Information for guidance purposes on taxes and charges arising form properties in Sotogrande
VERY IMPORTANT: The information contained in this page is only for information and guidance purposes, and not rights may be claimed in respect thereto. It is based on fiscal regulations in force at the time of publication on this website. If you are interested in purchasing a property, contact your lawyer to obtain precise and exact information regarding your fiscal obligations.
UPDATED by Ana Isabel Iglesias Cena, Lawyer, Official College Member number 1992 and Registered Administrative Agent number 978. Office in Sotogrande: Plaza del Agua, D-A-5, Portal 3, Puerto Deportivo de Sotogrande,11310 San Roque (Cadiz), Tel.: 0034 6184.108.40.206. Office in Algeciras: Gestoría Lex, C/Sáenz Laguna, 1 Entreplanta. 11201-Algeciras (Cadiz). Tel: 0034 9220.127.116.11
Tax obligations in Spain arising form properties
Tax residents in Spain
Income tax for natural persons
1.- Income allocation when you own property
Fiscal obligations and the taxes to be paid depend on the use of the property or dwelling purchased, namely whether it is for use as the habitual residence or as a second residence, either for personal use or to lease.
In the case of a dwelling purchased to be used as the habitual residence, it does not pay annual withholding taxes (IRPF), unless it loses the condition of habitual residence.
On the other hand, if the property is not the habitual residence, but rather a second residence, there are two different cases:
1.- If it is purchased for personal use, it will pay annual withholding taxes as return on real property at a rate of 2% of the cadastral value (if said value has not been updated in the last 10 years) or 1,1% if the cadastral value has been updated, which will be added to the taxable person’s tax base.
2.-If the dwelling is purchased to be leased, the income obtained will also pay taxes as return on real property, with the possibility of deducting all the expenses in connection with said lease (repairs, taxes and charges, Community of Property Owner fees, real estate agency fees, mortgage loan interest, home insurance, etc.). The income obtained may be subject to an exemption of 60% (and thus would only pay taxes on 40%) in case the dwelling is leased to a third party as the latter’s habitual residence, and that all other requirements are satisfied.
2.- Capital gains or losses obtained when the property is transferred
In connection with the habitual residence, the gains will be exempted from taxation when the total amount is reinvested in the acquisition of a new habitual residence. The gains obtained from the sale of the habitual residence will be fully exempted provided the seller is over the age of 65 and the property was his habitual residence for a period of 3 years.
In case the property is not the habitual residence, the gains, after deducting the expenses inherent to the purchase and the sale (including the municipal capital gains tax), shall be taxed at a rate of 19% up to 6,000 euros, at 21% up to 50,000 euros, at 23% above 50,000 euros and at 26% above 200,000 euros.
3.- Tax on inheritance and donations
In Spain, the Tax on Inheritance and Donations has been transferred to the Autonomous Communities, and the tax rate differs from one to another. The tax is paid in the autonomous community where the decedent had his/her habitual residence, and the heir has to pay taxes on all of the decedent’s property, irrespective of whether or not it is located in Spain.
For example, in Andalusía there is an exemption of 1 million euros for each direct heir (spouses, children and grandchildren), which means that the tax has been practically eliminated, or that it is very small.
Tax non-residents in Spain
Income tax for non-resident natural persons
1.- Income allocation when you own property
Natural persons who are non-residents in Spain must pay non-resident income tax (IRPFNR) for owning properties, which will depend on how the real property is used.
If the dwelling is for personal use, it will be taxed for income allocation. In general, the tax base will be 2% of the cadastral value, or 1.1% if the cadastral value has been updated in the last 10 years. The result will be subject to a rate of 19% in the case of EU citizens, and of 24% for citizens of non-EU countries.
This return must be declared and the tax paid once a year prior to the 31st of December, by filing model 210 (one for each owner and for the latter’s share of the property, and proportionally if they have not been owners all year, or if it was leased for some time).
If the dwelling was leased all year, or for a period of the year. the non-residents who are residents of another EU country will be taxed at a rate of 19% on the net return obtained from the lease, with the right to deduct all the expenses in connection with the lease (repairs, taxes and charges, Community of Property Owner fees, real estate agency commissions, mortgage loan interest, home insurance, etc.), whereas residents in other non-EU countries will be taxed at rate of 24% on the full amount of the return from the lease, without the right to deduct any expenses. This income will be declared quarterly by means of model 210.
The Property Tax is another tax that was transferred to the Autonomous Communities, who establish the tax rates and exemptions and are in charge of collecting the tax. This tax can change from one year to the next, so that non-residents in Spain should inquire regarding this matter at the time the tax has to be paid.
2.- Capital gains obtained when the property is sold
Once the property is sold, the non-resident taxable persons have to pay taxes for the capital gains they have obtained. The capital gains are the difference between the price of purchase, plus expenses inherent to the purchase and sale and improvements made to the property, and the price of sale, less expenses (taxes, real estate agency commission, lawyer’s fees, municipal capital gains tax), and the tax rate is 19%.
Given that this is an obligation generated once the property is sold, and in order to ensure that the non-resident complies with the tax obligation, the buyer is obliged to withhold 3% and pay that amount to the Spanish tax authorities. Following this payment, the non-resident taxable person has three months to file a tax return, with the possibility of obtaining a refund of that 3% if no capital gains were obtained, or if the capital gains are less, or if greater capital gains were obtained, having to pay the difference up to 19%.
3.- Tax on inheritance and donations
The inheritance tax for non-residents only burdens property in Spain. The same rules and exemptions as for residents are applicable, which depend on the Autonomous Community in which the property is located. If the property is located in Andalusia, the same rules explained in the section on the tax on inheritance for residents are applicable (exemption of 1 million euros for each direct heir).
Common taxes for residents and non-resident in Spain
1.- Real property tax (IBI) and charges (Rubbish, recycling, etc.)
All real property in Spain is burdened by local/municipal taxes and charges and are common to residents and non-residents, as they burden ownership of real property.
The Real Property Tax (IBI) is an annual tax collected by Town and City Councils. It is calculated on the basis of the real property’s cadastral value, as established by the Cadastre for each real property in all of Spain.
The rubbish and sewage charges is also annual. It is usually a fixed amount and is geared at financing services for the collection and treatment of rubbish by Town and City Councils.
2.- Municipal capital gains
The Tax on the Increase of the Value of Urban Land (IIVTNU) is a local tax that is applied to transfers of urban real properties when a property is sold or acquired by inheritance.
This tax shall only accrue if there has been a gain from the transfer, and it is calculated on the basis of the land’s cadastral value and the number of years the seller was the owner of the property. The law states that the seller is liable for payment of this tax (unless covenanted otherwise), but in the case of non-residents, the real property is accountable, which is why the buyer usually withholds from the price of the property the amount of the tax to ensure that it is paid to the corresponding Town/City Council