Are you a foreigner thinking about buying or selling a property in Spain? It’s a great idea, but before you jump in, there’s something you must be very clear about: taxes.
Both when buying and selling, there are taxes you must pay no matter what, and if you’re not well informed, you could face an unpleasant surprise.
In this article, I’ll explain step-by-step, clearly and directly, which taxes apply, how much you have to pay, and what you need to do everything properly from the start.
What taxes does a foreigner pay when buying a property in Spain?
Buying a property in Spain involves paying several taxes, whether you are a foreigner or not.
The key factor is whether the property is new or second-hand. Here’s a breakdown of the taxes and how much you pay in each case.
VAT (If you buy a new property)
If you buy a new property (that is, directly from the developer or construction company), you must pay VAT.
In most cases, the rate is 10% of the purchase price.
If it’s an officially protected property (VPO), the VAT is reduced to 4%.
This tax is paid at the time of purchase, along with the rest of the payment.
Property Transfer Tax (If it’s second-hand)
If you buy a used property, VAT does not apply. Instead, you pay the Property Transfer Tax (ITP).
The percentage varies depending on the autonomous community where the property is located.
Generally, it ranges from 6% to 10%, although in some areas it can reach up to 13%.
This tax is also paid after the purchase, when you submit the deed of sale to the tax office.
Stamp Duty (AJD)
This tax is charged for signing notarial documents, such as the deed of sale.
The rate ranges from 0.5% to 1.5%, depending on the autonomous community.
It only applies if the property is new. If you buy a second-hand property, you don’t have to pay it.
Property Tax (IBI)
Once you own the property, you’ll have to pay the IBI every year, which is a municipal tax.
It is set by the local council based on the cadastral value of the property.
The amount can vary significantly depending on the area.
The IBI is payable starting the year after the purchase.
Non-Resident Income Tax (IRNR)
This tax applies only if you do not live in Spain and your property generates income, for example, if you rent it out.
If you live in a European Union country, Norway, or Iceland, the rate is 19%.
If you live in another country, the rate is 24%.
It can also apply even if you don’t rent the property out, because the tax authorities consider that simply owning an empty property in Spain generates an “imputed” income.
How much are the taxes when buying a property in Andalusia?
If you are buying a property in Andalusia, the Property Transfer Tax (ITP) is currently 7% of the purchase price.
In addition, you should also consider notary and land registry fees, which together usually add about 3% more.
So, in total, you should plan for around 10% of the property’s price to cover all the taxes and legal costs involved in the purchase.
What you need to buy a property in Spain as a foreigner
Buying a house in Spain as a foreigner is not complicated, but there are some steps you must follow before signing.
Get a NIE (Foreigner Identification Number)
The NIE is a personal and unique number you need for any legal or tax procedure in Spain.
You can apply for it at a police station in Spain or at the Spanish consulate in your home country.
Why is it important? Because without a NIE, you can’t sign the deed, pay taxes, or open a bank account.
Open a bank account in Spain
Although it’s not legally mandatory, having a bank account in Spain will make the process much easier.
The main reason is that you’ll need it to pay the taxes related to the purchase.
You’ll also need it to set up direct debits for payments like IBI, utilities (water, electricity, etc.), or possible community fees.
Documents needed to apply for a mortgage (if you need one)
If you want to finance the purchase through a Spanish bank, you’ll need to provide several documents, such as:
- Passport or ID.
- NIE.
- Proof of income (pay slips, pension, rental income…).
- Income tax return from your home country.
- Employment contract or proof of professional activity.
Banks usually offer between 60% and 70% of the property’s value to non-residents, so you’ll need to have significant savings.
What taxes does a foreigner pay when selling a property in Spain?
If you’re a foreigner selling a property in Spain, you’ll also need to pay some taxes.
The main one is for the gain you make from the sale, but there’s also another tax based on the increase in the value of the land.
Non-Resident Income Tax (IRNR)
When you sell a property, it’s usually for more than you paid for it.
This profit is considered income, and since you’re not a Spanish resident, it’s taxed under the Non-Resident Income Tax (IRNR).
The tax rate is 19% if you live in an EU country, Norway, or Iceland.
If you live in another country, the rate is 24%.
Important: the buyer must withhold 3% of the sale price and pay it directly to the tax authorities.
This amount acts as an advance on the tax you owe.
Later, you can file a tax return to settle the final amount: if you owe more, you pay the difference; if not, you can request a refund of part or all of the 3%.
Municipal Capital Gains Tax (Plusvalía Municipal)
This is a local tax charged on the increase in the value of the land where the property is located, not on the total value of the property.
Here’s what you should know:
- It’s collected by the town hall.
- It’s calculated based on the number of years you owned the property and how much the land value increased during that time.
- Even though it’s called “capital gain,” you may have to pay it even if you sell at a loss, although in some cases you can claim a refund.
Usually, this tax is paid by the seller, although a different agreement can be negotiated in the contract.
Enjoy the buying or selling process with peace of mind by being well informed
Buying or selling a house in Spain as a foreigner is not complicated, but you need to be clear about the rules.
Whether you’re investing in a second home or selling an exclusive property, having the right information gives you confidence and prevents issues.
On our website, you’ll not only find unique homes in prime locations, but we also support you throughout the entire process, answering questions and making everything easier.
Ready to take the step? We’re here to help you.