TAX PLANNING IN SPAIN
Taxes to pay when you’re BUYING A PROPERTY:
- New Properties
|Value Added Tax (I.V.A.) This tax is paid by the buyer (goods) or user (services). The Spanish IVA for the transmission of new built property is currently rated at 10% of the price of the property. The IVA tax is paid together with every payment made to the developer of the property.|
|Judicial Documentation Act Tax (A.J.D.) This tax is paid on most of the documents prepared by the Notary (official documents, like the title deed (escritura) as a percentage of the value declared on them. This tax is 1.50 % of the value of the property.|
- Resale Properties
Patrimony Transmission Tax. (I.T.P) This tax is paid on the transmission of resale properties, which are not subject to VAT. Every Spanish region can establish the applicable tax rate, and in the Valencia Community the rate is 10% of the property value.
Taxes to pay when you’re SELLING A PROPERTY:
- CAPITAL GAIN TAX. A capital gain as a result of the sale of real estate property is subject to taxation. When a change in property takes place the income is considered due. In general terms, a capital gain is determined by subtracting the purchase value from the sale value.The tax rate that applies to the transfer of property by non-residents in 2015 is 20% and in 2016 it will be 19%.
The person, who purchases the property, is obliged to withhold and pay to the TAX AUTHORITY 3% of the agreed price. This payment is to be considered in the case of the vendor, as an advance payment of the tax corresponding to the transaction.
Tax-refund of the excess withheld: In case of capital losses or in case that the withholding exceeds the tax due, it is your right to receive a tax refund of the excess withheld.
- URBAN RATES (IBI) OR COUNCIL TAX. This local tax is on property with land and is paid annually, as long as there is a building on the land. It is calculated by the cadastral value of the property (official value registered in the Town Hall, which is usually inferior to the market value). When you buy a property, the seller should pay for the current year.
- PLUSVALIA TAX (URBAN LAND INCREASE TAX). This is a local tax and the local authorities determine the amount of plusvalía to be paid for each house in Spain, depending on the area where the property is located.
NON – RESIDENT TAX WHEN YOU OWN A SPANISH PROPERTY
Personal Income Tax in Spain
Income tax is payable by both residents and non-residents.
If the property is owned by a married couple or by various individuals, each person is treated as a separate taxpayer and must file returns separately.
A non-resident in Spain have to pay two types of taxes each year:
- Local Taxes (Council Tax/ IBI).These taxes are paid directly to your Town Hall or via the SUMA offices. (also for the residents)
- Government Taxes (Income Tax). These taxes are paid to the Agencia Tributaria (Tax Authority). Only for Spanish income tax, at fixed rates. The general tax rate will go down in 2015 from 24.75% to 20% for non-residents from EU countries or countries in the Euro monetary zone with a signed agreement with Spain. The rate for other countries will be 24%.
Filing period: January 1 – December 31 of the following year.
A resident of Spain is liable for tax on their worldwide income at scale rates after any available allowances and deductions.