Property taxes payable in Spain fall into one or more of the following categories. However it should be noted that Spanish Tax Law around Property can change rapidly, and you should always consult a lawyer as to what the current rules are when you go to purchase a property:
- Re-sale purchase tax
- New properties purchase tax
- Capital gains tax (sellers)
- Rental income tax on properties owned[/ordered_list ]
Re-sale purchase tax (transfer tax) is payable by buyers of used properties (as opposed to new builds) and varies depending on area (usually 8-10%).
New properties purchase tax (VAT) is payable by buyers of brand new properties. The rate is 10% if the property is finished or in the process of being built at the time of purchase. There is an additional stamp duty tax payable depending on the region (usually 1.5-2%). However, if you are buying land in Spain for the purpose of building a home, the VAT rate rises to 21%.
Capital Gains Tax
Capital gains taxes are payable by those selling a property and are calculated on the profit made by the seller (the difference between the final selling price and the price paid by the seller when it was originally purchased) . This could amount to as much as 21% of the profit made on the sale for non-residents. Spanish residents receive a reduced rate of VAT on property sales so, non-residents selling a property at a substantial profit margin may consider applying for residency before putting the property on the market. To ensure payment of this tax, Spanish law requires the buyer to withhold 3% of the total purchase price paid, to settle the final VAT bill should the seller take the sale proceeds and disappear! Exemptions for payment of capital gains tax exist if the seller purchased the property prior to December 1986, or, if the seller is over 65 years of age and has been legally resident for at least 3 years.
Taxation of revenue from rental properties in Spain is a complex matter depending on circumstance. Rates and deductions vary depending on the owners residency status, for what period of the year the property is rented out for and for what purpose i.e. business or home and various other factors.
Securing the services of a recommended local, independent lawyer for advice and current legislation in all these areas of property taxation, is advisable.