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We often get questions about taxes in Spain at Brilliant Real Estate

25 January 2018

The Spanish taxes

We often get questions about taxes in Spain at Brilliant Real Estate ... We have done research to get clarity for everyone.

The purchase or sale of existing or new real estate in Spain has a number of financial consequences for you as a (non-) resident in Spain. Below is a concise summary of the most important taxes and levies. For an exact calculation, we advise you to contact a (Spanish) accountancy firm.
Income tax residents

(= Impuesto sobre la renta de las personas ficas, IRPF)

Any foreigner resident in Spain must file a tax return with respect to his personal obligations and worldwide income. If you stay in Spain for more than 6 months per year, you will be considered as a tax resident even if you have not yet applied for a residence permit.
In Spain the income tax is progressive, running from 19 to 45%. As a Spanish resident you can deduct mortgage interest (interest and repayment) from your taxable income up to a certain amount.

Income tax non - Resident

If you, as a non-resident, do not officially rent the property, you are still liable for income tax in Spain. The tax is levied on an imputed or flat-rate income of 1.1 percent of the cadastral value of the home (and 2 percent if this value has not been revised since 1994). The allocated income is taxed at the non-resident rate of 19 percent (19.5 percent for 2015). For residents from outside the European Union, the rate is 24 percent.

Wealth tax

(= Impuesto sobre el Patrimonio extraordinario)
For this a progressive rate applies from 0.2% up to 2.5%.

Property tax

(= Impuesto sobre Bienes inmeubles - IBI)
The owner of the property pays between 0.3% and 0.8% property tax. The percentages depend on the municipality.
You always pay property taxes, even if you are not registered in Spain.

Tax on the appreciation of land

(= Plusvalia)
When selling your house with land, you always have to pay the value increase of the land to the municipality tax, regardless of the length of time you own the land.

Capital gains tax (via IRNR)


(= Impuesto sobre incremento de Patrimonio de la venta de un bien inmueble)
There is a difference in the tax rates to be calculated, depending on your residential property. As a resident, a different rate is applied than if you are not a resident.
For residents the following rates apply to the profit:
19% on the part between € 0 and € 6,000
21% on the part between € 6,000 and € 24,000
23% over the part above € 24,000
The income tax is charged to residents through the income tax of the year in which the property was sold.
For non-residents, a fixed rate of 19% applies to the profit.
The capital gain is the difference between the acquisition price and the selling price. The acquisition price is increased by maintenance costs, renovation costs, etc. An indexation system applies to the calculation of the purchase price, as a result of which the inflation is exempted.
The buyer will withhold 3% of the sales amount and pay it directly to the tax authorities via a 211 form as a withholding tax on this tax payment. In this way, the tax authorities have placed the responsibility for this payment with the buyer. If the seller does not pay this withholding tax to the tax authorities, the buyer will charge the capital gains for this tax payment.
Residents and non-residents who transfer real estate acquired in or for 1994 may qualify for a reduction in capital gains. This can even lead to an entire exemption. If you owned your house for more than two years on 31 December 1996, you are entitled to 11.11% reduction for each year that the house was in possession for longer than this date.

Transfer tax

(= Impuesto de Transmisiones Patrimoniales)
If you buy from a private individual, you pay transfer tax on the officially registered amount. The rate (in the province of Almería) currently amounts to 8% in other regions to 10%.
However, depending on the state in which the purchase is made, the rate may differ or it may even be decided to purchase with VAT (when buying and selling between business parties)

Sales tax (= IVA)

If you buy land from a project developer, you pay 21% IVA. If you buy from a private individual this is 8%. If you buy a new house from a project developer (house and land) then you only pay 10% IVA on the whole. If you buy the land first, you pay 21% IVA even if you later build a house on it by a project developer / contractor. You will then pay 10% IVA on the new building.
If you simultaneously have a garage built for the new building, you also pay 10%

Capital gains tax (via IRNR)

(= Impuesto sobre incremento de Patrimonio de la venta de un bien inmueble)
There is a difference in the tax rates to be calculated, depending on your residential property. As a resident, a different rate is applied than if you are not a resident.
For residents the following rates apply to the profit:
19% on the part between € 0 and € 6,000
21% on the part between € 6,000 and € 24,000
23% over the part above € 24,000
The income tax is charged to residents through the income tax of the year in which the property was sold.
For non-residents, a fixed rate of 19% applies to the profit.
The capital gain is the difference between the acquisition price and the selling price. The acquisition price is increased by maintenance costs, renovation costs, etc. An indexation system applies to the calculation of the purchase price, as a result of which the inflation is exempted.
The buyer will withhold 3% of the sales amount and pay it directly to the tax authorities via a 211 form as a withholding tax on this tax payment. In this way, the tax authorities have placed the responsibility for this payment with the buyer. If the seller does not pay this withholding tax to the tax authorities, the buyer will charge the capital gains for this tax payment.
Residents and non-residents who transfer real estate acquired in or for 1994 may qualify for a reduction in capital gains. This can even lead to an entire exemption. If you owned your house for more than two years on 31 December 1996, you are entitled to 11.11% reduction for each year that the house was in possession for longer than this date.

Transfer tax

(= Impuesto de Transmisiones Patrimoniales)
If you buy from a private individual, you pay transfer tax on the officially registered amount. The rate (in the province of Almería) currently amounts to 8% in other regions to 10%.
However, depending on the state in which the purchase is made, the rate may differ or it may even be decided to purchase with VAT (when buying and selling between business parties)

Sales tax (= IVA)

If you buy land from a project developer, you pay 21% IVA. If you buy from a private individual this is 8%. If you buy a new house from a project developer (house and land) then you only pay 10% IVA on the whole. If you buy the land first, you pay 21% IVA even if you later build a house on it by a project developer / contractor. You will then pay 10% IVA on the new building.
If you simultaneously have a garage built on the new building, you also pay 10% IVA. If you have a swimming pool or garage built at an existing house, you will pay 21% IVA.
You pay 21% IVA for detached renovations (which do not exceed 25% of the cadastral value).

Construction tax

(Impuesto sobre Construcciones, instalaciones y obras)
For the application for a building permit, approximately 2.5% tax is charged on the declared value of your future home (this value indicates the architect). The percentage depends on the municipality. Often the architect has already calculated the percentage in his quotation and the architect will pay that tax for you.

Inheritance law

If you are married and you have children (and no will) the legal division applies. This means that the survivor becomes the owner of all assets and liabilities, and that the children receive their inheritance in the form of a claim.
Motives to make a will:
• appoint an executor;
• set up a settlement administration so that
• appoint a guardian and a director for young children;
• an exclusion clause (so that your inheritance "stays in the family");
• make a "disaster clause" in case none of your family remains;
• an arrangement for whether or not to draw donations appropriately;
• saving of Inheritance tax (inheritance tax).

Inheritance for Foreigners with property in Spain

If you have your habitual residence in Spain for five years or longer and you have been posted abroad for more than five years, then in principle, Spanish law applies in the event of death.

Spanish inheritance law

It is absolutely incorrect that Spanish inheritance law automatically applies when foreigners own Spanish property. The Spanish Civil Code explicitly states that the nationality principle applies to determine which national law of succession applies, when a foreigner dies in Spain. A lawyer working with WSBA can inform you about the effect of the Spanish inheritance law when, on the basis of the conditions of the 1989 Hague Criminal Convention, your Spanish inheritance applies to your estate.

Testament

Depending on personal circumstances, making a will is advisable in your own country and / or in Spain; It is always advisable to have one will, according to the inheritance of your own country, for all possessions in and outside of Spain. For example, Spanish inheritance law does not have the same long-term protection as abroad.

Longest living testaments in Spain

A lawyer working with WSBA can inform you about the various longest living testament forms of foreign law.

Revoke / change testament

Each will can be changed or revoked at any time abroad or Spain. This is done by making a new will to inheritance of your own country.

Renew testament

It is also wise regularly (once every five years) to go through the will and renew if necessary. Your circumstances (composition of your assets or of the family) may have changed. Legislative changes may also be grounds for adapting your will.
What happens to the will after your death?
Only your last testament applies. I.e. if you have changed the will to an (foreign or Spanish) notary in the interim, only the last will.

Testament in Spain

A will, with choice of law for inheritance law in your own country, is also necessary for every foreigner with property in Spain,
• that has been issued for longer than five years in your own country, without a will and / or;
• who has now drawn up a Spanish will (according to Spanish law) and / or;
• who has drawn up a previous will (domestically), dating from before 1 January 2003 and / or;
• whose heirs are not the persons according to the law, to whom one wishes to withhold his / her possessions (in Spain and / or in their own country) and / or;
• who lives together "unmarried" or "unregistered" and wishes to share his / her partner in the estate and / or;
• who has made a will, the content of which needs to be adjusted, with or without the aim of saving Inheritance tax and / or;
• who is alone (so no longer has any family).

Settlement of Spanish legacies and wills

• The procedure for settling an inheritance in the Netherlands and Spain has the following components: issuing the certificate of inheritance, the deed of division, submitting the inheritance tax return and the definitive distribution of all goods over the heirs.
• In daily practice there is sometimes confusion about the concepts of inheritance law and inheritance tax. That is why it is good to explain the two terms below. The inheritance law regulates the transfer of the assets and liabilities of testator to the heirs. The Inheritance Tax is the tax on an inheritance that the heirs would have to pay in the event of death of the testator.

Inheritance tax

As of 1 January 2010, the rates have gone down sharply, the exemptions for partners and children have increased and also the inheritance of a company became fiscally more favorable. As a result of the adjustments, fewer children and partners come into contact with this tax. The law is simpler and more transparent by reducing the number of rates.
Exemptions and rates:
• The exemption of Inheritance tax for partners amounts to 600,000 euros;
• The exemption from Inheritance tax for children is € 19,000;
• The rates for partners and children amount to 10 percent over the first 118,000 euros and 20 percent over the remainder;
• The rates for "third parties" such as cousins are 30 percent over the first 118,000 euros and 40 percent over the remainder;
• The inheritance of a company with a value up to 1 million euros is 100 percent exempt. For companies that are worth more, an exemption of 83% applies to the excess.
Inheritance taxes UP TO 80% - planning necessary
(Advantage of the joint purchase of a property in Spain)
If a foreigner (non-resident of Spain) dies, then the Spanish inheritance and inheritance tax apply to the assets that are on Spanish soil.
In practice, this can lead to annoying problems regarding the settlement of the estate. By carefully drawing up a will in Spain many problems can be prevented. As regards the levying of inheritance tax on assets in Spain (houses, bank balances, securities, etc.), Spain is entitled to levy taxes.

Exemptions

The exemptions depend on the tariff group. A gift does not lead to an exemption. The groups with their exemptions are the following:
Groups by kinship:
1. descendents (legal, natural, not natural), adopted under 21 years: € 3.990,72 for each year less than 21 with a maximum of € 47,858.59
2. descendents older than 21 years; spouses; ascendants or adoptive parents regardless of age: € 15.956,87
3. branch in the 2º and 3º degree: € 7,993.46

4. the others eg the side branch in the 4º degree or higher: 0, -

prices

The Spanish succession rates for the first bracket amount to 7.65 percent to a maximum of 34 percent for the highest bracket. The highest bracket assumes a value above 797.555 euros.
These rates can be multiplied once again by 1.05 if the heir's assets for the death exceed 402,678 euros. The rates are even multiplied by 2 to 2.4 if the home is inherited by a non-family member.
In the Spanish succession declaration, the actual value of the home must also be indicated. It is now possible in most Spanish municipalities to ask what the value of the property for inheritance, gift tax and transfer tax is; this value is sometimes lower than the real market value, but it is allowed to use it for
mentioned taxes. Here too, debts entered into to acquire the Spanish dwelling can in principle be deducted from the value of that dwelling.

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