Tax Guide for Buying and Selling Property in Spain

When buying a property in Spain, it is very important to clearly understand all the tax implications involved in the transaction. Whether it is a second-hand property or a newly built home, different taxes must be taken into account.

Below we provide a clear overview of the taxes payable when buying and selling property in Spain, as well as the ongoing annual tax obligations related to property ownership.

What taxes are paid when buying a property in Spain?

1. Purchase of a second-hand property

When acquiring a resale property, the buyer must pay the following taxes:

Property Transfer Tax (ITP)

The Property Transfer Tax (ITP) is a tax whose competence lies with the Autonomous Communities. Therefore, the percentage payable depends on the applicable regional legislation.

This tax applies to the onerous transfer of real estate.

Stamp Duty (IAJD) – fixed quota

The Stamp Duty (Impuesto de Actos Jurídicos Documentados – IAJD), in this case as a fixed quota (not variable), is also regulated by the Autonomous Communities.

This tax applies to legal acts formalised in public deeds.

Taxable base for these taxes

Taxes are calculated based on:

• The value of the property declared by the parties, or

• The reference value assigned to the property by the regional public administration

The higher of the two values will always apply.

2. Purchase of a newly built property

When purchasing a newly built property, the tax regime is different.

Value Added Tax (VAT)

Value Added Tax (VAT) applies to the supply of goods and services carried out by businesses and professionals.

In the purchase of a newly built property, VAT applies because the seller acts as a business or professional developer.

• Standard rate: 10%

• Social or protected housing: 4%

There are regional particularities. For example, in the Canary Islands, the equivalent tax is IGIC, generally 5% or 3%, depending on the type of property and the buyer’s circumstances.

Stamp Duty (IAJD) – fixed and variable quota

In this case, the buyer must pay both the fixed and variable quota of the IAJD.

The variable quota depends on the Autonomous Community and usually ranges between 0.5% and 1.5%.

In practice:

• VAT is normally included in the purchase price

• IAJD is paid on the value declared in the notarial documents

Are there annual tax implications for owning a property in Spain?

Yes. Owning property in Spain entails annual tax obligations.

The property owner must pay several local taxes.

Property Tax (IBI)

The Impuesto sobre Bienes Inmuebles (IBI) is a municipal tax calculated based on the cadastral value of the property.

• The tax rate generally ranges between 0.4% and 1.1%

• The final amount depends on the municipality where the property is located

Waste collection tax

The municipal waste collection fee also depends on the municipality and generally does not exceed €350 per year.

Before completing a property purchase, it is common practice to request the IBI and waste collection receipts from the previous year to verify the exact amounts.

Taxation of rental income

Income obtained from renting the property must also be considered.

If the owner is a tax resident in Spain:

Rental income must be declared in the Personal Income Tax (IRPF).

If the owner is a non-tax resident:

Rental income must be declared through the Non-Resident Income Tax (IRNR).

The following rates apply:

• 19% for tax residents in the European Union, Iceland, Norway and, since 11 July 2021, Liechtenstein

• 24% for tax residents in all other countries

These percentages apply to the net income obtained from the rental activity.

IRNR when the property is not rented

There is an important particularity: when the property is not rented, non-resident owners must still pay Non-Resident Income Tax (IRNR) annually.

The tax is calculated as follows:

For tax residents in the European Union, Iceland, Norway and Liechtenstein:

• 19% on 1.1% of the cadastral value (if updated)

• Or 19% on 2% of the cadastral value

For tax residents in other countries:

• 24% on 1.1% of the cadastral value (if updated)

• Or 24% on 2% of the cadastral value

What taxes does the seller pay when selling property in Spain?

Municipal Capital Gains Tax (Plusvalía Municipal)

The Municipal Capital Gains Tax (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana) is a municipal tax.

It taxes the increase in value of urban land at the time of transfer.

This tax applies only to properties located on urban land, not to rural land.

By default, the administration applies the objective calculation method, although it is possible to apply the real calculation method, especially when no gain has been obtained or the gain is minimal.

Tax on the capital gain from the sale

The seller must also pay tax on the capital gain obtained from the sale of the property.

Depending on the taxpayer’s status:

• Individuals resident in Spain: Personal Income Tax (IRPF)

• Companies: Corporate Tax (Impuesto sobre Sociedades – IS)

• Non-resident individuals: Non-Resident Income Tax (IRNR)

Legal advice for property transactions

Buying or selling property in Spain involves multiple tax implications for both the buyer and the seller, as well as ongoing annual obligations.

Understanding which taxes apply in each case — whether the property is second-hand or newly built, and whether the owner is a tax resident or non-resident — is essential in order to properly plan the transaction and avoid future tax contingencies.

At CDLA Abogados, we provide comprehensive legal advice in real estate transactions, assisting both national and international buyers and sellers. We analyse all tax, urban planning and land registry implications in advance to ensure a secure and legally sound transaction.

You can find more information about our specialised Property Conveyancing service at the following link:https://www.cdla-abogados.com/compraventa