Taxes in Spain

The taxes you must pay in Spain have increased considerably during the last decade although they are still reasonably low when compared to the EU average – but the gap is closing! We would recommend that all foreigners should engage the services of a good lawyer (or other independent financial expert) who can advise you on your tax status.

The tax liabilities for individuals are listed below along with descriptions of what the relevant tax means to you: -

 Personal Taxes
 Taxes for Property Owners
 Taxes for Corporate Property Owners

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Personal Taxes in Spain

Personal Income Tax	Residents of Spain pay income tax on any income gained in the previous tax year as per the rates in the table below:  Income Tax  Rate on this portion  €4,000  15%  €4,000 - €13,800  24%  €13,800 - €25,800  28%  €25,800 - €45,000  37%  €45,000  45%
Non Residents Income Tax	The majority of people who are not resident in Spain will normally file income tax because they own property in Spain and are earning an income by renting it out. Other reasons why a non resident may have to file, are that they have earned dividends from a Spanish company or because they may have working in Spain for a portion of the year and are not liable for tax in their own country.
Wealth Tax	These are taxes that residents pay on their worldwide assets each year whereas non-residents are taxable only on properties they own in Spain. The wealth tax is only charged where the total asset value is more than €170,000 at a rate starting at 0.2% and rising to 2.5% for asset values over €10,700,000
Inheritance and Gift Tax	Anyone who receives a gift or inheritance that is valued over €8,000 and which is located in Spain must pay this tax, the rate of which starts at 7.65% rising to 34% for gifts or inheritances valued over €815,000. The rate is reduced to 5% if the beneficiary is a child of the deceased.
VAT Tax (IVA)	Spain’s standard rate of VAT (IVA) is 16%. The rate is reduced to 7% for essential items such as water, food etc. Tourists can reclaim this tax (for items over €90 – including IVA) at the port / airport by presenting their receipts at the relevant desk before leaving.
Transfer Tax and Stamp Duty	The purchaser of real estate or commercial transactions is required to pay this tax. The rates are 0.5% for commercial transactions and 6% for real estate transactions.
Property Tax (IBI)	The municipality where individual properties are located sets the property tax level for every property within its boundaries each year. This is normally in the range of 0.5% to 1.1% of the cadastral value of the property (roughly 20 times lower than its market value)
Motor Vehicle Tax	Payable annually the Motor Tax is based on the age and engine size of the vehicle.
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Taxes for Property Owners in Spain

Some things to remember whatever your Spanish residency status when referring to your tax affairs:

• If you are classed as a resident for tax purposes then you are required to pay personal income tax (which includes any capital gains taxes) and property tax.

• If, however, you are classed as non-resident, then you will be subjected to a non-resident property tax on top of those listed above which a resident has to pay. The personal income tax for non-residents refers to any income gained from renting out the property, as you would normally be paying other income taxes in your own country of residence

Non-residents:

Personal Income Tax

Each person is treated as an individual within Spanish tax law all paying his or her taxes separately. If a married couple or a collective owns a property, then the percentage share each person holds is their tax liability.

The income tax due is calculate differently depending upon the use of the property as follows:

• Property for Your Own Use
  

  Based on the cadastral value of the property (from the property tax receipt it will be either 2% or 1.1%) the taxable rate will be 25% of the calculated value – or prorate as applicable

• Property Used for Rental
  

  The total amount of the collected income is taxable in this case and is charged at 25%

Additional Property Tax

Every non-resident who owns a property on 31 December each year must pay this tax regardless of its value.

The tax is based on the highest of the following figures:

• The cadastral value of the property

• The Spanish tax office’s assessed value of the property

• The purchase price

Residents and Non-residents:

Capital Gains on Property Sales

Any gain in value (difference between purchase price and sale price), which is made when selling a property, is referred to as a Capital Gain and is therefore taxable. This tax applies to both residents and non-residents and is chargeable.

• Purchase price is referred to as the amount paid for the property plus expenses and the taxes involved at the time of purchase.

• Sale value is the agreed selling price minus and expenses and taxes paid.

Withholding Tax:

Regardless of residency status, the buyer’s solicitor will retain a portion of the sale price as an initial deposit against the capital gains tax due. This is a portion of the declared sale price and is usually 5% for non-residents and 3% for residents and was intended to ensure the tax is paid (particularly by foreign nationals). Once the tax liability has been calculated, you will then either have to pay more to the Spanish tax office or receive a refund of the unused portion of the deposit.

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Taxes for Corporate Property Owners in Spain

The standard corporate tax rate in Spain is set at 30%. You can offset all the expenses incurred in running a property such as utility bills, renovations, management fees, etc., against your tax bill although there are added accounting obligations involved.

Capital gains can stay with the company, unlike with private individuals, to incur the 30% tax charge. These must then be used, within a five-year period, for the purchase of another business (or house) otherwise the taxes applicable to that gain must be paid.

As it is the company that owns the property, it is separated from any litigation aimed at individuals since they do not own it.