Comparing the Costs of Owning Property

Impuesto sobre Transmisiones Patrimoniales(ITP) / Transfer Tax on the purchase of a resale property

Resident and Non-resident

7% of value stated on the deeds.

Company

Same as above.

Impuesto sobre el Valor Anadido (IVA) / Value Added Tax (IVA) on the purchase of a new build property

Resident and Non-resident

7% of value stated on the deeds.

Company

Paid as above but in certain circumstances if the company regularly buys and sells off plan property the IVA may be repaid as a tax credit.

Impuesto Sobre Bienes Inmuebles (IBI) / Annual property rates

Resident and Non-resident

Paid by the owners annually, depends on valor catastral of the property.

Company

Same as above but this tax is deductible from profits.

Impuesto Sobre el Patrimonio / Wealth Tax

Resident and Non-resident

Paid by new house/resale owners, the amount depends on value on the purchase deeds or if higher the value out of valor catastral. (see Form 214: Impuesto sobre el Patrimonio y sobre la Renta de no Residentes).

Resident individuals pay Wealth tax on their worldwide assets at December 31st. of each year, valued in accordance with tax rules. Non-residents are taxable on property situated, or rights exercisable, in Spain.

Company

Not applicable as the property appears as an asset in the company records.

Non-resident special information: Non-residents who own shares of a Patrimonial Companies will be obliged to pay Wealth Tax for the shares if the only asset is a property and company does no comply with the trading standards of an office and an employee with a labour contract.

Impuestos Sobre la Renta de las Personas Físicas – Imputed rental gains tax

Resident and Non-resident

This tax is paid by non-residents and residents who own a second or third property in Spain. The tax is on the imputed rental gain regardless of whether the property is rented or not.

Company

Not applicable. Rental income is taxed according to corporate tax. Therefore if the property is not being rented it’s not making an income.

Capital Gains Tax on the profit made from selling the property:

Resident

A resident is liable to15% capital gains tax on the profit.

Non-Resident

Pay a higher rate of 35%. When a property is sold, a 5% retention of the sales price is retained in lieu of pending taxes.

Company

Companies pay tax on the profits of a real estate transaction as part of their yearly corporate tax declarations. Corporate tax starts at 30% but can drop to 15% with correct structuring. In general corporate tax paid on the income derived from the property is paid on the profit, as well as a Dividends Tax when the proceeds are distributed to the shareholders. Corporate tax paid by the company on profits made in the sale and the resulting tax on dividends will depend on numerous factors such as company type, and whether the personal details of the shareholders or their tax residence is disclosed, and whether the shareholders can comply with Treaties to avoid double taxation, etc,.

Corporate tax payments

The Corporate Tax is due on the last day of the fiscal period. According to Spanish law, the fiscal period cannot exceed 12 months. As mentioned before, the taxable income is defined as the difference between the period revenues and period expenses. All business expenses are deductible if they are properly recorded and supported.

Plus valía / Municipal Add Tax Value

Resident and Non-resident

This small tax is paid to the Town hall in case of sale of property.

Company

Not applicable.

Inheritance Tax

Resident and Non-resident

Please refer to the article The Spanish System of Inheritance Law.

Company

As the property is owned by a company in the form of shares, these can be transferred. This method has been used to avoid the tax in the past but it is not clear whether this is still possible under recent rule changes.

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