With its vibrant culture, tasty food and picturesque beaches, Spain is one of the most chosen places by expats to live in, specially in Marbella. However, to do this you will need to be in the know on the tax implications of owning a second home in Spain and when you will need to pay the taxes by. In this article we are going to cover what taxes you will be expected to pay as a homeowner in spain.
The first tax that needs to be taken into consideration when buying a property in Spain is the wealth tax. The wealth tax is calculated on an individual basis, and calculates the tax depending on the total value of the assets owned by the person. This tax is only calculated when the property purchased has a value of over 700,000 euros.
Another tax that needs to be taken into account when purchasing a property in Spain is the income tax. This tax is for non-residents only as it is based on the amount of income that you earn from your property in Spain. In the case that you rent your property out when you are not there, then you would pay a percentage of this. However, in the case that you do not rent out your property, you would need to pay a certain percentage of the property value. This tax is based solely on the property value, as any normal income you may have needs to be declared in the country you live in. In order to be able to pay this tax it is vital that you have a NIE (número de identificación de extranjero) which works as your Spanish tax number and should be provided to you in order to purchase your property.
Annual real estate tax
The annual real estate tax (impuesto sobre bienes inmuebles) is based on the cadastral value and changes annually based on inflation. The cadastral value is the appraised value of your property – which can vary greatly depending in which province your property is located. The cadastral reference number provided here is especially important as it identifies your property at the cadastral office which can help cut out any confusion if any discrepancies appear between the description of the property and the description of the property that is on the deed.
Spanish income tax
When you purchase a second residence in Spain, you will be responsible for paying this tax on an annual basis. This tax is calculated as 2% of the cadastral value of the property, and can be reduced, in cases, to 1.1% when the cadastral value has been raised since 1994. This figure then needs to be multiplied by the cadastral value of the property and then taxed by 19.5% for those within the EU or Norway, or by 24% by all of those outside of the EU (which now includes the UK) This tax must be paid by the 31st of December and can be done so, by filling out the form modelo 210.
Now that we have covered the main taxes in Spain, we will quickly go over the additional costs that you may incur when purchasing a property. When purchasing a property in Spain it is recommended that you save between 10% and 12% of the property value for expenses such as the valorization of the property, the notary, the registry and other taxes such as the VAT. Whilst these expenses are all obligatory, they can vary based on if the property is a new build or a second hand home.
When purchasing a new-build home in Spain you will need to pay VAT and the Documented Legal Acts tax (ADJ) which varies from region to region. In the case that you are purchasing a pre owned property, then you only need to pay the Property Transfer Act (ITP) which is based on the percentage applied, by the autonomous region, to the registered price. The percentage can be reduced in cases of people with disabilities, young people and large families to 4%.
Whilst the tax side of owning a second residence in Spain might be hard to get your head around to at first, it is more than worth it as not only an investment but also as a step to improving the quality of your life. We here at Levy & Goldman put your comfort and well being above all else, and this can be seen reflected in our range of exclusive properties. Contact us and one of our agents will get in touch with you so that you can get started on your dream of owning a property in Spain today.