Buying a property in Spain is a fantastic opportunity to discover a change of pace and lifestyle, whether you’d like a weekend apartment in Barcelona, a holiday home in beautiful Valencia, or are planning an overseas retirement along the golden coastlines of San Sebastián
As with all elements of an international acquisition, it is important for you to understand the property ownership rules throughout Spain and the taxation associated with owning a home, holiday property or rental apartment to ensure you budget accordingly.
Here we look at the various costs, tax liabilities and legalities you should be aware of before proceeding with your Spanish property purchase plans.
Rules for Foreign Nationals Buying a Property in Spain
Post-Brexit, purchasing a home in Spain is slightly more complex, but there are no sweeping restrictions. The main requirement is that you will need a Número de Identidad de Extranjero or NIE. This identification number enables foreign nationals to register for taxation or open a local bank account.
You will be issued a number if you register your residency through an Oficina de Extranjeros or immigration office. Expats can also apply for an NIE via their nearest consulate, embassy, or in person by attending a Spanish police station with their passport.
If you plan to spend more than 90 days per 180 days in Spain, you may also need to consider your visa category since this is the maximum stay permitted for third-country travellers without a valid permit or visa.
Options may include:
- Applying for the Investor Visa, which grants residency to applicants purchasing a qualifying property for at least €500,000.
- Long-stay visas – available for those relocating for work, studying in Spain, opening a business or moving to join Spanish relatives who hold residency or citizenship status.
- Non-lucrative residence visas, which allow affluent expats to apply for a renewable residency permit when providing evidence of a minimum income.
Second homeowners may not require a visa if they are not planning to stay in Spain for over the 90-day threshold but will still need an NIE number to be allowed to proceed with a property purchase.
Average Spanish Property Purchase Prices
Spanish property prices differ considerably between high-demand cities such as Madrid, prestigious regions in Andalusia and Catalonia, and the balmy islands of the Balearics. However, as a rough average:
- Homes in central metropolitan areas cost around €3,131 per square metre – 38.8% lower than the average for a comparable property in the UK.
- Properties in more rural and suburban regions cost roughly €1,977 per square metre – 48.7% more affordable than the British average.
Combined with mortgage interest rates currently over 40% lower in Spain and general living costs of 21.2% beneath those in the UK, buying a Spanish home can be surprisingly affordable, particularly for expats purchasing a second or primary residence having previously lived in London and the southeast.
Taxes and Fees
Alongside the cost of your chosen property, you will need to budget for other outgoings:
- Legal fees normally cost around 1% to 2% of the property value.
- A local notary will charge a further 1% to 2.5% for services such as registering title deeds and paying title deed taxation charges.
- Should you need to apply for financing, mortgage fees are an average of 1% of the purchase value.
- Impuesto de Transmisiones Patrimoniales (ITP), the property transfer tax, is payable between 6% and 10% on existing homes. New builds and off-plan developments may be subject to IVA, the Spanish equivalent to VAT, at 10%.
Transfer taxes vary since the autonomous regions throughout Spain have discretion about the tax rates payable. Most purchases that attract an ITP liability need to be settled within 30 days of the completion of the sale, paid online, in person, or via your solicitor.
Tax Obligations for Foreign National Spanish Property Owners
Once your purchase has concluded, you should be conscious of ongoing tax liabilities, which may depend on your tax residency position. For example, if you own a holiday property in Spain but remain a UK taxpayer, you will need to declare any revenues earned through renting the property to HMRC.
Long-term residents will not usually be expected to declare their assets or income to the UK tax office since they will be categorised as Spanish taxpayers. However, there are further considerations around succession planning and inheritance tax.
Impuesto sobre Bienes Inmuebles (IBI) – Real Estate Tax
Each Spanish autonomous region charges a different IBI rate, which is calculated by the local town hall based on the home’s valor catastral (cadastral value). Rates currently vary from 0.4% to 1.1%. As an indication, the annual tax obligation is normally around €400 for an average-sized apartment and €2,000 for a large, detached villa.
Exacciones Municipales – Local Property Taxes
Local taxes are similar to council taxes in the UK and tend to be around €80 per year for an apartment, covering services the municipality provides, such as refuse collections and drainage.
Personal Income Tax
If you rent out a property in Spain for any period or have an empty property, you may be subject to income tax charges. Rental income is taxed on the progressive income tax scales, depending on the rates payable in your region.
An imputed income tax rate may also be payable for vacant homes that are not leased or rented. This tax is calculated based on between 1.1% and 2% of the home’s rateable value. Non-residents with a Spanish property pay the flat rate 24% income tax rate, also based on the same proportion of the catastral value.
Properties with a rateable value updated within the last decade are taxed at 1.1%, whereas those with an unchanged catastral rating are subject to the 2% assessed tax rate.
Spanish Wealth Tax
Spanish tax residents pay wealth tax calculated on their worldwide assets. Non-residents pay wealth tax against their assets or income in Spain, charged yearly against assets held on 31st December.
As with many of the taxes discussed, rates depend on the autonomous region where you live, with some regions offering the minimum tax-exempt asset value of €700,000 and a €300,000 tax exemption for all primary residential properties. Others have generous wealth tax allowances, with Andalusia and Madrid introducing 100% exemptions for residents.
Any taxpayer with wealth of over €2 million will need to file a wealth tax return, even if their taxable wealth falls beneath the exemption value.
Budgeting for Property Taxes on a Spanish Real Estate Acquisition
While we have detailed all of the main taxes levied against properties in Spain, it is important to note that total tax obligations will differ depending on the value of your home, where the property is based, the tax treatments imposed by the local municipality, and whether you are a resident taxpayer.
It is always advisable to speak with a suitably qualified wealth manager or financial adviser to evaluate how your Spanish property will be taxable and to consider further complexities, such as the impact on your estate and exposure to inheritance tax against the value of your Spanish home in the UK and overseas.
For more information about any of the details in this guide when buying a property in Spain, please get in touch with any of the three Chase Buchanan teams within Spain or complete our enquiry form to arrange a call back at your convenience.
*Information correct as at October 2023