Understanding the tax system in another country can be very tricky, especially when property is involved, so here is a break-down of taxes you might face in Spain.

Spain comprises of 17 Autonomis, including the Balearic Islands and the Canary Islands, as well as the enclaves of Ceuta and Melilla in Northern Africa, which all have the same tax system.

Tax on property

There are two local property taxes in Spain, both of which are based on the property’s theoretical rental value according to the local land registry.
The main one is Local Property Tax and is calculated by reference to the valor catastral – the official value of the property – registered in respect of all properties in Spain, and is usually between 0.5 per cent – 1 per cent.
The Local Mains Drainage and Refuse Collection Tax must be paid by ever property owner and the cost varies in each area. It is usually priced between euro200 and euro250 per year.

Personal taxes

If you own a property in Spain, but you are a non-resident, you may be liable for income tax, value added tax, wealth tax, capital gains tax and inheritance tax.

Income tax

An income derived on property in Spain should be declared within the country. If you sell the property within 12 months then the profit is considered an income rather than a capital gain, so you would be subject to Spanish income tax.

If you choose to rent out your Spanish property, you will also have to pay Spanish income tax.

The rates of income tax differ depending on your residence status. A non-resident is taxed at the standard rate of corporate tax at 35 per cent.
A resident – someone who spends more than 183 days within a year in Spain – is taxed in accordance to a sliding scale dependent upon the income.

Capital Gains Tax (CGT)

Selling a Spanish property more than 12 months after purchasing it means that you will be liable to pay Spanish CGT. This amount is based on the difference between the amount that you sell the property for and the amount that you declared having purchased it for minus inflation.

A non-resident must pay CGT at 35 per cent and residents pay at the rate of 15 per cent, however, a resident may also have the option to ‘roll’ the tax into another property provided it is a single main residence.