Real Estate Investment Taxes in Spain of NON-residents

What taxes should I pay as a Non-Resident for the acquisition of real estate.

First of all, let’s clarify the concept of Tax Residence to identify, in which country should your global income be taxed. In Spain, it is considered that you have your tax residence when the taxpayer habitually resides in Spain, that is, when the person lives in Spain at least 183 days a year or has his center of vital interests in Spain, that is, although not spend those 183 a year in Spain, if the spouse and minor children who depend on him or her habitually reside in Spain.

Entering the matter, in order to make it easier to understand the taxes in Spain, we must differentiate between the taxes to be paid for the acquisition of the property, whether it is a home, a premises or land, that is, real estate, and secondly, the taxes that will be paid year after year for the possession and utility of the property.

In the first case, in order to invest in real estate in Spain, you must pay the following taxes:

  1. IVA: is the value added tax that is paid only in the case of new or first transmission homes. In Spain, the tax rate is 10%.
  2. ITP: This is the Tax on Patrimonial Transmissions and is applied for the acquisition of second-hand or second-hand transmission residences. The tax rate is not fixed for the entire country, it varies depending on the region or autonomous community where the property is located and is between 6% and 10% on the purchase value of the property.
  3. AJD: it is the Tax of Documented Legal Acts, colloquially called the “tax on mortgages”. It is the tax that is paid every time a mortgage is signed in Spain, that is, if it is bought in cash, this tax does not apply. As in the case of the ITP, this tax varies depending on the amount of the mortgage and the autonomous community where the property is located and this tax varies between 0.5% and 1.5% of the purchase price.

Once the property has been acquired and the aforementioned taxes have been paid, the following taxes must be paid annually:

  • IBI: It is the Real Estate Tax. It is an annual tax, which is paid to the municipality, and varies depending on the city or town in which the property is located. This value is between 0.4% and 1.3% of the property’s cadastral value. We call this tax in Chile Contributions.
  • IRNR: It is the Income Tax for Non-Residents, in the case of residents it is the IRPF (Personal Income Tax). We will focus on IRNR, as it is what applies for this article. This tax is levied on the possession, leasing and transmission of real estate for Non-Residents. It should also be noted that Spain has signed double taxation agreements with a large number of countries at the international level, including Chile, Colombia, Mexico, Venezuela, Argentina or Brazil. That means that the income obtained from real estate can be subject to the taxes of the country where the property is located and it will be the country in which you are a resident where that income must be eliminated. You must differentiate between whether the property is to be rented or if it is to be empty. In both cases it will be taxed at the tax rate of 24%. In the case of being leased, 24% of the income obtained from the lease will be paid, and in the case of having it empty, 24% will be taxed on a percentage of the cadastral value of the house, which will be 2% if the cadastral value has not been revised in the last 10 years or 1.1% if it has been revised. The latter is called in Spain declare, by imputation of Income and is the same imputation for Residents. Finally, indicate that in the IRNR, the taxpayer cannot deduct any type of expense related to the maintenance of the property.

Regarding the income obtained by the transfer of the property, the buyer is obliged to retain 3% as payment on account, on the purchase value and pay it to the Spanish Public Treasury. If the profit between the sale value and the acquisition value (deducting expenses and taxes in both operations) is less than 3%, a refund may be requested for the difference. Tax rate in this case is 19%.

  • Wealth Tax: This tax also applies to Non-Residents, for the assets and rights they possess in Spain, being exempt from payment if these assets and rights have a value of less than 700,000 euros.

In this article, we have wanted to make a mere summary of the taxes that apply in Spain, when buying a house in Spain and facilitate the comparison with the taxes of the country where you usually reside. Likewise, from MaaR Agency – Property Advisors in Spain, we have our tax department, and we will be happy to expand this information in a personalized way and we will help you better understand Spanish taxation, which although as we can see in those described above, has its complexity in the form, but deep down it is not so different from Chilean, Argentine or Colombian taxation, for example.

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