It's time to purchase your first property.
Spain seems like an obviously idyllic location with its links to the industry, outdoor bar culture and beautiful scenery.
But when you see a property which is attractively priced, it may not tell the full story.
No matter where in Spain you are looking to purchase, there will always be taxes to be paid.
Complexities arise in that each region will determine the applicable rates individually.
Whilst this may be the case, the types of tax to be applied are generally similar across the board.
Read on to find out more or click a link below to jump chapter.
An exemption from wealth tax is allowable for both residents and non-residents of Spain covering the first €700,000 of assets owned.
If assets are valued above this level, rates of tax are staggered in bands.
It is important to remember here that wealth tax is applied to your assets as a whole.
If you already own other significant assets in Spain, the value of these will need to be considered on top of the total value of your new property.
However, you can also claim any Spanish loans against the value of these assets in order to reduce the total value of your assets for this purpose.
It is also important to remember that wealth tax is charged annually and is charged based on whether you own the assets in question on 31st December of each year.
Property Transfer Tax
Upon the transfer of ownership either one of two taxes will be payable dependent on whether the property is newly built:
Newly Built Property
If the property is newly built, you will be liable to pay Impuesto sobre el Valor Anadido.
This is a form of VAT chargeable on a one-off basis at a rate of roughly 10% of the property value.
Property Not Newly Built
If the property is not newly built you will pay Impuesto sombre transmissions patrimoniales, a form of property transfer tax, at a rate between 8 and 11% of the property’s market value.
The exact percentage to be paid will be dictated by the characteristics and more specific location of the property.
Actos Juridicos Documentados, a form of stamp duty, will be payable at a rate equivalent to roughly 1.2% of the market value of the property.
This is a one-off payment to be made at the point of purchase.
Impuesto sobre Bienes Immuebles (IBI) is a form of council tax which must be paid on an annual basis.
The percentage amount to be paid will be decided by the local tax authority dependent on the location, size and value of the property.
Navigating the minefield of tax legislation surrounding purchasing in Spain can seem daunting, but it needn’t be.
If you are thinking of purchasing property in Spain and are unsure of the tax liability that you will face, use our tax consultation service for a personalised report based upon your circumstances.
If you have any other questions regarding this article get in touch today, or let us know your thoughts in the comments section below.
Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.