Taxes for Foreigners Buying Property in Spain

How to Buy a House in Spain as a Non-Resident Foreigner

What taxes do non-resident foreigners pay when buying a home in Spain?

Buying a property in Spain as a foreigner involves several mandatory taxes and expenses. If you are a foreign buyer, you should keep the following in mind:

• Equal Taxation: The taxes for buying a house in Spain as a foreigner are the same as those paid by Spanish citizens.

• Property Status: The amount and type of tax depend on whether the property is brand new or a resale (second-hand).

• Regional Variations: Tax rates vary depending on the Autonomous Community.

• Additional Costs: In addition to taxes, there are other secondary expenses associated with the transaction

In general, when buying a home in Spain, you may encounter:

Taxes directly related to the purchase. These taxes usually amount to between 10% and 12% extra.

Subsequent taxes, depending on the intended use of the property.

Tips for buying a house in Spain for the first time

What taxes do foreigners pay when buying a second-hand home in Spain?

When we talk about second-hand homes, we mean those that have already had one or more previous owners. The main tax when buying a second-hand home is the Property Transfer Tax (ITP). VAT is not paid on second-hand home purchases.

ITP (Property Transfer Tax)

The ITP is the most important tax when buying a second-hand home because it taxes the transfer of property between individuals, in this case, the used home.

To pay the Property Transfer Tax (ITP), it’s important to note that the rate varies depending on the autonomous community and typically ranges from 6% to 10% of the purchase price, although in some communities it can reach up to 13% for higher-value properties.

It’s also important to be aware that some regions offer tax breaks for young people, large families, or those buying subsidized housing (VPO).

This tax must be paid within the timeframe established by the corresponding regional regulations.

In the following table, we can see a practical example of how much is paid for this tax if we buy a property for €100,000:

Taxes foreigners must pay when buying a newly built property

When we buy a newly built property, the main taxes we must pay are the following:

1. VAT (Value Added Tax)

Unlike second-hand properties, in this case VAT is payable. The rate is 10% of the purchase price.

For example, if we buy a property for €100,000, we must add €10,000 in VAT.

2. IAJD (Stamp Duty – Impuesto sobre Actos Jurídicos Documentados)

This tax is paid for the formalisation of the public deed of sale and for registering it with the Land Registry.

Its rate varies depending on the Autonomous Community and usually ranges between 0.5% and 1.5% of the property price. Therefore, for a €100,000 home, we would pay between €500 and €1,500.

It is important to note that since November 2018, when a mortgage is taken out, the IAJD is paid by the bank. However, if we buy a newly built property in cash, without applying for a mortgage, the buyer must assume this cost.

Let us look at the following table showing what must be paid for both taxes, VAT and IAJD, when buying a €100,000 property.

Other taxes and additional costs when buying a property

In addition to taxes, when buying a property in Spain we must assume a series of additional costs that can increase the total cost of the transaction:

• Notary fees, which vary depending on the price of the property and the number of copies of the public deed. They usually amount to between 0.2% and 0.5% of the property value. Therefore, for a €100,000 home, we would pay between €200 and €500.

• Land Registry, to register the property in our name. This cost is calculated in brackets and varies depending on the property value declared in the public deed. For a €100,000 property, the cost would be €133.

• Valuation fees, mandatory if we apply for a mortgage. They usually range between €250 and €600.

• Municipal taxes, such as IBI, once we become owners. This is a tax paid annually. Each town hall sets the tax rate when paying IBI, although it is usually 1% of the cadastral value of the property.

Community fees and property maintenance costs

In Spain, it is very common for properties to be part of a community of owners or residential complex. This implies:

• Regular community fees, intended for the maintenance of the building (cleaning, lift, common areas, etc.). These usually amount to around €100 per month.

• Possible extraordinary assessments, for example for:

  • Façade renovations.

  • Installation or repair of lifts.

  • Structural works or roof repairs.

Before buying, it is advisable to:

• Request a certificate confirming that all community payments are up to date.

• Find out about any approved or planned extraordinary assessments, as these may represent a significant expense in the short or medium term.

Is it necessary to pay Non-Resident Income Tax (IRNR) if we buy a house as foreigners?

The Non-Resident Income Tax (IRNR) is not a tax paid when purchasing a property. It is a tax that may be mandatory after the purchase if:

• We are not tax residents in Spain.

• We rent out the property and obtain rental income.

This tax is regulated by Royal Legislative Decree 5/2004 of 5 March.

IRNR tax rates

• Residents in the European Union, Iceland and Norway:

  • Tax rate of 16% on the income obtained.

  • Possibility of deducting certain expenses associated with the rental, in accordance with Article 19.

• Other citizens:

  • Tax rate of 24%.

  • No deduction of expenses is allowed, in accordance with Article 25.

International double taxation

If we have already paid tax on that income in our country of residence, a double taxation exemption may apply, in accordance with the international agreements signed by Spain.

Taxes for Foreigners Buying Property in Spain

Is there a 100% tax for foreigners buying property in Spain?

In recent years, there have been news reports about the possibility of a 100% tax for foreigners buying property in Spain, but it is important to distinguish between what has been proposed and what is actually in force.

At present, there is no approved and effective 100% tax that generally applies to foreigners purchasing property in Spain. The initiatives that have appeared in the media are proposals or draft measures that would still need to become law and overcome legal and political obstacles before coming into force.

Who would this proposal affect?

This proposal would affect EU and non-EU citizens differently:

1) EU nationals or citizens of the European Economic Area (EEA)
If we are citizens of a member country of the European Union, Iceland or Norway:

• We have the same tax rights as a Spanish citizen.

• We pay the same basic taxes when buying property in Spain (ITP or VAT + IAJD, depending on the type of property).

• In the known proposals, we would not be affected by this additional 100% tax.

This includes, for example, buyers from Germany, France, Italy or Poland who do not reside in Spain but are nationals of an EU/EEA country.

2) Non-EU nationals (for example, Venezuela, Mexico, the United Kingdom after Brexit, Russia, the United States, etc.)
If we are foreigners who do not belong to the EU or the EEA, the situation under discussion would be different:

• The proposals to impose an additional 100% tax have focused on non-EU buyers who are not tax residents in Spain.

• It would not apply to transactions subject to VAT, that is, newly built properties purchased directly from the developer.

However, this proposal has not yet been approved, so at present, property purchases by non-EU foreigners remain subject to the same basic taxes as any other buyer (ITP or VAT + IAJD).