Real estate in Spain and taxes. A practical guide
The growing interest of foreign investors in real estate in Spain can be seen clearly. For five years, there has been a real boom in buying apartments, houses and residences in this country. A significant group of foreign investors are Poles, who are looking for safe and profitable destinations in the sunny part of Europe. We check how to prepare for the purchase of real estate so that no costs surprise us.
Whether you are buying an investment property or planning to move to a home in Spain, buying a property abroad can be exciting for buyers, but it can also be a source of anxiety, especially if you are new to the subject. When planning to buy a house or apartment in Spain, it is worth remembering that in addition to the transaction price, there are additional costs to consider, such as taxes, registration fees and notary fees. A reliable and experienced specialist should remind buyers to include these in their total investment budget.
ITP and VAT taxes payable when buying a property in Spain
Real estate taxes in Spain vary not only depending on the primary or secondary market, but also depending on the region. In the case of the secondary market, the property transfer tax (ITP) is progressive and ranges from 6 to 10 percent in almost all of Spain. The exceptions are the Costa Blanca, where, apart from Murcia, the tax is 10 percent of the purchase price, and Andalusia, where the tax is 7 percent regardless of the transaction value. When buying a property on the primary market, you have to add VAT of 10 percent to the price offered by the developer and the tax on legal transactions (AJD) of 1.2 percent of the purchase price (here, too, there may be differences depending on the region).
Additional costs
Another cost is the notary fee, which is charged according to the value of the apartment or house, and the fee for entry in the land register, which is about 60 percent of the notary fee. Investors who partially finance the purchase of real estate with a mortgage loan must expect to pay the property valuation, tax on legal transactions and bank commission.
Fees due after purchasing real estate
In Spain, as in Poland, there are a number of fees and taxes related to owning real estate. These include: real estate tax (IBI), waste collection tax (basura) and non-resident property tax (IRNR). These taxes are levied by the municipality where the property is located.
Property rental taxes in Spain
A Polish tax resident who rents out their property in Spain is required to pay tax on the income earned in this country. This means that the rental must be reported to the local tax authorities, and residents of the European Union must pay 19% income tax on the income earned. Citizens of non-EU countries pay a higher rate, 24%. EU citizens are required to include income from abroad in their annual tax return filed in their home country. Details are regulated by the regulations on the avoidance of double taxation.
The calculation of tax due on income earned abroad (in this case from renting out real estate in Spain) is based on the proportional deduction method. In practice, this means that income earned abroad is taxed in Poland, but the amount of tax paid in Spain is deducted from the amount due.
Worth knowing!
The requirement for Polish tax residents to report foreign income to the Polish tax office also exists when they do not earn any other income in Poland, apart from that earned abroad.