Latest news

Real estate in Spain is attractive for many reasons: the country’s near-perfect climate, low cost of living, and now the added incentive of lowered tax rates.  In dealing with the current fiscal climate, which has affected every corner of the globe, Spanish authorities have reduced some real estate taxes in an effort to spark sales.  The transfer of real estate, normally subject to an 18 per cent VAT (value-added tax) assessment upon closure of the sale, currently is assessed at only eight per cent.  If the transfer is not within the Spanish VAT system, an even lower rate of six per cent is assessed.

Add to that the fact that many properties, though certainly not all, have seen reductions in value, and it becomes apparent that knowing the ins and outs of the tax and assessment system in Spain can save buyers quite a bit of money.  Properties located in or near resort areas, and those with higher values such as ‘estate’ properties, have not seen the dips in value of more pedestrian properties.  In fact, many of these higher-end properties have actually appreciated in value even during the soft real estate market.

People who are considered residents of Spain are those who live in the country 183 days per year or more, those whose primary business interests or economic activities are based in Spain, or those whose spouse and/or children reside in Spain. Spanish residents who sell property in Spain pay both personal income tax as well as personal property tax.  Capital gains tax, as part of the personal income tax, may be payable, depending on any difference in property value between original purchase and sale.

Non-residents pay a limited personal income tax if they let out their property in Spain.  The personal income tax paid by non-residents only includes income from the property in Spain itself; other income such as salaries, self-employment income (other than from the property) or pensions from the home country are not taxed by Spain.  Income tax is paid on the gross amount of rental receipts from the property, before deductions for on-going costs like maintenance, repairs, and rental expenses.  The taxes are usually paid quarterly, unless you have only sporadic rentals, in which case you would file a return at the end of each rental period.

Non-residents also pay an additional property tax so long as they own the property on December 31^st of each year.  The taxable amount for this additional tax is based on the value of the property, but it is based on the net value, after subtracting the amount of any mortgage balance.  If the property is owned by a married couple, each must file their own return, listing the percentage of ownership attributable to the individual, which is typically 50 per cent. 

With the Spanish government becoming more aggressive with incentives for investment in real estate in Spain, now may be a very good time to find a hidden gem on one of the Costas or high in the clear mountain air.