Spanish Real Estate Taxes
Transfer Tax
Depending on whether you are purchasing new or resale property, either transfer tax (ITP) or value-added tax (IVA) will apply on the transfer of property. A 7% transfer tax (ITP) is generally charged on the purchase of real estate. When buying a parcel of land from a developer, this is replaced by IVA at 7% or 16%, plus 1% stamp duty.
Inheritance/Gift Tax
Foreign residents in Spain are liable for Spanish inheritance tax (IHT), regardless of the country in which the inheritance is situated. Non-residents are liable for Spanish IHT on assets they inherit, that are physically located in Spain. Spain levies inheritance tax on assets received as an inheritance or gift. Taxes must be paid within six months, although you may file for another six-month extension. In the case of an estate transferred to a spouse, parent, or child, a 95% deduction may apply. The condition is that the spouse, child, or parent has lived with the deceased for at least two years prior to his or her death. The amount of tax due depends on the relationship with the deceased.
Wealth Tax
Patrimonio tax is levied on your assets in Spain, including property, bank accounts, cars, bonds, stocks, and shares. For residents, the wealth tax applies only to property worth over $180,000. For non-residents, the tax is levied on all property, no matter what the value. It can be based on either cadastral value, purchase value, or the value estimated by the tax authorities, whatever is greater. The wealth tax is set at 0.2% for assets up to $197,000, and goes up to a maximum of 2.5%.
Rental Income Tax
Depending on whether or not you are deemed to be a permanent resident, the tax rate on rental income is either 25% or 35%. For nonresidents, income on property is set to about 2% of the cadastral or rateable value of the property, and then a rate of 25% tax is applied to the base value. This tax is filed annually. Interestingly, the tax is paid by the tenant, with the tax deduction made from the rental before the net amount is passed on to the owner. Owners should insist on proof that the tax payment has been made on their behalf. Any income from rent received in Spain by non-residents is subject to a payment of a flat rate of 25%. Even if the property is not rented, owners are still liable for tax on the imputed income, at rates ranging from 2% to 20% of the official property value.
Property Tax
Local property tax (IBI) is levied by the local town hall and is paid annually. The amount is based on the fiscal or rateable value (valor catastral) of the property, and takes into account the value of the land, plus the value of the building, according to type, location, and usage. Each municipal town hall decides on the percentage to be charged in respect of local rates. In the case of Marbella, the formula applied is 0.85% of the rateable value of the property (which is usually far less than its true market value).
Capital Gains Tax
Capital gains tax is due on the sale of a number of assets, including real estate, antiques, art, stocks, and businesses. Residents over 65 years of age are exempt from capital gains on the sale of their property. If you are under 65 and re-invest in Spanish real estate within three years, you are not required to pay capital gains as long as the investment is equal to or larger than the proceeds of the earlier sale. Alternatively, if the property is owned for more than 10 years, then the capital gains liability disappears. However, you may be liable to tax in your country of residence. The rate of capital gains tax is 20% for residents, and 35% for non-residents.
Other Taxes
Plus valia is a local municipal tax based on the officially assessed increase in the value of the land since the last time the property changed hands. This tax is normally payable by the vendor, but it may be stipulated that the buyer pays. It can range from a few hundred dollars to as much as several thousand dollars on larger properties with a lot of land.