Last Updated on September 29, 2023 by Kristina Valcheva
If you are a foreign investor thinking about buying or selling a property in Spain, this is possibly one of the best times in decades to do it.
Many thought the pandemic would be devastating for the real estate market, but the number of people wanting to buy Spanish real estate has increased.
Spain’s enticing beauty and climate have stolen many hearts over the centuries.
This country is an appealing destination due to its stunning beaches, impressive architecture, excellent food, iconic sites, and incredibly rich culture.
The thriving tourism industry and a well-developed economy are factors that are paying off in Spain’s favor.
In fact, according to the World Tourism Organization data, Spain is the third most visited country in the world following the United States and France.
All these factors lead to a boost in interest from local and foreign investors.
Construction companies are racing to meet the demand for new-built, residential property across the Spanish coastline, and developing inland cities.
Prices are on the rise with a stable trend up in the coming years.
A wide range of real estate types is on the market – from high-end luxury properties to common single-room apartments, from excellent rural old houses to new neighborhoods in the cities.
Demand for Spanish properties is high, both to purchase and to rent out to holidaymakers and workers.
So, if you seek to make a profit from reselling, offering your property on Airbnb, or just securing your savings with good interest, Spain has all the potential you are looking for.
With that in mind, here is everything you need to know about the details of buying and selling property in Spain, as well as your basic tax responsibilities.
Is it a good time to buy property in Spain?
Let’s face it – we’re living in unusual and uncertain times.
If you are considering or are in the process of purchasing a home in Spain, you may be wondering if now is the right time to do so.
However, now is the perfect time to invest in Spanish property according to some experts.
While the housing market slowed during the country’s first coronavirus lockdown, demand began to rebound as restrictions were eased.
In 2023, the Spanish real estate market is expected to become more stable, with the possibility of some reduction in property prices.
There are varying opinions among experts on the potential price changes, with projections ranging from a decrease of three percent to an increase of four percent, due to the current uncertainty surrounding the economy.
Despite this uncertainty, the Spanish housing market is considered by many experts to be one of the top-performing markets in Europe for the year 2023.
Is Spain a good place to invest in property?
Spain has year-round sunshine, a magnificent coastline with amazing beaches, a relaxed lifestyle, and a lower cost of living when compared with many other European countries.
Spain’s location is beneficial too. Close to Portugal and France, Spain is just a short flight from the UK, Italy, Germany, and North Africa.
Spain, as a prominent tourist destination, offers a diverse choice of accommodation options.
The pandemic has made the country more appealing to foreign investors and expats in the last year.
The Mediterranean coast is currently in high demand, and Andalusia is still popular.
The good news is that, in general, Spain has a lot to offer for a mid-to-long-term investment, and with careful planning, research, and due diligence, investors can find a gem that turns out to be a sustainable future cash source.
Can foreigners buy property in Spain?
Yes, without a doubt!
Spain favors international investment, both resident and non-resident.
In Spain, there are no limits on purchasing property, whether commercial, residential or land.
What’s more, if you purchase a home for more than €500,000, you may be eligible for a Golden Visa.
Am I considered a resident or non-resident in Spain for tax purposes?
It is also critical to understand whether you are a non-resident or a resident of Spain.
The Spanish Tax Office considers a person to be a legal resident in Spain if any of the following conditions are met:
- the individual spends more than 183 days of the year in Spain.
- the individual’s economic activities are centered in Spain.
- when a non-legally separated spouse and her/his dependent underage children normally reside in Spain.
On the other hand, if you just spend 1 to 182 days in the country, you will be considered a non-resident.
Spanish property ownership and tax
If you are a non-resident in Spain, there are specific tax implications whether you buy, sell, or own a property.
This also applies to improvements you’ve made, as long as you have legitimate invoices for the service.
What documents do I need to sell property in Spain?
Here are some of the documents you will need if you decide to sell your property:
- Certification of ownership:
- Title deed or deed of the house – You received this document when you bought the property.
- Identity document – The document that allows citizens to be identified personally and unequivocally. “NIE” (Foreigner’s Identity Number) is one example.
- Certifications that prove you are up to date with payments, copies of utility bills
- Land registry record or “Nota simple registral”
- (IBI) Property Tax or “Impuesto sobre bienes inmuebles”
- Certificate stating there are no outstanding debts with the resident’s association or “Certificado de estar libre de pagos de la Comunidad de Vecinos”
- Certificate of outstanding debt and cancellation of encumbrances in the Registry or “Certificado de deuda pendiente y Cancelación Registral”
- Your residencia card if you have residency status
Some other documents that you might need:
- Energy Performance Certificate (EPC) or “Certificado de eficiencia energética”
- Report of Building Inspection or “Certificado de Inspección Técnica del Edificio (ITE)”
- Certificate of Occupancy or “Cédula de habitabilidad”
What is NIE (Numero de Identidad de Extranjeros) and why do you need it?
In Spain, your Tax Identity Number is the NIE (Numero de Identidad de Extranjeros, is your Foreigner’s Identity Number).
There are various occasions when you will most likely be asked to provide your NIE number.
- when you sell or buy real estate
- you open a bank account
- when you deal with utility companies
- when you obtain insurance
- when you deal with the Spanish tax authorities
- you sell/ buy stocks, bonds, shares
- when you buy a car
What are the fees and costs when selling a house in Spain?
As a seller, you will have to pay:
- Estate agency fees (around 3-6%)
- A certificate of energy performance (costing between €150 and €500)
- If you sell for more than you bought it, you must pay capital gains tax (see below)
- Plusvalía tax (we will explain more below)
What taxes should I pay when I sell a property in Spain?
There are a number of taxes to consider if you are a non-resident selling real estate in Spain.
When selling a house in Spain, you must be aware of Plusvalia and Capital Gains Tax.
The Capital Gains Tax rate is between 19% and 24%, and Plusvalia is a percentage of the transaction.
What is the PlusValía tax?
In Spain, plusvalia is a municipal tax paid to the local Town Hall in the area where the property is situated.
When the seller is a non-resident, the buyer could be held liable for the payment, so it is necessary that you or your lawyer ensure that the Plusvala Municipal is paid within 30 days of the sale.
The value depends on the growth in the cost of the property, known as valor catastral, as well as the number of years you have had it.
Plusvalia is due even if you lose money selling because the land value rises every year, regardless of the real market worth of the property.
In Spain, the official value of land always rises, even when actual values drop.
*IBI or the Impuesto Sobre Bienes Inmuebles, is a tax that all property owners in Spain are required to pay. Also referred to as property tax.
What is the IRNR or the capital gains tax in Spain?
If you sell property, you must pay IRNR or capital gains tax on your sale profits.
The difference between the purchase and sales values must be included when calculating the IRNR:
- The property’s acquisition value – The purchase price plus notary fees, land registry fees, and other fees incurred as a result of the purchase. Furthermore, the improvements and investments made to the property will be included.
- The property’s sales value – The price at which the property is sold plus the costs of the sales procedure (real estate agency, notary’s office, etc.).
Non-residents from EU/ EEA countries pay 19% capital gains tax, whereas non-residents from other countries pay 24%.
If you are not an official Spanish resident, the buyer is obligated to pay the tax authorities 3% of the purchase price after completion of the sale.
This will be deducted from any capital gains tax liabilities you may have. You must pay any remaining balance within 30 days of the sale, or you may seek a tax refund, if applicable.
If the percent withheld exceeds the taxes due, the seller is entitled to a refund once all taxes are paid.
However, if the seller’s tax bill exceeds the percent retention, the Spanish tax authorities may pursue the vendor back home, although it is rare.
This tax retention is referred to by a variety of terms in both English and Spanish. It is known as the’retención (sobre la venta de inmuebles) a cuenta del impuesto de la renta de los no-residentes’ in Spanish, and the capital gains tax retention on property sales in English.
Some individuals also refer to a withholding tax, which is money that is withheld, deducted, or held back from a property sale in Spain.
If the vendor believes he is entitled to a refund, he has three months to submit Form 212 demanding a refund. This procedure is carried out at the local tax office (delegación de hacienda).
This tax rebate does not apply automatically, that’s why you must hire a lawyer or a tax expert to do it on your behalf who will actively seek it.
On average, it takes less than 6 months. In the unlikely event that it takes more than a year, the tax office will pay legal interest on top (3% in 2021). You are paid more for the delay than any high street bank now pays on savings.
Be aware that if there are any minor errors in the documentation, the tax authorities will use these to delay any refund. As a result, ensure that all of the information on your 212 reclaim form is correct.
What taxes should I pay when I buy a property in Spain?
Buying a property entails paying various taxes ranging from 8% to 11.5 %, depending on whether the house is newly built, or the property has already been owned by another person, which is known as a resale.
As a non-resident, you must pay Income Tax (including Capital Gains Tax), Property Tax, and Non-resident Tax in Spain.
If your property is new
When you buy a new-build property in Spain, you must pay two taxes:
- VAT (IVA in Spanish) is a 10 % tax applied on the purchase price. For example, if you buy a new-build property in Mallorca for €950,000, you must pay €95,000 in VAT.
- Stamp duty (legal documentation tax/AJD in Spanish) is set at 1.5 % of the sale price. In the case of the abovementioned villa, you would have to pay €14,500 in AJD.
If your property is resale
Transfer tax (Impuesto de Transmisiones Patrimoniales/ITP in Spanish) is the only tax you will have to pay on resale property purchases.
The amount owed is determined by the property’s value and is calculated on a sliding scale.
In 2020, ITP is:
- 8% on properties worth up to €400,000
- 9% on properties costing between €400,000 and €700,000
- 10% off properties priced over €700,000
What other fees should I pay when I buy property in Spain?
Some of the fees you will need to pay include:
- land registry fees
- notary fees
- real estate agent costs
- legal fees
- Gestoría fees
- banking costs
- mortgage fees
What you need to know about tax if you rent out your Spanish property
Spanish tax on rental income is different for tax residents and non-residents.
The distinction is in the tax rates, rental property tax deductions, and the frequency of declaring your income.
However, both residents and non-residents must file a Spanish property tax return.
If you are a non-resident and rent out your home in Spain, you must file a tax declaration for each quarter in which you receive rental revenue.
Non-residents are liable to the flat non-resident Income Tax (IRNR, Impuesto Sobre la Renta de Personas No Residentes), which is a 19% flat tax rate if you live in an EU or EAA country.
If you are not a resident of the EU or EAA, the flat tax rate is 24%.
You must file a deemed tax return if your property is not rented out.
If you want to know more, check out our guide on Non-resident Tax in Spain.
Who can help me deal with my Spanish property taxes?
Do you feel overwhelmed and stressed by the prospect of dealing with tax papers?
Did you know that, besides your tax duties, you can also claim a Spanish tax refund?
What’s more, with the help of an experienced tax expert, you will be able to claim all the tax credits and deductions applicable to your personal circumstances.
We are here to help you!
PTI Returns’ tax specialists can help you file your Spanish tax return online and claim your refund.
Why choose PTI Returns?
Save time and stress – Our property tax specialists will handle all the tricky tax paperwork
Peace of mind – Property Tax International (PTI Returns) is part of CluneTech (formerly known as Taxback Group), employing over 1,500 people in more than 20 countries worldwide. We have more than 25 years of experience in international tax and we will keep you compliant with the Spanish tax authorities
Convenient service – Our service is online and we will transfer your tax refund straight to your bank account anywhere in the world
Your questions answered – If you have any questions that we did not answer, you can request a free callback from our tax experts
No language barrier – Our tax experts will deal with language barriers and with the local tax office
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