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.