Budgeting for Taxes When Buying a Property in Spain

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Buying a property in Spain is a fantastic
opportunity to discover a change of pace and
lifestyle, whether youd like a weekend apartment
in Barcelona, a holiday home in beautiful
Valencia, or are planning an overseas retirement
along the golden coastlines of San Sebastián. As
with all elements of an international
acquisition, it is important for you to
understand the property ownership rules
throughout Spain and the taxation associated with
owning a home, holiday property or rental
apartment to ensure you budget accordingly. Here
we look at the various costs, tax liabilities and
legalities you should be aware of before
proceeding with your Spanish property purchase
plans.
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Rules for Foreign Nationals Buying a Property in
Spain
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Post-Brexit, purchasing a home in Spain is
slightly more complex, but there are no sweeping
restrictions. The main requirement is that you
will need a Número de Identidad de Extranjero or
NIE. This identification number enables foreign
nationals to register for taxation or open a
local bank account. You will be issued a number
if you register your residency through an Oficina
de Extranjeros or immigration office. Expats can
also apply for an NIE via their nearest
consulate, embassy, or in person by attending a
Spanish police station with their passport. If
you plan to spend more than 90 days per 180 days
in Spain, you may also need to consider your visa
category since this is the maximum stay permitted
for third-country travellers without a valid
permit or visa.
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• Options may include
• Applying for the Investor Visa, which grants
  residency to applicants purchasing a qualifying
  property for at least 500,000.
• Long-stay visas available for those relocating
  for work, studying in Spain, opening a business
  or moving to join Spanish relatives who hold
  residency or citizenship status.
• Non-lucrative residence visas, which allow
  affluent expats to apply for a renewable
  residency permit when providing evidence of a
  minimum income.
• Second homeowners may not require a visa if they
  are not planning to stay in Spain for over the
  90-day threshold but will still need an NIE
  number to be allowed to proceed with a property
  purchase.

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Average Spanish Property Purchase Prices
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Spanish property prices differ considerably
between high-demand cities such as Madrid,
prestigious regions in Andalusia and Catalonia,
and the balmy islands of the Balearics. However,
as a rough average Homes in central
metropolitan areas cost around 3,131 per square
metre 38.8 lower than the average for a
comparable property in the UK. Properties in
more rural and suburban regions cost roughly
1,977 per square metre 48.7 more affordable
than the British average. Combined with mortgage
interest rates currently over 40 lower in Spain
and general living costs of 21.2 beneath those
in the UK, buying a Spanish home can be
surprisingly affordable, particularly for expats
purchasing a second or primary residence having
previously lived in London and the southeast.
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Taxes and Fees
Alongside the cost of your chosen property, you
will need to budget for other outgoings Legal
fees normally cost around 1 to 2 of the
property value. A local notary will charge a
further 1 to 2.5 for services such as
registering title deeds and paying title deed
taxation charges. Should you need to apply for
financing, mortgage fees are an average of 1 of
the purchase value.
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Impuesto de Transmisiones Patrimoniales (ITP),
the property transfer tax, is payable between 6
and 10 on existing homes. New builds and
off-plan developments may be subject to IVA, the
Spanish equivalent to VAT, at 10. Transfer
taxes vary since the autonomous regions
throughout Spain have discretion about the tax
rates payable. Most purchases that attract an ITP
liability need to be settled within 30 days of
the completion of the sale, paid online, in
person, or via your solicitor.
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Tax Obligations for Foreign National Spanish
Property Owners
Once your purchase has concluded, you should be
conscious of ongoing tax liabilities, which may
depend on your tax residency position. For
example, if you own a holiday property in Spain
but remain a UK taxpayer, you will need to
declare any revenues earned through renting the
property to HMRC. Long-term residents will not
usually be expected to declare their assets or
income to the UK tax office since they will be
categorised as Spanish taxpayers. However, there
are further considerations around succession
planning and inheritance tax.
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Impuesto sobre Bienes Inmuebles (IBI) Real
Estate Tax
Each Spanish autonomous region charges a
different IBI rate, which is calculated by the
local town hall based on the homes valor
catastral (cadastral value). Rates currently vary
from 0.4 to 1.1. As an indication, the annual
tax obligation is normally around 400 for an
average-sized apartment and 2,000 for a large,
detached villa.
Exacciones Municipales Local Property Taxes
Local taxes are similar to council taxes in the
UK and tend to be around 80 per year for an
apartment, covering services the municipality
provides, such as refuse collections and drainage.
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Personal Income Tax
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If you rent out a property in Spain for any
period or have an empty property, you may be
subject to income tax charges. Rental income is
taxed on the progressive income tax scales,
depending on the rates payable in your
region. An imputed income tax rate may also be
payable for vacant homes that are not leased or
rented. This tax is calculated based on between
1.1 and 2 of the homes rateable value.
Non-residents with a Spanish property pay the
flat rate 24 income tax rate, also based on the
same proportion of the catastral
value. Properties with a rateable value updated
within the last decade are taxed at 1.1, whereas
those with an unchanged catastral rating are
subject to the 2 assessed tax rate.
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Spanish Wealth Tax
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Spanish tax residents pay wealth tax calculated
on their worldwide assets. Non-residents pay
wealth tax against their assets or income in
Spain, charged yearly against assets held on 31st
December. As with many of the taxes discussed,
rates depend on the autonomous region where you
live, with some regions offering the minimum
tax-exempt asset value of 700,000 and a 300,000
tax exemption for all primary residential
properties. Others have generous wealth tax
allowances, with Andalusia and Madrid introducing
100 exemptions for residents. Any taxpayer with
wealth of over 2 million will need to file a
wealth tax return, even if their taxable wealth
falls beneath the exemption value.
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Budgeting for Property Taxes on a Spanish Real
Estate Acquisition
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While we have detailed all of the main taxes
levied against properties in Spain, it is
important to note that total tax obligations will
differ depending on the value of your home, where
the property is based, the tax treatments imposed
by the local municipality, and whether you are a
resident taxpayer. It is always advisable to
speak with a suitably qualified wealth manager or
financial adviser to evaluate how your Spanish
property will be taxable and to consider further
complexities, such as the impact on your estate
and exposure to inheritance tax against the value
of your Spanish home in the UK and overseas. For
more information about Financial Advisers in
Spain of the details in this guide when buying a
property in Spain, please get in touch with any
of the three Chase Buchanan teams within Spain or
complete our enquiry form to arrange a call back
at your convenience.
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Source
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erty-in-spain/