Property Related Taxes

Property Related Taxes


New property sales tax is 10%. Sale of land for property development is charged at 21%.  Used  property  sales  also  attract  a  tax  of  between  6%  and  10%  –  a  transfer  tax called Impuestos sobre Transmisiones Patrimoniales (ITP). ITP is not set at the national level but rather by the AC’s.

There  is  a  form  of  stamp  duty  in Spain  called  AJD  on  all  notarisation  of  documents. AJD is only payable on land and new property sales. The rate is a minimum of 0.5% of the sale price, but can be up to 1.5% if the AC allows.

Costs and Taxes involved in Buying Spanish Property

The  total  official  costs  for  purchasing  a  constructed  residential  property  should  be approximately  11%  to  13%  for  resale  property  (properties  which  have  been  sold before)  and  slightly  higher  for  new  properties,  but  it’s  best  to  budget  for  a  total  of 15% in case of unexpected eventualities.

Rental Income

Many people let out their UK property when they leave the UK. For some people, this is regarded as their pension and they can often have several ‘Buy to Let’ properties in their portfolio. This income remains taxable in the UK and must be reported each year.

However, it must also be declared in Spain and is taxable in Spain. It is added to any other  income  and  taxed  at  the  scale  rates  of  tax,  although  the  UK  tax  paid  on  this income can of course be offset against the Spanish tax on the same income to avoid double taxation.

Renting out a Spanish Property

Very simply, income generated from renting out a Spanish property is subject to tax in  Spain.  For  non-residents  who  are  resident  in  another  EU  country,  the  net  rental after deductions (such as mortgage interest, repairs, agency fees and taxes), is taxed at a flat rate of 19.5%. For those resident outside the EU it is 24% and no deductions can be used to reduce the taxable income.

Spanish  residents  pay  tax  on  the  net  rental  income (including  rent  from  abroad)  at the  progressive  scale  rates. There  is  a  reduction  of  60%  available  against  net  rental income  for  long  term  lets  (normally  one  year  or  more).  Even  if  you  have  a  property other  than  your  main  home,  that  is  not  let  out,  the  Spanish  will  deem  a  notional income, calculated at at least 1.1% of the value of the property x 19.5% – 24%.

Selling your Property

There are no capital gains tax liability on the sale of your property if you have lived there more than three years, if you are over 65 years of age or if you reinvest the total proceeds in a new main home.

Under  the  Double Taxation  treaty,  gains  arising  from  the  sale  of  your  UK  home  are subject  to  Spanish  capital  gains  tax  of  23.5%,  even  if  the  property  was  your  main home before you moved to Spain. You would also be liable for UK capital gains tax. From  the  6th  April  2015,  UK  capital  gains  tax  applies  on  the  sale  of  UK  residential property even if the owner is non-resident.