Non-residents purchasing or selling real estate in Spain must comply with certain tax obligations at both the purchase and sale stages. These tax implications can be complex and vary depending on the nature of the transaction and the buyer’s or seller’s status. Below, we outline the main taxes that generally apply to non-residents in these transactions.
Taxes for Non-Residents on Property Purchases in Spain
When non-residents purchase a property in Spain, they must pay several taxes, including:
Value Added Tax (VAT)
Generally, VAT applies to the purchase of new properties, which means when the seller is the developer or builder and the property has not been previously used. Properties occupied for less than two years without prior transfer are also considered new.
In some cases, VAT may also apply to the purchase of second-hand properties when both the buyer and seller are entrepreneurs for VAT purposes and the buyer is entitled to deduct the VAT paid. In such cases, the sale and purchase deed must expressly state the waiver of VAT exemption.
The standard VAT rate is 10% for residential properties and 21% for commercial properties. Parking spaces (up to two per residence) and storage rooms acquired together with a home are also subject to the reduced 10% VAT rate.
Stamp Duty (AJD – Actos Jurídicos Documentados)
Stamp Duty applies to notarized documents and is levied on the public deed of sale when the transaction is subject to VAT.
The tax rate varies by region, ranging from 0.5% to 2.5% of the declared property value. This tax must be paid to register the purchase in the Property Registry.
Transfer Tax (ITP – Impuesto sobre Transmisiones Patrimoniales)
For second-hand properties, neither VAT nor stamp duty generally applies (unless the VAT exemption is waived); instead, the Transfer Tax is due. The ITP tax rate varies by autonomous region and usually ranges from 6% to 11% of the transaction value.
ITP also applies to the transfer of ongoing concerns that include real estate.
ITP and Stamp Duty are mutually exclusive: when a transaction is subject to ITP, the notarization of the purchase deed is not subject to Stamp Duty.
Taxes for Non-Residents on Property Sales
When non-residents sell a property in Spain, they are subject to direct taxes, primarily on the potential capital gain from the sale.
Withholding Tax on the Sale (3%)
Under Non-Resident Income Tax (IRNR) regulations, when a non-resident sells a property in Spain, the buyer must withhold 3% of the purchase price as an advance payment of the IRNR due on the capital gain.
The buyer must transfer this withholding to the Spanish tax authorities. If the seller’s final tax liability is lower than the amount withheld (or if no tax is due), the Spanish tax administration will refund the corresponding amount to the seller.
Non-Resident Income Tax (IRNR) on Capital Gains
If non-residents make a profit on the sale of a property (i.e., the selling price minus the purchase price and associated expenses results in a positive figure), they must pay Non-Resident Income Tax (IRNR).
The tax rate is:
- 19% for residents of the EU and EEA
- 24% for non-residents from other countries.
Municipal Capital Gains Tax (IIVTNU – Plusvalía Municipal)
In addition to IRNR, non-residents must also consider the Tax on the Increase of Value of Urban Land (TIVUL), known as Plusvalía Municipal.
This tax, managed by the local municipality, applies to the increase in the value of the land over the period the seller has owned the property. The taxable base is calculated based on the cadastral value of the land and the number of years the seller has owned the property.
The tax rate varies according to the municipality and the property value.
Although in the case of non-resident sellers the buyer is legally responsible for paying this tax, it is common practice for the seller to assume the cost.
Conclusion
The buying and selling of real estate by non-residents in Spain comes with various tax obligations that must be managed carefully to avoid mistakes and penalties.
Non-residents should be aware of VAT, Stamp Duty, or ITP for purchases, IRNR and TIVUL on sales. Proper tax planning and compliance are essential for a successful real estate transaction in Spain.
If you need additional information regarding the taxes for non-residents on real estate transactions in Spain,
