If you’re a first-time buyer in Spain, it’s crucial to understand the different property taxes you may have to pay. This guide on “Property Taxes in Spain for First-time Buyers” will provide you with an overview of the taxes you can expect to pay, such as IBI, IRPF, Plusvalia, VAT (Spanish VAT is referred to as IVA.), transfer tax, notary fees, property registration fees, and wealth tax.
Impuesto sobre Bienes Inmuebles (IBI)
The Impuesto sobre Bienes Inmuebles, or IBI, is an annual tax that property owners in Spain must pay. The tax is based on the cadastral value of the property and is used to fund local services like street cleaning, rubbish collection, and public lighting. The cadastral value of the property is assessed by the local government, and the amount of IBI you will pay depends on this value. It’s essential to pay your IBI on time to avoid interest charges and penalties.
Impuesto sobre la Renta de las Personas Fisicas (IRPF)
The Impuesto sobre la Renta de las Personas Fisicas, or IRPF, is the Spanish income tax paid by residents and non-residents. As a non-resident property owner in Spain, you’ll need to pay IRPF on any rental income you earn from your property. The rate of tax you pay depends on your income level, and you’ll need to submit an annual tax return to the Spanish tax authorities. It’s important to keep track of your rental income and expenses to ensure that you’re paying the correct amount of tax.
Plusvalia
Plusvalia is a local tax paid by the seller of a property in Spain. The tax is based on the increase in the value of the property since the last transfer of ownership. As a buyer, it’s important to note that you won’t be responsible for paying plusvalia – this tax is the seller’s responsibility. However, it’s essential to factor this cost into your budget when negotiating the purchase price of the property.
IVA / ITP (Impuesto de Transmisiones Patrimoniales)
- IVA or transfer tax (ITP), which is paid when buying a new or resale property, respectively. The rate of tax varies depending on the property’s value and location. The buyer is typically expected to pay this, so be sure to factor this in when you are purchasing.
- The typical rate of IVA on new properties for the Costa Blanca region is 10% of the property value. However, there are some exceptions, such as properties classified as social housing, which may have a reduced rate of 4%.
- On the other hand, the typical rate of transfer tax ITP when buying a resale property in the Costa Blanca region varies depending on the autonomous community where the property is located. In the Valencian Community, which includes the Costa Blanca, the current rate of ITP is 10% of the property value.
Notary fees and property registration fees
Notary fees and property registration fees, which are paid for the legal process of transferring property ownership. The fees are typically paid by the buyer and can vary depending on the property’s value and location.
- The notary and registration fees in the Costa Blanca region of Spain typically depend on the value of the property being purchased. These fees are set by law and are based on a sliding scale, which means that the higher the property value, the higher the fees will be.
- As a rough estimate, for a property with a value of around €150,000, the notary fees in the Costa Blanca region could be around €600 to €800, while the property registration fees could be around €400 to €600. However, it’s important to note that these are just estimates, and the actual fees may vary depending on the specific circumstances of the property purchase and the notary and registration offices used.
- These will of course be in addition to the fees being charged by your legal representative for organising this and making sure everything is in order with your purchase.
Wealth tax – Impuesto sobre el Patrimonio or the Patrimonio Tax (IP or IPRF) / Impuesto sobre la Renta de las Personas Físicas
Wealth tax is a tax that is levied on the net worth of individuals. In Spain, this tax is called the Impuesto sobre el Patrimonio or the Patrimonio Tax. The wealth tax applies to Spanish residents and non-residents who own assets in Spain, including real estate.
The wealth tax is calculated on the net worth of the individual, which is the difference between the total value of their assets and the total value of their liabilities. The tax rate is progressive, meaning that the more wealth an individual has, the higher the tax rate they will pay.
In the case of real estate, the taxable base for the wealth tax is the cadastral value of the property. The cadastral value is the assessed value of the property used for tax purposes, which is usually lower than the market value.
In the Costa Blanca region, the wealth tax rate can vary depending on the value of the property and the wealth of the individual. The tax rate starts at 0.2% for assets under €700,000 and can go up to 2.5% for assets over €10,700,000.
Example based on a 100,000 euro purchase
Bear in mind this has been based on the purchase price and no assumptions have been made to the cadastral value of the property, nor have the fees for your legal counsel been included. Here’s an itemized list of the approximate charges that would be levied on the purchase of a property with a purchase value of 100,000 euros on the Costa Blanca region of Spain:
- Transfer tax (ITP): 10% (10,000 euros)
- Notary fees: 600 euros
- Property registration fees: 400 euros
- Wealth tax (IP): Varies depending on the net worth of the buyer, but assuming a net worth below 700,000 euros, the rate would be 0.2% on the value of the property, which would be 200 euros.
Therefore, the approximate charges for the purchase of a 100,000 euro property on the Costa Blanca region of Spain would be around 11,200 euros, which includes transfer tax, notary fees, property registration fees, and wealth tax. It’s important to note that these charges are approximate and can vary depending on the specific circumstances of the buyer and the property.
It’s important to note that the various taxes in Spain are subject to change and may vary depending on the individual’s circumstances, therefore you should always consult with a tax professional or a legal advisor to ensure that you’re meeting all your obligations as a property owner in Spain.
- Spanish Tax Office (Agencia Tributaria). (n.d.). Agencia Tributaria. Retrieved from https://www.agenciatributaria.es/AEAT.internet/en_gb/Inicio.shtml
- Spanish Ministry of Finance (Ministerio de Hacienda). (n.d.). Ministerio de Hacienda. Retrieved from http://www.hacienda.gob.es/en-GB/Paginas/Inicio.aspx
