Overview of the Property Taxes in Spain
Denise Watson, Tuesday, 12 November 2013
This article is part of a series of 8 articles about buying property in Spain. The other articles in the series cover the following topics:
Like in other countries, property owners in Spain pay community taxes and other contributions in the area they live, for which they receive various services. In Spain, there are two taxes payable on your property every year, namely, the IBI (impuestos sobre bienes immuebles) and the local refuse and drainage tax (basura y alcantarillado).
The IBI, like a community tax, is payable once a year to the local town hall and a direct payment (domiciliación) can be set up with your bank to make this payment on your behalf. The amount payable, set between 0.4% and 3% of the property value, depends on where you live e.g. a house in a small village may cost only two hundred euros a year, whereas a home in a big city, where more services are available, will cost closer to the 3% figure quoted.
The refuse tax is payable twice or maybe four times a year and could be up to two hundred and fifty euros a year. However, in the more rural areas, where water may come from the hills and drainage may be in the form of septic tanks, the total yearly fee could be as little as fifty euros.
Once you settle into your own area, you’ll get to know when these payments are due and, in the case of the refuse tax, you can collect your payment notification directly from the town hall, rather than waiting for it to be delivered. Again, if you wish, you can set up a direct payment at your local bank, saving you having to make two to four trips into the village or town to make the payments.
When Selling your Spanish Property
Once you have owned a Spanish property for over one year, a later sale will involve the payment of capital gains tax (CGT), sometimes referred to in the bigger cities as plusvalia, which is currently calculated at 18% on the difference between your buying and expected selling price, with a deduction for an inflationary fee
If, as a non- resident, you wish to sell your property, the buyer will pay a 5% retention tax directly to the Spanish tax authorities and the remaining 95% to you, the seller. The 5% retention is then held to one side by the tax office until the capital gains tax is calculated. Depending on whether the CGT figure is higher or lower than that 5% retention, the seller will either receive a refund or be asked to pay the shortfall.
‘Deemed’ Rental Income
In Spain, if your Spanish home is not your main residence (i.e. the property is a holiday home), you will be asked to pay a deemed rental tax (rendimientos de capital inmobiliario) on that property, an imputed tax to be paid as if you were renting it out. This is a calculation which comes from assessing 2% of the value of your property and then calculating 25% of this figure (this is therefore 0.5% of the value of your property) to be paid annually. As an example, if your property is valued at 200,000 euros the calculated tax on a deemed rental income will be 1,000 euros.
Inheritance Tax
When the owner of a property in Spain dies, ownership passes to the other owner, if that name was entered on the sales deeds (escritura de compraventa). If there was only one name of a married couple on the paperwork, fifty percent ownership will be passed to the spouse and fifty percent to the sum total of all children. The current inheritance tax stands at around 5% but, if the property passes to non-relatives or to grandchildren, the percentage may be a little higher. It is important that, if you are a married couple, and you are buying a property in Spain, it is sensible to have both names added at the initial sales stage, as trying to add it later will incur costs.
Changes in Laws and Taxes Due
Over the last ten years, the laws relating to buying property in Spain and the levels of taxes payable have changed several times. While the figures quoted here are applicable in this moment, it is important that you check for any updates.
Overall
It’s always best to be up-to-date with the tax situation in your country of residence, or the country in which you do have property. Falling foul of a payment date could incur heavy costs, so always check what rules apply and how they affect you.
This article is part of a series of 8 articles about buying property in Spain. The other articles in the series cover the following topics:
Like in other countries, property owners in Spain pay community taxes and other contributions in the area they live, for which they receive various services. In Spain, there are two taxes payable on your property every year, namely, the IBI (impuestos sobre bienes immuebles) and the local refuse and drainage tax (basura y alcantarillado).
The IBI, like a community tax, is payable once a year to the local town hall and a direct payment (domiciliación) can be set up with your bank to make this payment on your behalf. The amount payable, set between 0.4% and 3% of the property value, depends on where you live e.g. a house in a small village may cost only two hundred euros a year, whereas a home in a big city, where more services are available, will cost closer to the 3% figure quoted.
The refuse tax is payable twice or maybe four times a year and could be up to two hundred and fifty euros a year. However, in the more rural areas, where water may come from the hills and drainage may be in the form of septic tanks, the total yearly fee could be as little as fifty euros.
Once you settle into your own area, you’ll get to know when these payments are due and, in the case of the refuse tax, you can collect your payment notification directly from the town hall, rather than waiting for it to be delivered. Again, if you wish, you can set up a direct payment at your local bank, saving you having to make two to four trips into the village or town to make the payments.
When Selling your Spanish Property
Once you have owned a Spanish property for over one year, a later sale will involve the payment of capital gains tax (CGT), sometimes referred to in the bigger cities as plusvalia, which is currently calculated at 18% on the difference between your buying and expected selling price, with a deduction for an inflationary fee
If, as a non- resident, you wish to sell your property, the buyer will pay a 5% retention tax directly to the Spanish tax authorities and the remaining 95% to you, the seller. The 5% retention is then held to one side by the tax office until the capital gains tax is calculated. Depending on whether the CGT figure is higher or lower than that 5% retention, the seller will either receive a refund or be asked to pay the shortfall.
‘Deemed’ Rental Income
In Spain, if your Spanish home is not your main residence (i.e. the property is a holiday home), you will be asked to pay a deemed rental tax (rendimientos de capital inmobiliario) on that property, an imputed tax to be paid as if you were renting it out. This is a calculation which comes from assessing 2% of the value of your property and then calculating 25% of this figure (this is therefore 0.5% of the value of your property) to be paid annually. As an example, if your property is valued at 200,000 euros the calculated tax on a deemed rental income will be 1,000 euros.
Inheritance Tax
When the owner of a property in Spain dies, ownership passes to the other owner, if that name was entered on the sales deeds (escritura de compraventa). If there was only one name of a married couple on the paperwork, fifty percent ownership will be passed to the spouse and fifty percent to the sum total of all children. The current inheritance tax stands at around 5% but, if the property passes to non-relatives or to grandchildren, the percentage may be a little higher. It is important that, if you are a married couple, and you are buying a property in Spain, it is sensible to have both names added at the initial sales stage, as trying to add it later will incur costs.
Changes in Laws and Taxes Due
Over the last ten years, the laws relating to buying property in Spain and the levels of taxes payable have changed several times. While the figures quoted here are applicable in this moment, it is important that you check for any updates.
Overall
It’s always best to be up-to-date with the tax situation in your country of residence, or the country in which you do have property. Falling foul of a payment date could incur heavy costs, so always check what rules apply and how they affect you.
Spanish property for sale. Appartements, villas and houses for sale on the Costa del Sol, Costa Brava and Costa Blanca. For sale by owner and by agent.
Read here what to check and settle when you sign the Title Deed of the purchase with the Spanish Notary.