What Foreign Buyers Should Know About Taxes and Fees in Spain

Spain remains one of the most popular destinations for foreign property buyers, thanks to its Mediterranean climate, rich culture, and attractive lifestyle offerings. However, whether you are buying for personal use or investment purposes, understanding the taxes and fees involved in the purchasing process is crucial. In this article, we will outline the key taxes and fees that foreign buyers should be aware of before embarking on their property journey in Spain.

1. Introduction

Spain continues to attract international buyers for a variety of reasons—stunning beaches, a relaxed lifestyle, and lucrative investment opportunities. However, navigating the Spanish property market requires more than just finding the perfect home or holiday property. Taxes and fees are a critical part of the process, and failing to fully understand them could result in unexpected costs.

In this blog, we will break down the most important taxes, ongoing ownership costs, transaction fees, and regional variations that foreign buyers should be aware of before making a purchase in Spain.

2. Key Property Taxes for Foreign Buyers

a. VAT (IVA) vs. Transfer Tax (ITP)

One of the first things foreign buyers will encounter is the VAT (known as IVA in Spain). This tax applies to new properties purchased directly from a developer. It is typically set at 10% for residential properties. However, if you are buying a resale property, VAT does not apply. Instead, you will pay a transfer tax (Impuesto de Transmisiones Patrimoniales or ITP), which can range from 6% to 10%, depending on the region. For example, in Madrid, the ITP rate is around 6%, while in Catalonia it can reach 10%.

Practical Example:
If you are purchasing a newly built property for €300,000, you will need to pay €30,000 in VAT. On the other hand, for a resale property at the same price, the ITP tax could range from €18,000 to €30,000, depending on the location.

b. Stamp Duty (AJD)

In addition to VAT or ITP, foreign buyers will also face the AJD tax, or stamp duty, when purchasing new properties. This tax applies only to new builds and varies by region, with rates typically ranging from 0.5% to 1.5% of the property's value.

For example, in Madrid, the AJD tax is approximately 1.5%, while in some other regions, it can be as low as 0.5%. Always check with your local tax office for the exact rate.

c. Annual Property Taxes (IBI)

Once you own the property, you will be subject to the annual property tax known as IBI (Impuesto de Bienes Inmuebles). This tax is calculated based on the cadastral value of the property, which is different from the market value. The rate for IBI can range from 0.4% to 1.1%, depending on the municipality.

For example, a property valued at €300,000 may incur an IBI tax of around €600 to €3,300 annually.

3. Ongoing Ownership Costs

a. Non-Resident Income Tax (IRNR)

Even if you don't rent out your property, foreign buyers are subject to Spain's Non-Resident Income Tax (IRNR). This tax applies to the "imputed income" of the property, which the Spanish tax authorities estimate based on the property's value. The tax rate is 24% for non-EU residents and 19% for EU/EEA residents.

For example, if your property is valued at €200,000, you may be taxed on an imputed income of around €1,200, with the exact amount depending on your tax residency status.

b. Wealth Tax (Impuesto sobre el Patrimonio)

Spain also imposes a wealth tax on property owners, which is applicable to both residents and non-residents. This tax applies if the combined value of your assets exceeds certain thresholds (generally €700,000). Rates range from 0.2% to 3.5%, depending on the value of the property and assets.

For non-residents, the tax applies only to assets located in Spain. However, some regions offer exemptions or lower rates, so it's essential to check the local rules.

c. Rental Income Tax

If you plan to rent out your Spanish property, you'll need to consider rental income tax. For EU/EEA residents, rental income is taxed at 19%. For non-EU residents, the tax rate increases to 24%.

Foreign buyers can deduct expenses like property management fees, mortgage interest, and maintenance costs from their rental income before calculating taxes.

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4. Transaction & Legal Fees

a. Notary Fees

When you purchase a property in Spain, a notary must certify the deed of sale. Notary fees typically range from 0.5% to 1% of the property value. For example, a €300,000 property may incur notary fees of €1,500 to €3,000. These fees are usually paid by the buyer.

b. Land Registry Fees

Land registry fees are also required to officially record the ownership of the property. These fees are generally low, ranging from 0.2% to 0.5% of the property price.

c. Lawyer's Fees

Hiring a lawyer is highly recommended for foreign buyers in Spain, especially if you're not fluent in Spanish or familiar with local property laws. Legal fees typically range from 1% to 2% of the purchase price, but this can vary depending on the complexity of the transaction and the lawyer's experience. A good lawyer will help you navigate the legalities, review contracts, and ensure that the property title is clear.

d. Mortgage Fees (if applicable)

If you're financing your property with a mortgage, be prepared for additional costs. These include bank arrangement fees, property valuations, and insurance, typically totaling between 0.5% and 2% of the loan amount.

5. Regional Variations

Spain's tax system varies significantly across different regions. Autonomous Communities (e.g., Madrid, Catalonia, Andalusia) set their own rates for property taxes, including the Transfer Tax (ITP) and Wealth Tax. For instance, while Madrid has a relatively low ITP rate of 6%, Catalonia's rate can be as high as 10%.

Additionally, some regions may have specific exemptions or reductions for property taxes, so it's essential to consult local tax advisors to understand the specific rates that apply to your property's location.

6. Common Mistakes Foreign Buyers Make

While Spain offers excellent investment opportunities, there are several common pitfalls foreign buyers often fall into:

• Underestimating Total Costs: Buyers often overlook additional taxes and fees that can add 10%-15% to the property price.
• Ignoring Wealth Tax: Many foreign buyers forget to account for Spain's wealth tax, which could apply if their assets exceed the threshold.
• Not Budgeting for Ongoing Taxes: Annual property taxes (IBI) and non-resident taxes can catch buyers off guard.
• Assuming Equal Treatment for EU vs Non-EU Buyers: There are significant tax differences between EU and non-EU buyers, especially regarding rental income and tax residency.

7. Practical Tips for Buyers

• Consult a Local Tax Advisor: Ensure that you fully understand your tax obligations before making a purchase. A local advisor can help you avoid mistakes and optimize your tax situation.
• Check Regional Tax Rules: Different regions have different tax rates, so be sure to research the local rules of the area where you plan to buy.
• Understand Double Taxation Treaties: Spain has treaties with many countries to avoid double taxation, which could impact your tax obligations.
• Budget Realistically: Don't just budget for the property price. Add 10%-15% more to cover taxes, fees, and other expenses.

 

Published 9/3/25