Below you will find a brief summary of taxes that you as a non-resident will be obliged to pay to the Spanish authorities as a consequence of owning property in Spain. Some of the taxes are involved in the purchase of a property and others in the sale of the property.
Taxes when purchasing a property:
1. Transfer tax – “Impuesto sobre Transmisiones Patrimoniales” (ITP)
This is payable in situations where there is no VAT e.g when it is a resale property or a purchase of a second-hand property. The tax is due upon signing the contract of sale. As a general rule, transfer tax is 7% of the purchase price. However, many regions apply their own rate of tax.
2. Stämpelskatt (”Impuesto sobre transmisiones”)
This is a tax that you will have to pay when purchasing a newly built property, together with VAT (called IVA in Spanish). A newly built is a property that is being sold for the first time. You’d normally buy this kind of property from a developer or a bank. Stamp duty is normally 1% of the purchase price. However, it may vary in different regions.
3. Council tax – the so called IBI (Impuesto sobre Bienes Inmuebles) and basuras.
If you own a property in Spain and are living in it on 1 January in any given year, you will be liable to pay this annual local property tax. The amount is the rental value multiplied by a tax rate set by the local authorities. The valor catastral is determined according to the size, condition, location, title, lease details, cost of improvements and construction cost of the property. The cadastral value is usually much lower than the market value of the property.
There is also basuras(“recogida residuos sólidos urbanos y alcantarillado”), a rubbish and main drainage collection tax. Usually due once a year and is calculated by the local authorities as well.
4. Income and Wealth tax4
a) Income tax( IRNR “Impuesto sobre la Renta de No Residentes” ) – Individuals who own a Spanish property and have no rental income are required to submit an annual tax return, Form 210, and pay income tax based on the rateable value (“valor catastral”) of the property.
When the property is rented out, a quarterly return and tax payment must be submitted, also using Form 210.If you are a citizen of an EU country, Norway or Iceland all expenditure relating to the rental of the property are deductible for tax purposes. If you are a citizen of a non-EU country, then the full amount of income that you receive is taxable with no allowances. The current tax rate for non-residents is 19% for residents of the EU/EEA and 24% for others.
b) Wealth tax (“Patrimonio”) – Although wealth tax was abolished in Spain in 2009, it has since been reintroduced. Wealth tax in Spain is payable on the value of your assets on the 31 December each year. This is a tax on all of your assets and includes your property. If your wealth is more than €700,000 you will be liable for wealth tax of 0.2–2.5% on net assets, although variations exist within regions. It is an individual deduction.b
Taxes when selling a property:
1. Plusvalía
The “plusvalía” is a local (municipal) tax charged by the town hall on properties when they are sold, whether it is a new build or a resale. It is calculated on the rateable value of property and the number of years that have passed since the property last changed hands. The objective is to tax the increase in the value of the land on which the property stands.
The base for this tax is the “valor catastral”. The amount due in tax will depend on how long the seller has owned the property: the longer the period, the higher the amount of tax. By law, it should be paid by the vendor but is negotiable. If you (the vendor), are not resident in Spain (whatever your nationality), the buyer may insist on withholding funds to pay the plusvalía on your behalf, as the new owner would become liable for the plusvalía in the event of non-payment (i.e. if a non- resident does a runner without paying).
2. Capital Gains Tax (CGT) or “Ganancias y Pérdidas Patrimoniales”
Capital gains tax, paid on profits from selling property or other investments, is charged at a rate of 19% for non-residents. The Spanish Tax Authority withholds 3% from the sale of your property. This is taken directly from the purchaser so that you only receive 97% of the amount the property was sold for. The 3% is a safeguard so that non-residents do not ‘disappear’ before they have settled their CGT account. If more CGT is needed than is covered by the 3% then you will need to provide the extra, if not you will receive a refund. In order to collect any refund, you need to complete a form 210H. This should be submitted within three months of the sale along with the last four years of non-resident income tax. From the date that it is presented you should allow around a year to receive the refund.
3. Income & wealth tax
Bear in mind, that should you sell a property during 2019 you will need to submit your tax return for the 2019 calendar year by 30 June 2020. See more information above under Point 4.
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Mallorcaresidencia
