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Key property tax considerations when moving to Spain

The Spanish property market has long been attractive to overseas investors and regardless of what happens with Brexit, Spain’s “Golden Visa” programme makes it possible for anyone, regardless of nationality, to obtain residency in the country upon purchasing property within Spanish territory to a value of at least €500,000 per applicant.

Under Spanish law, a husband and wife (and children under 18) can be considered as a single applicant. This means that those looking to Spain as a retirement or holiday destination can buy with confidence about their ability to live in their chosen property. While Spanish real estate professionals are often used to dealing with international buyers, it’s a good idea to do some homework before you even start looking for a property and in particular to grasp the basics of Spanish property law.

When buying, tax depends on whether or not a property is new build

If you are buying a new-build property, you will pay IVA (VAT), whereas if you are buying an existing property, you will pay Property Transfer Tax. In either case, you should allow for up to 10% of the property value. As a buyer, you will probably also need to pay title deed tax and the land registration fee, but these are very low cost, typically in the region of 1% to 2.5% of the purchase price. Unless you are getting a mortgage, the only other cost you will be expected to pay as a buyer is notary costs.

When selling, capital gains tax is now the same for residents and non-residents

Spanish capital gains tax works rather differently from CGT in the UK in that it applies at least to some extent regardless of how long you have lived in the property, unless you are over 65 and have lived in the property for at least three years. If you are a Spanish resident, then you must declare the profit from the sale on your tax return. If you are not, then 3% of the sale price will be withheld by the authorities and you will then have to pay the balance within 3 months.

Inheritance tax is the same for residents and non-residents

Up until 2014, inheritance tax in Spain discriminated between residents and non-residents, this was discrepancy was removed with effect from 1st January 2015.

Renting is relatively unusual but can be a good option

Home ownership is strongly ingrained in Spanish culture, but rental properties are available and may be the most appropriate option for those who wish to make shorter stays. Those who wish to rent out a property they own should be aware that they will need to pay tax in Spain on any income generated from property located in Spain.

Spain’s rules and taxes vary widely between regions

Spain is one of the most decentralized countries in the world and certainly in Europe, hence each of the 17 autonomous regions has a high degree of freedom to organise its tax structure as best suits its need. In the Canaries, for example, there are a number of tax incentives to encourage the development of business in the area. For this reason, anyone interested in moving to Spain and starting their own business to generate a post-employment income might be particularly interested in this region.

Author: Mark Burns

Hopwood House

DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. 

Published on 1st August 2017
(Last updated 21st March 2018)

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