Spain property-related taxes and post-purchase costs (Part I)

Just bought a property in Spain?

These are the taxes and costs to budget for!

Passport in hand? Suitcases packed? Ready to start your new chapter in Spain? Excellent!

Purchasing a property abroad opens a treasure trove of promises and dreams! You’ll meet new people, enjoy totally different landscapes, partake of our many festivals and traditions and enjoy the wonderful weather in most of our geography.

However, as exciting as this new stage in your life is, it’s extremely important you are well informed and well accompanied from beginning to end.

Our mission at Fuster and Associates is always to keep you informed and to make sure you have all the tools you need to make educated choices.

We want you to feel as secure and confident about your new life as possible!

And while we assume you are stepping into your new Spanish property with a clear understanding of the expenses involved in the purchase process (mortgage, VAT, notary, agency …), we thought it might be important to outlay them all for you.

So that there’s no unpleasant surprises later on!

Spain property-related taxes and post-purchase costs

Now that you live in Spain or you are on your way to becoming a Spanish property owner, you have to keep track of all the property-related taxes and post-purchase costs.

As wonderful as being a home owner in Spain is, it also entails keeping tabs on your financial obligations besides your initial outlay and your monthly mortgage payments.

What type of costs are we referring to?

We are going to break them down one by one for you so that there are no unwanted surprises later on in your mailbox and you are free to enjoy your Spanish home all year round!

Council Tax – IBI (Impuesto de Bienes Inmuebles)

The second most important invoice you’ll have to face as a home owner in Spain is the Real Estate Tax (IBI).

Paid once a year, the IBI will be calculated by your local authorities (your local town hall) in alignment with the cadastral value of your property.

Please, keep in mind that:

• Every area has a different cadastral value given the fact that the local municipality is the authority that determines the tax rate in Spain.
• The cadastral value tends to be lower in comparison to the actual market value.
• On average, the IBI nears the EUR 150 mark for a one-bedroom apartment. If you’ve purchased a detached home with five bedrooms on a 1,000 sq. m land, you’d be looking at an IBI of about EUR 2,000.

How do the authorities calculate the IBI?

Your IBI rate will be calculated based on the city you’ve bought on, the area your sits in and the type of housing.

The town hall authorities of the region where you intend to purchase your property calculate your IBI it in accordance with the cadastral value of the area. The rate used for determining this value varies from 0.4% to 1.3%.

For instance, if your selected town has a rate of 0.5% and the cadastral value is EUR80,000, the IBI will be a total of EUR 400.

Wealth Tax – Impuesto del Patrimonio

Whether you’re buying a property in Spain as an investment, a permanent home to live in or as a holiday rental, you need to understand all your taxes! Starting with the Wealth Tax.

Because the Wealth Tax is sneaky kind of tax… Why?

Because the Spanish Wealth Tax has no equivalent in many countries, the UK being one of them. Being unaware of this type of tax will result in paying more unnecessary taxes and penalty fees.

What do you need to know about the Spanish Wealth Tax?

For starters, the Spanish authorities will determine your payment annually based on the total net value of the assets that you possess in Spain as a non-resident.

If you are a resident, they will include all your assets across the globe.

However, the first EUR 700,000 worth of assets will be exempted from this tax.

The rate of the Spanish Wealth Tax varies from 0.24% to 3.03%.

If you own your property jointly with other persons, each owner will have to pay taxes according to what percentage of the property belongs to him/her.

Spanish Income Tax

Are you a non-resident in Spain? Are you renting out your purchased property and not living in it?

Unfortunately, you will still have to pay income tax in Spain.

In cases where you are not renting out your property:

• You will have to pay 19% of the 2% of cadastral value if there has been no revision since 1994.
• If there has been a revision, you will have to pay just 19% of the 1.1% of the cadastral value.
• If you are not a citizen of EU state, you will have to pay 24% of the cadastral value.

If you decide to rent your Spanish property:

• You will have to pay 24% if your tenant is not a citizen from an EU Nation.
• Otherwise, you will have to pay 20% of your rental income to the tax man or woman.

What makes you a Spanish resident?

If you fulfill any or all the following requirements you are considered to be a Spanish resident:

• You have been living in Spain for more than 183 days in one year.
• Your centre of financial interests is located in Spain.
• Your spouse and/or underage children live in Spain.

Our advice?

Declare all your income, whether you earn it in Spain or elsewhere, and pay your income tax Spain accordingly. It will save you a lot of headaches!

We’ll be glad to solve your tax issues associated to owning a property in Spain and help you prevent any negative consequences in the form of fines or excessive tax payments.

Utility Taxes

Water supply

This is a fee paid for having access to drinking water.

It tends to be more common in those municipalities where water is a scarce commodity or where special maintenance works are needed.

Sometimes the community of owners will be responsible for the rate applied to the entire building.

Each municipality determines the rate for Water Supply and Sewage tax.

As a home owner, you are obliged to pay four times a year. The amount will depend on how much water your household uses.

Rubbish Collection Tax

The Rubbish Collection tax is paid once or twice a year and the rate varies according to the municipality and the region where you have purchased your property.

Does it make sense?

We hope we’ve clarified some of the expenses you need to budget when purchasing your new home in Spain. If you have any doubts, please feel free to send us a message or book one of our “No Obligation Free Consultations” here.

We can’t wait to help you write your new chapter in Spain!

We want to help you navigate all the legal complexities that come with your home buying in Spain, but this article is legal information and should not be seen as legal advice.