What is the real cost of owning your Spanish property as a non-resident?

Congratulation for your purchase, now let’s check the annual costs of owning your property.

You’ll have those divided into five different groups: Taxes, Insurance, Utilities (Electricity, Water, Gaz, Television, Internet, Telephone), the charges of your own property and eventually Community Charges.

Let’s have a look at a concrete example: a two bedroom apartment in Barcelona of 100 m2 with a market price in 2022 of 440.000€ and a “valor Catastral” of 100,000€. We assume a rental value of 18.000€.

1. Taxes

   If you want to have a detailed view from our experts on this subject, have a look at our article: What taxes do you have to pay on your Spanish property?

   Here is a quick summary:

   a. Local Tax: IBI, “Impuesto sobre Bienes Inmuebles“:

   What is it? A local tax on any Spanish property.

   Who has to pay for it? Any owner of a Spanish property, local or foreigner.

   How do you know? You’ll get a letter after June of any year but some local authorities don’t send it. You owe this tax

   Who is the beneficiary? The tax is payable to your local Town Hall. Those are for infrastructure, waste collection,…

   If you pay too late, you will have to pay a penalty.

   Where can I pay it? Your local Town Hall, a few of them are available online.

   Our tip: A few of them allow domiciliation of payment: very easy, they will take the amount from your account every year. A very good solution if you are living abroad. Make sure your account balance is sufficient: some banks would refuse to pay or would charge you a high interest if the account would fall into negative territory.

   How is the Tax Calculated? The IBI is based on the “Valor Catastral“. The “Valor Cadastral” can be legally adjusted if needed by any Town Hall.

   Our tip: by working with a lawyer, he will make sure that the previous owner paid for it, if it is not the case, you’ll have to pay for him!

   What if your property is empty? You owe the tax!

   Our tip: After buying a property, register your property with the Town Hall within two months. Take all the official documents with you. Most of the time, your lawyer will do this for you.

   If you forgot it, your local town hall could recoup the amounts due for the last 5 years + penalties… So, now you know!

   The IBI for the apartment in Barcelona is under 0.6% of the “Valor Catastral“: i.e. 360€

    

   

    

   b. State Tax: You are renting it. You are not renting it… Modelo 210 – Form 210

   A. You are renting out your apartment => Quarterly filling, before the 15th of the month following the end of the quarter.

   The State tax for the apartment in Barcelona is 19% of the “Rental Value“: i.e. 3648€ on an annual basis and 912€ on a quarterly basis.

   Our Tip: you have items that could reduce this amount, check with (y)our lawyer.

   B. Your apartment is not rented => Yearly filling

   The State tax for the apartment in Barcelona is under 0.2% of the “Valor Catastral“: i.e. 200€

   Where can you find the Spanish form 210 directly in English?

   Where can you find the official information for filing your Spanish Form 210 in English?

   Have a look at the help guide written in English by the Spanish Authorities.

   Our Tip: Pay attention, if you bought the property with someone else (spouse, kids,…), everybody needs to do one filling for the taxes!

   Our Tip: Take advantage of our network and get your filling done by someone on the ground.

    

   

2. Insurance

   The insurance should be around 0.05% of the price of your property.

   The insurance for the apartment in Barcelona is under 250€.

   Our Tip: Many insurance brokers in Spain speak foreign languages. Ask a quote from our home insurance partner in Spain.

    

   

    

3. Utilities

   If your apartment in Barcelona is empty, you’ll have a few charges just to have accounts open and running:

   +/- 15€ / month for water

   +/- 20€ / month for electricity

   +/- 6€ / month for gas

   For a total of 41€ / month if your apartment in Barcelona is not rented.

   If your apartment in Barcelona is rented, charges may increase up to 150€ / month. With inflation rising since 2021, you should expect those costs to increase even more in the future.

   Our Tip: If your Gas meter needs to be reopened, you’ll have to get a technician to certify that your installation standards is fine. Count about 150€ for this.

    

4. Community Charges

   This charge depends on the property you bought:

   • Is there a lift in the building?
   • Is the property new? Does it need more or less of maintenance?
   • Are many properties empty?
   • Do you have a swimming pool?
   • How often is the property cleaned?

   For your apartment in Barcelona count between 50€ and 100€ per month.

   Our Tip: Ask for the last Assembly documents before buying. Your lawyer will do this in general. You will get a much better picture on those costs and on the costs carried on the property in the past or to be done in the future.

    

5. Charges of your own property

   • Do you have a private garden?
   • Do you have your own private pool?
   • The paintwork needs doing?
   • Do you have a mortgage? Check our paper we wrote on that to find out what is your monthly mortgage payment: What is the cost of your Spanish Mortgage? Your ultimate Mortgage calculator

    

   

   To sum up: 0.8% per year:

   • 0.15% Local tax,
   • 0.05% National tax(not rented ),
   • 0.05% Insurance,
   • 0.1% Utilities (empty),
   • 0.3% Community charges,
   • 0.1% Property charges

    

   

    

   Do you want to be sure of the cost of buying a Spanish property? Read the news we wrote on this. Last but not least another interesting paper is: cost of living in Spain vs any country in the world.

    

    

    

   

   All those information are from reliable sources. We advise you to check those with your fiscal and legal advisor in Spain in order to get all those costs up to date and adjusted to your specific situation. Find your Spanish property lawyer here.

    

   Do you want to start searching immediately?

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   If you don’t know where to buy, this general article on the Spanish Real Estate market could be very useful: Everything you ever wanted to know about the top 20 Spanish real estate markets

    

   

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   This infographic could help you before buying your new property in Spain.

   

   Don’t try to do it alone, you think you will save money, but you will WASTE money

The post What is the real cost of owning your Spanish property in 2023? appeared first on How to buy in Spain.

What taxes do you have to pay on your Spanish property?

This paper will cover the three different tax issues related to the acquisition of a property in Spain:

• the acquisition of a property (newbuild or resale),
• the ownership of a property, and
• the sale of the property.

1.Taxes related to the acquisition of your Spanish property

The case of a newbuild property

• VAT is 10% for residential properties everywhere in Spain as the VAT is a national Tax. The VAT is 21% on plots, garages and storage rooms.
• Stamp Duty of 1.5% for almost all Spanish regions.

As a reminder, of course, there are other expenses than taxes related to the acquisition: Notary fee: The notary fee for the purchase of a typical residential property would vary between €500-€2,500. Land Registry fee: normally, the land registry fee amounts to 50-70% of the notary fee and legal fees.

The case of a resale

The transfer tax varies between 8 and 10% and is different for each autonomous community.

If you want to read more on that subject, our legal and tax partner in the region of Barcelona, Maite, wrote a few interesting articles:

Spain property tax: What are the taxes involved in the purchase, holding, and sale of your Spanish property?

Tax Residence. Why is it important for you? Definition and examples (Part I)

Tax Residence, Why is it important for you? Why do you have to pay taxes in Spain? (Part II)

This is another one written by Juan another legal partner in Barcelona: How can we calculate the Transmission Tax on a Spanish Property?

2.Taxes related to the ownership of a property in Spain

As a foreigner, you will be taxed in your home country usually on your worldwide income. As an owner of a property in Spain, you will have to pay a few taxes. In order not to tax you twice, most of the time, your home country has a tax treaty with Spain to solve the issues. Usually, there is a tax treatment different depending on where you are from. Are you from EU or from outside the US. A second issue that will help to know which tax treatment you should have on the property is related to the use of the property: Do you plan to use it for yourself or do you intend to rent it? Please note that short-term rental (usually periods of less than two months) most of the time requires an authorisation from to autonomous region and from the town hall. The regulations are different for each autonomous regions in Spain. Two interesting reads on this subject are those two articles: An update on the short-term rental regulation in Andalusia and Tourist apartments in Spain.

The lawyer will search for the Cadastral Value of the property and will check if the previous owner paid the IBI tax.

The non-resident Income tax is paid to the Spanish Tax Authorities

There are two cases:

If you don’t rent your property

You will be taxed with a fixed percentage (usually 1.1%) on the cadastral value of your property: this amount is supposed to be your income

• you will pay a 19% tax on that amount if you are a European Union Citizen
• you will pay a 24% if you are not a European Union Citizen.

If you rent your property

• You will be taxed on your net rental income at a 19% rate if you are a European Union Citizen and
• 24% on your gross income if you are not a European Union Citizen.

That means that sometimes you can deduct some expenses and that’s why your legal and tax adviser will save you money here: … no fines… and deductions to diminish your rental income.

Have a look at two events that occurred to customers from our Tax partner in Barcelona, Maite: “I remember a case in which a foreign client acquired a home in Spain as a second residence, to occupy it during his vacations. It turns out that in Spain, a person having a second home must pay taxes on it, which this client did, by paying 24% on the established taxable base, for the days of the year in which the house was not occupied. What this client did not know was that for residents in the European Union and in the European Economic Area the applicable tax rate is 19%, but the period to be considered is the whole fiscal year, not only empty days.”

“In another instance, a foreign client had rented a house in Spain. He declared the gross income because he had been told that non-residents cannot deduct any kind of expense. What he did not know is that this rule is not applicable to residents of the European Union and the European Economic Area, as it was the case. The latter has a more favourable treatment, having the right to deduct the same expenses foreseen for residents in Spain, being taxed accordingly for a lower profit margin.”

Wealth Tax in Spain

If you are a resident, you will be taxed on your worldwide assets, if you are non-resident with Spanish assets above 700.000 Euros, you will be subject to the wealth tax. The rates are starting at 0.2% and scale up to 2.5% if you have more than €10m.

The local Tax, or IBI Tax

Is a fixed amount calculated from your Cadastral Value that you have to pay to the town hall.

Further reading on the tax related to your Spanish property:

Do you plan to buy or rent a property in Spain? Consult your property tax advisor in spain first!

Do you want to rent your property in the Costa Blanca or in the Valencian region?

Spain property tax: What are the taxes involved in the purchase, holding, and sale of your Spanish property?

3.Taxes related to the sale/ transmission of a property in Spain

You are not already selling your property but, it is already good to know. Maybe, knowing this, you will change the way you structure your purchase. Should you buy with bare ownership for your children and Usufruct for yourself? Should you buy within a company structure?

Two taxes are due at the time of sale, whether this is done by a non-resident natural person or legal entity:

• The so-called “Municipal Surplus Value” (“Plusvalía Municipal”), a tax again of a local nature that in this case taxes the increase in the value of the land over the years. It must be settled by the seller at the corresponding City Hall within one month from the conclusion of the operation.

It should be noted with respect to this tax that there is great controversy in Spain regarding the way to calculate it by the municipalities, both because there might not be a real increase in the value of the land due to the crisis, and also because the formula used is not adequate. When the amount is high, it is very convenient to consult a professional to evaluate the convenience of filing an appeal before the Courts.

• And, again, the Non-Resident Income Tax: it is calculated on the capital gain obtained on the sale (sale value less acquisition value), which is taxed in this case at a 19% rate, be the seller EU resident or not.

Note that the buyer, when buying a property from a non-resident, is obliged to withhold a 3% on the sale price and pay it to the Tax Authorities within a month from the sale.

The seller will subtract the amount withheld in the result of his Non-Residents Tax declaration, which must be presented in the 3 months following that former month. Should there be a difference in his favour, he is allowed to be refunded.

Further reading on the subject:

Property purchase in Spain with usufruct and bare ownership

Spain property tax: What are the taxes involved in the purchase, holding, and sale of your Spanish property?

This article: “Part IV. Tax aspects related to your Spanish property: acquisition, ownership and sale of your Spanish property

Introductory paper: Why do you need independent legal and tax partners for your property acquisition in Spain?
Part I. Buying a property in Spain: Is a Spanish Notary enough? Why is an independent Spanish lawyer strongly advised?
Part II. Buying a property in Spain as a foreigner: Are you allowed to buy a property in Spain as a foreigner? Do you need a Visa? Who is buying? How do you finance?
Part III. Legal due diligence on your Spanish property
Part IV. Tax aspects related to your Spanish property: acquisition, ownership and sale of your Spanish property
Part V. Inheritance, Estate Planning and Granting a Will in Spain

For easiness of reading, it is split into five different articles: they could be read one after the other or separately.

The post What taxes do you have to pay on your Spanish property? appeared first on How to buy in Spain.

What are the taxes involved in the purchase, holding, and sale of your property in Spain?

The purchase and sale of real estate in Spain, as well as its ownership, generate the obligation to pay different taxes, also for non-residents in Spain. This publication’s aim is to explain in a simplified way what these taxes are, for the specific case of non-tax resident buyers or sellers in our country, whether these are individuals or legal entities. For more on the residency definition, read more in the first two papers we wrote on that:

• Tax Residence in Spain: Why is it important for you? Definition and examples(Part I)
• Tax Residence in Spain: Why is it important for you? Why do you have to pay taxes in Spain?(Part II)

What taxes will I pay when I buy?

The purchase of a property in Spain may be taxed either by VAT (Value Added Tax) or by ITP (Transfer Tax), which in both cases must be paid by the buyer. The application of one or the other tax may depend on many factors; among others, the condition of the seller, and also that of the buyer. A purchase that is not basic, such as those that will be explained below, will always require a detailed study of these conditions, but, in general, we could summarize the operations and basic rules as follows:

• An operation made between non-entrepreneur individuals will be taxed under ITP. The ITP is a tax assigned to the Autonomous Communities, so its rate varies in each one of them; in Barcelona, for example, it is 10% if the purchase value does not exceed one million Euros. The tax is paid to the Autonomous Administration through a specific Form which must be submitted in the month following the date of the public deed.
• The sale of a new real estate made by a property developer will be subject to VAT, whoever the buyer is, at a 10% rate if it is a home or 21% if it is a business premises. In this case, the tax is paid to the seller at the time of signing the deed.
• Finally, the sale between businessmen (companies or individuals) can be subject to VAT or ITP, depending on multiple factors that, as we said, it is necessary to analyze in each case.

And when I already have the property, what taxes should I pay?

There are two kinds of taxes that may have to be satisfied by the mere possession of the property if it is not leased, depending on whether the holder is a natural or legal person:

• One is the IBI (Tax on Real Property), a local tax that is calculated based on the property’s cadastral value. It is satisfied annually or quarterly to the City Council of the town where the property is located, whoever the holder is. It is advisable and habitual to ask for a direct debit of the tax, to avoid oversights and formalities.
• The second, which only individuals pay, is the Non-Resident Income Tax. It is calculated on 2% of the cadastral value of the property (1.1% under certain conditions), and the general rate in force for non-residents is applied, which is currently 19% for EU residents and 24% for the rest. It must be paid annually.

Legal persons residing in a country qualified as a tax haven, however, must also satisfy a special type of Non-Resident Tax, consisting of an annual 3% of the property’s cadastral value.

Finally, note that in Catalonia an additional tax was approved for legal entities that detain real estate not affected by any activity, but it was appealed against without having been yet resolved for the time being.

If the property is leased, on the other hand, both legal entities and individuals must satisfy, in addition to the IBI, the Non-Resident Income Tax, calculated as follows:

• EU resident: 19% of the net income obtained (rent received minus deductible expenses according to Law, which are in general all those inherent to the property, interest included if there is a mortgage, and amortization).
• Non-EU resident: 24% of gross rent (that is, without deduction of expenses).

Generally, the tax will be paid in this case quarterly.

Finally, when I sell?

Again, two taxes are due at the time of sale, whether this is done by a non-resident natural person or legal entity:

• The so-called “Municipal Surplus Value” (“Plusvalía Municipal”), a tax again of a local nature that in this case taxes the increase in the value of the land over the years. It must be settled by the seller at the corresponding City Hall within one month from the conclusion of the operation.

It should be noted with respect to this tax that there is great controversy in Spain regarding the way to calculate it by the municipalities, both because there might not be a real increase in the value of the land due to the crisis, and also because the formula used is not adequate. When the amount is high, it is very convenient to consult a professional to evaluate the convenience of filing an appeal before the Courts.

• And, again, the Non-Resident Income Tax: it is calculated on the capital gain obtained in the sale (sale value less acquisition value), which is taxed in this case at a 19% rate, be the seller EU resident or not.

Note that the buyer, when buying a property from a non-resident, is obliged to withhold a 3% on the sale price and pay it to the Tax Authorities within a month from the sale.

The seller will subtract the amount withheld in the result of his Non-Residents Tax declaration, which must be presented in the 3 months following that former month. Should there be a difference in his favour, he is allowed to be refunded.

This article is written by one of our independent partners in Spain, Maite, who is one of our Fiscal partners in Catalonia. Check her profile.

Do you want to get in touch with her? Ask us for an introduction and benefit from the power of our network.

Maite

Looking for a real estate lawyer in Spain? Follow the link and get one of our local lawyer.

Looking for another real estate expert in Spain: Mortgage, Insurance, Survey of property, Property hunting, …? Ask us directly one of our 100+ local partner!

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