Buying is only the first tax event. Once you own a home in Spain, a set of annual taxes begins, and some of them apply even if you never rent the property out. This guide covers the taxes a foreign owner pays while owning, renting and selling. The taxes you pay at the moment of purchase are in the taxes that apply when buying property in Spain.
The rates below are the standard ones, and they can change. Your situation (country of residence, how you use the home, who owns it) changes the result. Treat this as a map and have a Spanish tax adviser confirm the figures and the deadlines for your case. I am a property agent, not a tax adviser.
Which taxes does a foreign owner pay in Spain?
The main ones are:
- Local property tax (IBI) and rubbish charges, paid to the town hall.
- Non-resident income tax on imputed income, if you do not rent the home out.
- Non-resident income tax on rental income, if you do.
- Wealth tax, for some owners.
- Capital gains tax and the municipal plusvalía, when you sell.
- Inheritance or gift tax, when the property passes to someone else.
IBI and local charges
IBI (Impuesto sobre Bienes Inmuebles) is the annual local property tax. It is charged by the town hall on the cadastral value, which is usually much lower than the market value, and the rate is set by each municipality. There is no single Costa del Sol figure, so ask the seller or developer for the latest receipt. Rubbish collection (basura) is billed separately in most towns. Community fees are not a tax, but they belong in the same budget. I cover all the running costs in the cost of owning property in Spain.
Imputed income tax: the tax owners forget
If you own a home in Spain and do not rent it out, a non-resident still files an annual return. Spain treats the property as if it produced income. The imputed income is a percentage of the cadastral value: 1.1% where the cadastral values were revised in recent years, and 2% otherwise.
That income is taxed at 19% for owners resident in the EU, Iceland, Norway or Liechtenstein, and at 24% for owners resident elsewhere, including the UK. As a worked example, a home with a cadastral value of €200,000 and the 1.1% rate has an imputed income of €2,200. The tax is about €418 at 19% or about €528 at 24%.
The return is filed on Form 210, normally by 31 December of the following year. Each co-owner files for their own share. Missing it is a common and avoidable mistake, so put it in your diary.
Tax on rental income
If you rent the home, you declare the income in Spain. The rates are 19% for owners resident in the EU, Iceland, Norway or Liechtenstein, who can deduct certain expenses, and 24% for owners resident elsewhere, who pay on the gross income without deductions. Returns are usually filed quarterly on Form 210. Imputed income may still apply for the months the home is not let.
Tax is only one part of letting. Holiday rental also needs the right regional licence, and your community statutes may restrict it. I do not manage rentals, so I will tell you plainly when a development does not suit holiday letting instead of selling you a yield that may not exist. My view of the rental side of new builds is in rental potential of new builds in Spain.
Wealth tax
Spain has a wealth tax on net assets above an exempt amount, which is €700,000 under the state rules. The state scale runs from 0.2% up to 3.5% on the highest bands. In practice, the result depends on regional rules. Andalusia applies a 100% bonus for residents of the region. Whether a non-resident can use a regional bonus depends on the details of their assets, so this is a point for your tax adviser. A separate national solidarity tax on large fortunes applies to very high net worth. If you are near any of these thresholds, structure the purchase with advice before you complete.
When you sell: capital gains and plusvalía
When a non-resident sells, capital gains tax is charged on the profit at 19% for EU, Iceland, Norway and Liechtenstein residents, and at 24% for others. On a resale, the buyer normally retains 3% of the price and pays it to the Tax Agency on account of that tax. The municipal plusvalía is a separate local tax on the increase in land value, and I explain it in plusvalía explained.
Inheritance and gift tax
A non-resident who owns Spanish property can leave it to heirs, and the heirs can face Spanish inheritance tax. The amount depends on the relationship, the region and the value. Andalusia offers significant reductions for close family. Because the rules differ for residents and non-residents, this is worth a conversation with a Spanish tax adviser and, ideally, your own will review.
UK and other double taxation
Paying tax in Spain does not always mean paying it twice. Spain has double taxation agreements with many countries. If you live in the UK, read the Spain and UK double taxation agreement.
A practical calendar
- Each year: IBI and rubbish bills from the town hall. Imputed income on Form 210 if the home is not let.
- Each quarter: Form 210 for rental income, if you rent.
- When relevant: wealth tax, if you are above the exempt amount.
- On sale or inheritance: capital gains, plusvalía, and inheritance or gift tax.
Many owners appoint a Spanish tax adviser or a property manager to handle the filings. It is usually the cheapest way to avoid penalties.
Planning to buy on the Costa del Sol?
I can help you understand the full cost of owning a specific new development before you reserve, including community fees and the annual taxes. For the tax advice itself, I will put you in touch with an independent adviser. Get in touch and tell me what you have in mind.
