Certain taxes, including the Plusvalia, must be paid after a property purchase transaction takes place in Spain. In addition to these, there are annual local taxes due on a property which must be paid by the owner…
Taxes On Purchasing Property
The buyer of a new build property in Spain from a developer, or an unregistered property (that is, an off-plan property acquired from another individual prior to being registered) will have to pay Spanish VAT (IVA – Impuesto sobre el Valor Añadido) at the rate of 8%. There is no IVA in the Canary Islands; instead, a sales tax Impuesto General Indirecto Canario (IGIC) of around 5% is levied.
In addition to IVA, a document fee AJD (Impuesto sobre Actos Jurídicos Documentados) is levied, which is similar to UK Stamp Duty of 0.5% (1% in Andalucia).
ITP (Impuesto Transmisiones Patrimoniales) is Spanish property transfer tax which is similar to the UK Stamp Duty Land Tax and levied on all other residential property acquisitions (that is, registered properties).
- ITP is generally levied at 7% of the purchase price
- In Cataluña, Baleares, Asturias and Extremadura it has been increased to 8%
- In Andalucía it is 7% but 8% on the excess over €400,000
- In Cantabria it is 7% but 8% on the excess over €300,000
- In the Canaries it is 6.5%
Local Property Taxes
Owners of residential property which they use themselves (or have available for their use) pay a local tax known as IBI (Impuesto sobre Bienes Inmuebles). It is paid by the person who occupies the property on the 1stJanuary in any year and not usually apportioned if they later move.
The tax is similar to the UK’s council tax and raised and spent by the town hall (ayuntamiento) of the area of residence and is calculated on the basis of the notional rental value (valor catastral) of the property. A property owner may appeal against the valuation decision, but the sums involved are usually so small it is not worthwhile.
The amount charged is the rental value multiplied by the tax rate fixed in the locality.
Where a second-hand property is bought, and the IBI has not been paid by the previous owner, the local town hall can charge for unpaid IBI for up to a maximum of five years arrears as well as penalties of up to 20%.
- When purchasing a property, ask to see the latest IBI receipt to confirm that this has been paid, and if possible to see the receipts for the previous five years
- When selling a property, confirm that the ownership information has been changed at the registry, to ensure liability for the IBI on a property ends when ownership ends
There may also be an extra charge for rubbish collection, which in some areas is charged separately, as well as possible additional taxes for other projects and to cover shortfalls.
A demand for payment is sent out annually; check when payment is due, as the date can be changed and there is no legal requirement to advise an owner of the new due date. If the bill is not paid by the specified date it will incur a 20% penalty. To avoid this, it is possible to set up a direct debit from a bank.
When a property is sold, or it otherwise changes hands, the local town hall raises a tax called plusvalía which is a tax on the increase in the value of urban land (that is, excluding the value of any buildings). The demand includes a realistic allowance for inflation in the growth in value of the land.
Some transactions are exempt such as transfers between husband and wife. However, plusvalía remains payable on the disposal of a main residence even for Spanish residents.
The tax rate is fixed by the town hall and varies depending upon the size of the local population and the length of ownership. For a town of more than 100,000 inhabitants the minimum tax rate is 20% and the maximum 30%.
A declaration must be made by the vendor (or purchaser) within 30 days, but in practice the town hall usually calculates the tax based on the property values entered in the local property register from the Deeds of Sale.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual must take personalised advice.