Tax considerations when buying property in Spain

Tax Matters

This page is an advisory page only and represents our understanding of the current legal and business situation. Advice and opinions expressed here should never be used as a replacement for professional advice.

Spanish street

You need to discuss tax matters with your lawyer.

You will be particularly interested in capital gains tax and inheritance tax, both of which can be very high.

A spouse in Spain cannot inherit without being taxed. And a spouse in Spain does not have automatic inheritance rights to a partner's assets.

Tax laws are different for residents and non-residents.

Tax rules are far too complex to go into here. You must seek professional advice, preferably before purchasing, to minimise your tax liability. Many purchasers with children actually buy the property in the childrens' names with the parents having permanent right to sole occupation until death. Doing it this way avoids the issue of inheritance tax.

Property Tax

Property in Spain is subject to an annual property tax (IBI) payable to the local municipal authority. The tax is based on the value of your property and you pay a percentage of that value (the percentage is not very high, but rates vary throughout Spain). Your lawyer can check this for you.

If you are not residing in your property, you will have to pay an imputed tax on rental earnings. This is payable even if you do not rent out your property.

If you do rent out your property, you must report your rental earnings, and you will be taxed on profits. Rental properties must be registered as such with your regional government, and they must comply with specified standards.

Failure to pay taxes on time can result in quite high penalties. Persistent failure to pay relevant taxes can result in the authorities placing an embargo on any Spanish bank accounts you have, and/or on your property.

If your property is embargoed, the authorities have the right to sell it. Such sales are often carried out at auctions, and the amount realised will usually be well below the true property value. You should ensure this never happens to you by keeping on top of tax matters. Again, you can ask your lawyer for advice.

Make a will

It is in your best interests to make a will that expresses what you want to happen with your Spanish assets when you die.

If you are not a Spanish national, you have the right to decide whether your Will should be interpreted under Spanish laws, or under the laws of your home country.

It's a good idea to instruct the lawyer that is handling your purchase to make a will for you. Wills need to be registered with a notary to make them valid, and you can have this done at the same time as you complete your purchase.

Buying property in Spain - First Steps - Choose your area

Decide on the type of property you want and see what is available

Calculate your budget and arrange finance

Arrange an inspection visit to see available Spanish properties

Making an offer on a property

Exchanging currency

Arranging a mortgage on your Spanish property

Legal matters

Deposit and completion

Tax considerations when buying Spanish property

Approximate costs when buying property in Spain