Just bought a property in Spain?
These are the taxes and costs to budget for!
Purchasing a property abroad opens a treasure trove of promises and dreams! You’ll meet new people, enjoy totally different landscapes, partake of our many festivals and traditions and enjoy the wonderful weather in most of our geography.
However, as exciting as this new stage in your life is, it’s extremely important you are well informed and well accompanied from beginning to end.
And while we assume you are stepping into your new Spanish property with a clear understanding of the expenses involved in the purchase process (mortgage, VAT, notary, agency …), we thought it might be important to outlay them all for you, so that there’s no unpleasant surprises later on.
Spain property-related taxes and post-purchase costs
We understand! All you can think of is the wonderful paella you are going to cook yourself in your new terrace overlooking the Mediterranean! Who wants to think about unpleasant taxes and costs!
Unfortunately, now that you live in Spain or you are on your way to becoming a Spanish property owner, you have to keep track of all the property-related taxes and post-purchase costs.
As wonderful as being a home owner in Spain is, it also entails keeping tabs on your financial obligations besides your initial outlay and your monthly mortgage payments.
What type of costs are we referring to?
We are going to break them down one by one for you so that there are no unwanted surprises later on in your mailbox and you are free to enjoy your Spanish home all year round!
Council Tax – IBI (Impuesto de Bienes Inmuebles)
The second most important invoice you’ll have to face as a home owner in Spain is the Real Estate Tax (IBI).
Paid once a year, the IBI will be calculated by your local authorities (your local town hall) in alignment with the cadastral value of your property.
Please, keep in mind that:
- Every area has a different cadastral value given the fact that the local municipality is the authority that determines the tax rate in Spain.
- The cadastral value tends to be lower in comparison to the actual market value.
- On average, the IBI nears the EUR 150 mark for a one-bedroom apartment. If you’ve purchased a detached home with five bedrooms on a 1,000 sq. m land, you’d be looking at an IBI of about EUR 2,000.
How do the authorities calculate the IBI?
Your IBI rate will be calculated based on the city you’ve bought on, the area your sits in and the type of housing.
The town hall authorities of the region where you intend to purchase your property calculate your IBI it in accordance with the cadastral value of the area. The rate used for determining this value varies from 0.4% to 1.3%.
For instance, if your selected town has a rate of 0.5% and the cadastral value is EUR80,000, the IBI will be a total of EUR 400.
Wealth Tax – Impuesto del Patrimonio
Whether you’re buying a property in Spain as an investment, a permanent home to live in or as a holiday rental, you need to understand all your taxes! Starting with the Wealth Tax.
Because the Wealth Tax is sneaky kind of tax… Why?
Because the Spanish Wealth Tax has no equivalent in many countries, the UK being one of them. Being unaware of this type of tax will result in paying more unnecessary taxes and penalty fees.
What do you need to know about the Spanish Wealth Tax?
For starters, the Spanish authorities will determine your payment annually based on the total net value of the assets that you possess in Spain as a non-resident.
If you are a resident, they will include all your assets across the globe.
However, the first EUR 700,000 worth of assets will be exempted from this tax.
