Taxes Associated with Buying and Selling Property in Spain for Foreigners

Buying and selling property in Spain involves several taxes that are crucial to understand to avoid surprises and properly plan your finances. In this post, we detail the main taxes that foreigners should consider when acquiring or selling real estate in Spain.

1. Property Transfer Tax (ITP)

  • The ITP is the tax applied to the purchase of second-hand properties. This tax varies between 6% and 10% of the property value, depending on the autonomous community where the property is located. It is a tax that must be paid by the buyer and is one of the largest costs associated with purchasing a property in Spain.

2. Value Added Tax (VAT) and Stamp Duty (AJD)

  • For new properties, instead of ITP, these taxes are paid: VAT (IVA in spanish), which is 10% for residences. Additionally, Stamp Duty (AJD) must also be paid, usually around 1.5% of the property value, although it can vary depending on the autonomous community. These taxes apply to the purchase of residences as well as garages or storage rooms.

3. Non-Resident Income Tax (IRNR)

  • When a foreigner sells property in Spain, they must pay IRNR on the capital gains obtained. This tax is 19% on the gain for residents of the EU, Iceland, and Norway, and 24% for residents of other countries. The gain is calculated as the difference between the sale price and the purchase price, adjusted for certain costs and improvements.

4. Municipal Plusvalía

  • The municipal plusvalía is a tax on the increase in the land value from the purchase date to the sale date. This tax is paid by the seller and is calculated by the local council based on the cadastral value and the number of years you have owned the property. It is important to obtain a prior calculation to avoid surprises.

5. Property Tax (IBI)

  • The IBI is an annual tax that must be paid by the property owner in Spain, regardless of nationality. This tax is managed by the local council and is calculated on the cadastral value of the property. It is important to keep this recurring expense in mind when planning the purchase of a property.

Understanding the taxes associated with buying and selling property in Spain is essential to plan your finances and avoid surprises. Each of these taxes can significantly impact the total cost of the transaction, so it is advisable to seek expert advice on the matter.

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