Real Estate Law & Taxation

Also known as Council Tax or Real Estate Tax, it is a municipal tax on the value of the real estate and has to be paid by the person who appears as owner on January 1 of each year. The city council is responsible of its settlement and collection, who may set the tax rate, as well as any discounts and exemptions that it deems appropriate. In any case it is limited between 0.4% and 1.1% of the cadastral value of the property.

The collection of this tax is usually used to invest it in the same town hall: gardens and public lighting, pavements, cleaning and city maintenance…

The receipt of this tax is issued annually and can be paid through direct debit.

Municipal tax to pay the costs of garbage collection and disposal. Each municipality establishes the amount and periodicity of payment, generally payable semi-annually.

Non-resident individuals, holders of assets and rights in Spain at 31 December of each year, are subject to pay the wealth tax.

The taxable amount, in case of real estate, is determined by the difference between the value of the property in the deed and the debts that may exist over the property (mortgage).

On the other hand, non-resident taxable individuals have a minimum exemption of €700,000 that is, they will only be taxed if the value of their properties exceeds that amount. Thus, in the case of a marriage having properties worth €1,400,000 in which each has a 50% stake on those assets, they will be exempt from declaring. In any case, all taxable individuals whose assets exceed €2,000,000 will be required to declare, even if, once the deductions and the exempted minimum have been applied, the result is zero.

The tax rate will be between 0.2% and 2.5% and will vary according to the tax base. The declaration of this tax must be presented on-line.

According to law, any person who is in one of the following scenarios is considered resident in Spain:

1.- Lives more than 183 days in Spain.

2.- Main source of income is in Spain.

3.- Spouse and minor children live in Spain

Therefore, will be obliged, regardless of whether or not it has been officially registered as resident at the Ministry of the Interior, to present income tax declaration in Spain as a tax resident.

Declaration must include all personal income and expenses, whether produced or paid in Spain, or abroad. The latter does not imply that the taxpayer has to pay twice for the income generated abroad. In such cases, an exemption from the tax at source would be requested or the amounts paid would be claimed in the country where the income was generated.

Those individuals and legal entities resident in Spain who own properties and assets abroad, must submit a statement informing about those possessions to the Tax Office according to the Spanish law.

This declaration must be submitted on-line and, if failing to do so or presented late or with false or incomplete information, it will be considered a serious tax offense that will entail very high economic sanctions.

Non-resident companies that own a property in Spain and their fiscal residence is established in a tax haven, must pay a special tax on the property.

The deadline for presenting this annual tax ends on January 31 of the next fiscal year in question and the tax rate is 3% on the cadastral value of the real estate.

In the case of non-resident companies that own properties in Spain and had established their fiscal residence in countries with which Spain has signed an agreement to avoid double taxation and, therefore, are exempt from paying this tax, are legally obliged to provide an email address to the Tax Office where authorities can send them all communications and notifications.

If the property is for own use or is empty, the applicable rate is 24% and, in the case of taxpayers residing in an EU State Member the rate is 19%. The taxable amount will be 1.1% of the cadastral value of the property, if that value has been revised or modified after January 1, 1994, and 2% of the cadastral value in all other cases. Likewise, a proportional calculation will be made according to the number of days of the year in which the person has been the owner of the property in question.

The deadline for filing and paying income tax in the case of property for own use is between January 1 and December 31 of the year following the year in which it occurred.

Non-resident income tax must be paid by self-assessment, which means that taxpayers (or their designated representative) are required to personally calculate, complete and validate the corresponding online form and arrange payment. The Spanish tax authorities will not send non-residents any communication, payment advice or settlement in relation to this tax.

General rate for non-resident income earned through property rental is 24%, but if those taxpayers are residing in an EU Member State, this rate is reduced to 19%.

When there is a double taxation agreement with Spain, the owners can deduct the amounts paid for this concept in the tax return that they present in their country of residence.

At the end of each quarter, a statement must be made about the income earned from renting the property.