LOCAL TAXES

There are two local property taxes which are both based on the property’s rateable value, the “Valor Catastral”.  This value is set by the local Town hall, and is adjusted in line with inflation. The rates of tax will vary from region to region due to the varying rates of tax imposed by the regional and local governments.

Local property tax (Impuesto Sobre Bienes Inmuebles (IBI))

This is the main local property tax affecting owners of properties in Spain payable yearly to the town hall. The amount of the tax is calculated by reference to the valor catastral (official value of the property) registered in respect of all properties in Spain. The percentage charged varies from area to area, and is roughly 0.5% to 1%.

Local mains drainage and waste collection tax (alcantarillado y basura)

This local tax payable by the property owner and is related to rubbish collection and drainage. The amount to pay varies from area to area, and should be paid to the local town hall every 3 or 6 months. This tax should be between €200 and €250 per year. In addition, if your Spanish property has a garage entry you are obliged to pay €18 per year.

PERSONAL TAXES

As a non-resident property owner in Spain, you may be liable for income tax, value added tax, wealth tax, capital gains tax and inheritance tax. Individual situations vary considerably and it is best to seek specialist advice from a tax consultant who has knowledge of the Spanish tax system.

Personal Income Tax (“Impuesto a la renta de las personas físicas”) each taxable situation may vary then we suggest you to get advice from an expert but we may mention some guidance in this point. Includes two concepts that are based on the cadastral value (“valor catastral”) which is the official value for taxes purposes. The rate varies in some autonomous community within Spain.

If the property you have bought is your permanent residence, there is an exemption. However, if it is your second residence and it is not rented to a third person, Spanish Tax authority will assume you are receiving an imputed income, which is about 2% of the cadastral value. Additionally, if you are non-resident tax-payer, you are obliged to pay a tax rate between 19% or 24% depending the type, amount of income as well as the country you are tax resident.

https://sede.agenciatributaria.gob.es/Sede/ayuda/manuales-videos-folletos/manuales-practicos/manual-tributacion-no-residentes/tributacion-rentas-comunes-obten-espana-nr/rentas-imputadas-bienes-inmuebles-urbanos.html

https://sede.agenciatributaria.gob.es/Sede/vivienda-otros-inmuebles/tributacion-arrendador-viviendas-otros-inmuebles/tributacion-alquiler-apartamentos-turisticos/impuesto-sobre-renta-no-residentes.html

Capital Gains Tax.- The current level of capital gains tax is set at 19% to 26% for Spanish residents, except to those over the age of 65 that are exempted and those who are selling their permanent address that are exempted while reinvesting in another property for this purpose.

The tax rate is 19% to apply to the Benefit Value for both Spanish Tax Residents and Non-Residents. In the case of non-residents, the purchaser is obliged by law to retain 3% of the sales price and pay it directly to the tax authority (Tesoro Público) as credit for the pending tax. In the case that the 3% is greater than the actual capital gains tax payable, the vendor can reclaim this amount.

https://sede.agenciatributaria.gob.es/Sede/ayuda/manuales-videos-folletos/manuales-practicos/manual-tributacion-no-residentes/tributacion-rentas-comunes-obten-espana-nr/ganancias-patrimoniales/ganancias-patrimoniales-derivadas-venta-inmuebles.html

Wealth Tax- (“Impuesto al patrimonio”)- This national tax is applicable differently depending on the autonomous community you are resident. In Andalucia, the minimum exempted is 2.000.000,00€ of the net wealth value for Year 2022. However, it has been approved to abolish the tax from 2023.

https://sede.agenciatributaria.gob.es/Sede/declaraciones-informativas-otros-impuestos-tasas/impuesto-sobre-patrimonio.html

https://www.juntadeandalucia.es/organismos/haciendayfinanciacioneuropea/areas/tributos-juego/tributos/paginas/impuestos-cedidos-patrimonio.html

Plusvalia

Plusvalia is a tax levied by the local Town Hall based on the particular area where the property is located, on the surface area of the land, on the Catastral value and on the date of the previous title deed. This tax is essentially a tax on the increase in value of the land may range from a few approximately £12 to tens of thousands, on larger properties owned for many years. By law the vendor (seller) is obliged to pay this tax but it is common practise for the parties to negotiate on who is to assume this liability.

https://cpd.sanroque.es/ap/sites_ayto/inicio/app/calculo_plusvalia.php

Inheritance Taxation.- Expats resident in Spain and paying tax are liable to pay Spanish Inheritance tax regardless of the country in which the inheritance is situated. Non-residents are liable to pay Inheritance Tax in Spain only on assets which are physically located in Spain. In Andalucia, is currently subsidised by 99% for spouse and direct relatives.

https://www.juntadeandalucia.es/organismos/economiahaciendayfondoseuropeos/areas/tributos-juego/tributos/paginas/impuestos-cedidos-sucesiones.html

Again, this is a very basic but uncomplicated guide to Inheritance Tax. For a more in-depth guide, you will need to investigate the subject further and get professional financial advice.

There are ways to avoid and minimize Wealth Tax and Inheritance Tax

• Buy jointly with spouse and children and or future inheritors, to spread the wealth.
• Take out a mortgage loan on the property to reduce the Net wealth and liability.
• Buying or owning through a Spanish limited Company
• Buying or owning through an EU company
• Buying or owning through a UK limited company
• Sell the property to future inheritors either fully or partly.
• Organising life insurance ensuring adequate funds to cover the Inheritance Tax bill.

For a more in-depth guide, you will need to investigate the subject further and get professional financial advice.

Holmes Property Sales S.L. does not take responsibility for the accuracy of the information contained in this post, it may be out of date, incorrect or may not be applicable to your personal situation. It is meant to be used only as a guide. If you would like full detailed advise applicable to your own personal situation we recommend you speak to a professional legal and fiscal adviser.

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We all know the background scene by now: faltering banks sitting on large stocks of unsold houses, dropping property prices, rising unemployment and a double-dip recession that just doesn’t seem to end, fed as it is by continued uncertainty about the Euro and Europe’s finances. Even the fact that much of the rest of the world isn’t in a much better position doesn’t reduce the hurt Spain is feeling right now.

But does this mean we should all give up and head for the hills? No, 2012 has so far been a much better year on the Costa del Sol, with increasing enquiries, interest and also sales. While some continue to question whether the property market has bottomed out, the traditional markets are returning, with money in the bank and little requirement for finance. Therefore, the market has actually been enjoying a gentle recovery in highly desirable luxury pockets such as Sotogrande. This is for all the old reasons; a secure long-term investment, an unrivalled climate in Europe, and superb luxury facilities right on your door step.

In areas like this supply and demand are converging and prices are holding their own. Barring any major event this means that the market – at least here – has bottomed out. In other words, now is the time wily investors regard as the ideal moment to buy. The craziest deals came in the wake of the financial crisis, in 2009, but generally speaking property prices now look to have hit their lowest aggregate level since the highs of 2007.

Spain got an important bank bailout and Greece voted pro-Euro and austerity, and yet the scaremongering about the Eurozone won’t go away. We agree that the region, and Spain in particular, faces an era of important economic restructuring and that full economic recovery is some time away, but the glaring focus on the Eurozone ignores the fact that luxury property on the Costa del Sol does not depend on the financial health of Spain, moreover it depends on international money. There are several pockets within Spain that for these reasons are enjoying a much more positive outlook. Fortunately Sotogrande is one of them!

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