kinds of rent:
- Long term rental. If the rented property is used to satisfy the permanent need of the tenant’s house.
- Short term rental. If the property is used to cover the temporal need of the tenant’s house. It will have a shorter duration that the long-term rental but longer than the touristic rental. The property will not be used by the tenant for tourism.
- Holiday lets. Every Region in Spain has stated rules about this kind of rental.
In general terms the laws regarding holiday rentals in the different Spanish Regions have stated that the landlords that wish to rent out their properties are obliged to register the properties with the “Servicio Territorial de Turismo” or the “Registro Turistico” in the area where the property is located.
In all the cases the owner is obliged to submit the form called “declaracion responsable”.
Also, some regions are requiring a “city-planning compatibility certificate” issued by the Town Hall like previous and compulsory condition to submit the “declaracion responsible”.
Once the competent Touristic Register has checked that the application submitted by the owner satisfies all the legal requirements the owner will receive a document with the reference to advertise the property like touristic property (It also is called “touristic license”).
Does the rental of a touristic apartment have VAT? This is a question asked frequently. The rental of the property without providing any hotel facilities is exempt from VAT.
However, if the landlord is offering to the tenants the typical hotel services (laundry, concierge services…) then the VAT must be charged. On that case the VAT to apply will be the 10% to the price of the accommodation.
Non-Resident
If you are NON-RESIDENT in Spain and you let your property in the country, then you have to pay income tax on the rent instead of the imputed tax described for the properties no rented.
You must present a quarterly declaration at the end of each quarter (April, July, October and January of the following year). In the quarterly declaration you must declare the PROFIT earned in each quarter.
If the equity of the quarter is NEGATIVE, you do not have to present the quarterly form, instead, in January of the following year you have to present an annual form including all the negative quarters.
If you let some quarters but the other part of the time the house is NON LET, you must present:
- The quarterly form for the quarters let and, separately,
- The annual form of the periods non let (so the MINIMUM tax is calculated proportionally)
Deductions: The deductible expenses include, but are not limited to, electricity, water, gas, advertising fees, home maintenance and repair expenses.
What is the tax base when a non-resident has a leased property in Spain?
In general, the taxable base will be the amount received by the lessor for all items, including, where applicable, the amount corresponding to all the assets transferred with the property and excluding Value Added Tax. No deduction whatsoever may be made from the total income thus obtained.
However, in the case of taxpayers resident in another Member State of the European Union, in relation to income obtained as from 1 January 2010, and those resident in Iceland and Norway in relation to income obtained as from 1 January 2015, they may deduct expenses for the determination of the gross tax base, provided that it is accredited that they are directly related to the income.
Due to BREXIT, the tax liability for the owners who are residing in UK has been changed:
- The rentals generated form 01/01/2021 are taxed 24% upon the gross income.
- They cannot deduct expenses on the rental income.
The tax on rental income for residents in EU, Iceland and Norway is the 19% and they can deduct expenses.
The rental income tax is the 24% for the owners of the rest of the countries.
Resident in Spain
If you are RESIDENT in Spain and you let your property in the country, then you have to pay income tax on the rent.
You need declare any income from the renting of your property in the yearly income tax return (form called 100).
The deductible expenses above listed for the Non-Resident are also applied for Resident owners renting property in the country. You can deduct for example mortgage interest, insurance, IBI, and bills like community fees.
Also, in the case of the renting of property for residential use (long rental), the positive net profit, calculated as the difference between the total gross income and the deductible expenses, will be reduced by 60%, regardless of the age of the tenant.
Wealth Tax
The Wealth Tax was abolished in 2008 and re-introduces a “temporary basis” in 2011.
This annual tax is applied to Non-Resident and Spanish Residents as well.
Exemptions. For both Residents and Non-Residents, the exempt amount per taxpayer is 700.000€
The liability for Non-Residents is limited to properties, assets and rights located in Spain so if you are Non-Resident, you will only be taxed on your assets in the country that are valued over 700.000€.
For the Residents the liability will depend on the region of the country where you live and the Wealth tax will also apply to all of your worldwide assets.
The taxpayer’s main residence is exempt up to a maximum amount of 300,000€.The exemption will be applied by the taxpayer who has a full or shared right or a real right of use or enjoyment over the main residence.
Every region in Spain is setting different allowances and rates for the Residents, even some regions have approved a tax rebate of 100%.
Local Taxes
Plusvalía tax
The Plusvalia tax is a local tax due for the increase in the catastral value of the urban land from the date of the owner acquired it to the date of the property is transferred.
This is a direct tax based on the value of the house. It is known as LOCAL RATES, COUNCIL TAX or IBI (and SUMA BILL in Alicante Area). All names mean the same.
The catastral value of the urban land is stated in the council tax bill.
In order to calculate the Plusvalia tax the Town Hall takes into account the increase in the value of the land, the period of time that you were owner, the percentage applicable to the increase and the tax rate approved by each Town hall.
The Plusvalia tax is due in the case of sale, donation or inheritance of the property.
Plusvalia in the sale; in that case the Plusvalia will be paid by the seller.
Please, note that according to the Tax law if the seller is Non Fiscal Resident in the country, then the Town Hall would require the payment to the buyer as substitute taxpayer.
The deadline to submit the Plusvalia declaration is 30 working days from the completion date.
Now, due to Sentences of the Supreme Court and the Constitutional Court of Spain, you are entitled to recover the referred amount if you can prove that you had not real profit with the sale of the property; it is if the sale price is lower than the price of the purchase.
Plusvalia in the donation or inheritance procedures; The Plusvalia will be paid by the beneficiary; it is, the person who receives the property is liable to pay this tax.
In the case of donation, the Plusvalia declaration must be submitted on 30 working days from the signature of the donation title deeds.
In the case of inheritance, the Plusvalia declaration must be submitted on 6 months from the date of the death.
Tax on Real Estate
This is a direct tax based on the value of the house. It is known as LOCAL RATES, COUNCIL TAX or IBI (and SUMA BILL in Alicante Area). All names mean the same.
Each Town Hall Council determines the percentage to be applied to the cadaster value of the property. Every year, Town Halls increase the value of the tax by applying the percentage given by the Government in the Nation Budget act.
This is also a yearly tax and there is the possibility –strongly recommended- of setting up a direct debit.
The person who is the owner of the property on the 1st of January is liable for the payment of this tax.
Car Road Tax
This is the called IVTM.
It is a yearly tax collected by the Town Hall where the car is registered.
The bill will be received sometime between March and June. It will depend of every Town Hall.
The amount to pay is set by the municipal authorities and it will change from town to town. Also the fiscal horsepower is taking in count to fix the due tax.
Vado Permanente (Car Entrance Tax)
If you have a garage or an entrance that allows access for a vehicle to a house then you are obliged to pay this local charge. It is because you are crossing the public footpath.
What happens if you don’t pay it? The Town Hall is entitled to block the entrance and replace (for example) the ramp with a higher pavement. The owner would be charged for this works.
The level of tax due varies according to the width of the entrance in use and the number of parking spaces.
The payment is annual and usually you will receive the bill between March and June, It will depend of every Town Hall.
Also, in addition every garage should have a vado permanente sign with a licence permit and it is a one-off payment. This sign means that if some car is parked in your entrance it can be taken away.
Rubbish Tax (Basura)
It is the local charge which you are obliged to pay to the Town Hall where your property is located for rubbish removal.
The payment is compulsory although the property will be unoccupied.
Every Town Hall is fixing the amount due which is different from one town to another.
In some towns like San Javier (Murcia) the payment is required every 6 months.
In other ones like Vera (Almeria) the bill is issued every quarter.
You can set up direct debit for the payment.
