As in Germany, owning property in Spain entails certain tax obligations and consequences. Understanding these tax aspects is important not only after purchasing a property, but particularly before the purchase, in order to make a well-informed decision regarding your property in Spain:

Spanish Property Tax (IBI)

Spanish Property Tax (Impuesto sobre Bienes Inmuebles – IBI) is a municipal tax linked to the ownership of real estate and is generally payable by all property owners. The tax is payable annually or semi-annually, with the specific payment deadline depending on the municipality in which the property is located.

The authority responsible for administering the tax generally notifies each property owner annually and issues the corresponding payment notice. As the tax remains payable even if the payment notice cannot be delivered, it is advisable to arrange payment by direct debit with the relevant municipal authority.
The amount of tax payable depends primarily on the cadastral value of the property, which in turn is determined by factors including the value of the land, the value of the buildings and the characteristics of the construction.

Sale of property

If the property is sold, the seller is generally responsible for paying the tax for the entire year, even if ownership of the property changes at the beginning of the year. In practice, however, the tax is often apportioned between the buyer and the seller.

Joint ownership

If a property has several owners, they are jointly liable for payment of the tax. Therefore, if the property forms part of a matrimonial property regime, an undivided estate or is jointly owned for any other reason, any of the co-owners may pay the tax and subsequently claim reimbursement of the corresponding shares from the other co-owners.

Property ownership and Personal Income Tax (IRPF):

In addition to the municipal property tax, owning property may also have implications for Personal Income Tax, which is levied at national level. Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas – IRPF) generally applies if your principal or tax residence is in Spain. In relation to property ownership, the following situations should be distinguished:

a) Main residence (residencia habitual)

If you use the property as your main residence, the property itself is generally not subject to taxation under Spanish Personal Income Tax (IRPF).

b) Rental income (rendimiento de capital inmobiliario)

If you rent out your property, the income received is taxable as income from immovable property (rendimiento de capital inmobiliario). If the property is rented out for only part of the year (holiday rentals, short-term rentals or periods between tenants), the days during which the property is not rented are treated as periods of personal use for tax purposes. In such cases, deductible expenses can only be allocated to the periods during which the property was rented. Consequently, if the property is rented out for only half of the year, only the corresponding proportion of the expenses may generally be deducted.

It should be noted that this income is generally subject to specific tax filing obligations.

c) Personal use (imputación de renta)

Personal use of a property is generally subject to taxation where the property is neither the owner's main residence nor rented out. In such cases, a notional amount of income is generally calculated on the basis of a percentage of the property's cadastral value and is then subject to the applicable income tax rules.

 

Property ownership and Non-Resident Income Tax (IRNR)

If your tax residence is outside Spain, owning property in Spain may give rise to Spanish tax obligations either in respect of the property's personal use or any rental income received, as the property does not constitute your main residence for Spanish tax purposes. Rental income may generally be subject to taxation in Spain and may also need to be declared in your country of tax residence. Tax paid in Spain may, where applicable, be credited against the tax payable in your country of residence in accordance with the relevant double taxation agreement.

Our law firm will be pleased to assist you in analysing your individual situation, carrying out any necessary administrative procedures and assisting you with the preparation and filing of the relevant tax returns. If you are interested or have any specific questions regarding this matter, please feel free to contact us by email or telephone.

Author: 

Christoph Sander
Lawyer and Tax Advisor
CEO, Partner, Director
info@sspartners.es
Tel: (+34) 951 12 13 06
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