The most common Spanish taxes are:
- Income tax
- Capital tax
- Real estate tax
- Tax on land valuation
- Capital gains tax
- Transfer tax
- Construction tax
Income tax (= IRPF: Impuesto sobre la renta de las personas físicas)
Income tax in Spain is progressive, ranging from 24% to 45%, and is levied on your worldwide income. The tax applies to anyone who is resident in Spain. Foreigners are considered tax resident in Spain if they have a Spanish residence permit (residencia) or if:
- They stay in Spain for more than 183 days per calendar year;
- Their personal and professional or business activities and interests are mainly played in Spain;
- Their spouse (s) and / or children (financially dependent on them) are resident in Spain.
If you are a resident and your taxable income remains below the tax-free rate, it is advisable to report income tax. You can then submit a so-called “nihil declaration” (which allows you to prove that you have made a declaration at least). This is a prerequisite for eligibility for renewal of your residencia.
Non-residents (foreigners who do not meet the above criteria) should also pay income tax in Spain if they own Spanish real estate. Income tax then refers to the so-called “rental value” of the home. About 2% of the cadastral value (valor catastral) determined by the municipality is subject to 25% tax. Has the municipality revised the cadastral value of the property after 1994, then a percentage of 1.1% instead of 2% applies.
- New: Due to the economic crisis, an extra crisis rate will apply from 2012, from 0.75% to 7% (depending on the tax rate), in addition to the regular tax rate.
Capital tax (= Impuesto extraordinario sobre el patrimonio)
Although 2008 tax relief was abolished in Spain, it was reintroduced for taxpayers in connection with the economic crisis in 2011. A tax resident is only taxable for capital tax if his worldwide assets exceed € 700,000 (per person), including the value of his own property in Spain. For this home (which serves as main residence), a separate exemption of up to € 300,000 applies. At 31 December of each year, net assets (assets minus debts) are progressively taxed, depending on the tax rate increasing from 0.2 to 2.5%.
For non-residents, this capital tax does not apply to global assets, but only to the potential assets in Spain that they hold above the exemption limit. The exemption of € 300,000 for the possession of a private home does not apply to them because they are not residents and therefore do not have a home in Spain which serves them as principal residence.
- New: The Spanish government plans to abolish capital gains tax (in 2014?) As soon as the economic situation allows.
- New: Since 2013, each tax resident has the obligation to inform the Spanish taxpayer of his foreign assets
Real estate tax (= IBI: Impuesto sobre bienes inmeubles)
Each property owner in Spain pays between 0.3% and 0.9% (with outliers up to 1.3%) property tax (IBI) per year on the value of the property, depending on the municipality to which the property belongs. . This value, the valor catastral, is determined by the municipality. It is not unusual that there are significant increases in the valor catastral periodically, as municipalities strive to close the valor catastral closer to the real market value of the property.
The municipality will send you an assessment annually (usually between June and September) and then pay this tax at the municipal tax office (SUMA). After the initial assessment and payment, you can also direct the IBI by direct debit. To do this, you must complete a form (domiciliado) at the tax office, so that the IBI will be automatically debited from your Spanish bank account automatically.
In addition to an assessment of property tax, many municipalities receive a tax assessment of the municipal waste collection center (Recogida de Basuras). This assessment can also be met by automatic payment.
Tax on value increase of the land (= Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana)
This tax on the value increase of the land – in Spain shortly plus valia – should be paid to the municipality when selling the property. The plus valía is therefore not levied on the property itself but on the land on which the property is situated. Also, when selling an apartment, the part of the property belonging to the apartment should be paid plus valía. For the calculation of the plus valia, the municipality takes the valor catastral (cadastral value) of the ground as a starting point. The height of the plus valía is then dependent on the number of inhabitants of the municipality and the number of years the seller had the property in his possession. The maximum period for which this tax is calculated in Spain is basically 20 years. When selling the property (and the ground), the seller must pay this tax to the municipality. If the seller fails, the buyer is liable for payment of the plus valia.
Capital gains tax (= Impuesto sobre incremento de patrimonio de la venta de un bien inmueble)
This tax is not about the value increase of the land, but about the value increase of the building. The capital gains tax is levied in Spain through income tax (and potentially capital tax) and is calculated on the difference between the value of the property upon purchase (as stated in the “old” Escritura) and the value on sale (as stated in the “new “Escritura”). At the purchase price, the owner may add a number of costs, as they increase the purchase price, such as the paid transfer tax or IVA, registration fee and costs of expansion / renovation of the property. In addition, the costs incurred in connection with The sale of the property will be deducted from the selling price, eg brokerage and taxation costs. In addition to these selling and selling costs, a government-adjusted inflation adjustment (which depends on the year of purchase of the property) may be applied over the years in which the owner of the property was owned.
The capital gains tax rate is progressive and ranges from 21% (over profit to € 6,000) to 27% (over profits above € 24,000).
If the seller of a property in Spain is non-resident, the notary is obliged to retain 3% of the Escritura value and to pay it to the Spanish taxpayer. This 3% deduction is not a final tax, but a provisional tax. The seller is obliged to report on the sale of his property within 3 months and to indicate what the actual capital gain is and what amount of capital gains tax owed. If the 3% paid is insufficient, payment must be made.
- New: As of 2013, for residents, profits on real estate achieved within one year after purchase are taxed progressively in income tax (depending on one’s income ranging from 24% to 45%).
- New: The exemption and discount schemes for the capital gains tax of sold homes purchased before 1996 will expire from 2013.
Transfer tax (= Impuesto de Transmisiones Patrimoniales)
If you buy an existing house from a private individual, you will pay tax in Spain on the amount stated in the Escritura. Depending on the province, the ITP rate varies from 7% to 10%. In addition, you pay stamp duty (all applicable to new construction) the so-called AJD (Impuesto sobre Actos Jurídicos Documentados), which varies from 0.5% to 1.5%, also depending on province (and municipality).
If you buy from a project developer or contractor, you do not pay a transfer tax, but 10% IVA (VAT).
In order to pay less transfer tax, the Escritura (and is) often gets a lower value than the actual value. However, when selling the property, you must pay tax in Spain on the profit. A lower purchase value in the Escritura means that the profit on sales increases and you should pay a higher capital gains tax on sale. The benefit of the purchase is thereby resumed on sale. In addition, it is increasingly common for the buyer to be subject to a surcharge (plus interest and fine), if the stated value in the Escritura is clearly lower than the real market value.
VAT (= IVA: Impuesto sobre el Valor Añadido)
IVA on real estate is calculated only when purchasing real estate or (construction) of a property through a project developer or contractor.
If you buy building land from a project developer or contractor, you pay 21% IVA over the purchase price of the land. If you buy building land and directly build a new building on it by a project developer or contractor, you will pay 10% IVA on the whole. If you buy the ground first, you will pay 21% IVA, even if you later build a house. About this new building you pay 10% IVA. If you simultaneously build a garage or a swimming pool at the new building, you also pay 10% IVA. However, at a later stage, you can build a swimming pool or garage at an existing house, then you pay 21% IVA. If you buy an existing house from a project developer or contractor, you will pay 10% IVA. About smaller renovations (which are less than 25% of the cadastral value) you pay 21% IVA. About renovations that amount to more than 25% of the cadastral value, you pay 10% IVA.
In addition to the above-mentioned IVA, you will also be subject to seal tax, the so-called AJD (Impuesto sobre Actos Jurídicos Documentados). This seal tax varies from 0.5% to 1.5% and differs by province and even by municipality.
- New: As of 2012, the IVA rate has been increased from 18% to 21%. The special low IVA rate increased in 2013 from 4% to 10%.
Construction tax (= Impuesto sobre construcciones, instalaciones y obras)
In addition to the cost of a building permit, the municipality will calculate the building costs of your future property as specified by the architect or contractor. The tax rate differs by municipality. The base rate is 2%, but may sometimes be higher. This construction tax is due at the time of construction commencement, regardless of whether the municipality already issued a building permit. As soon as the house is delivered, an escritura de Obra Nueva (New Construction Act) has to be prepared by the notary. About the value included in this Escritura, the municipality charges another 0.5% and 1% building tax. This percentage also differs
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