SPANISH PROPERTY TAXES

The purchase of a property in Spain involves - both for residents and non-residents - a series of fiscal obligations which must be met: TAXES ON CONVEYANCE OF ASSETS AND DOCUMENTED LEGAL PROCEDURES (ITP-AJD in its Spanish acronym) AND/OR IVA (Spanish equivalent to VAT): The IVA tax (equivalent to British VAT) is applicable to the purchase of newly built properties and urban plots which are immediately available for building. It amounts to 7% of the purchase price to the purchase of newly built properties, and 16% to purchase of urban plots which are immediately available for building. This tax must be paid on each instalment. In addition, the obtention of the title deed is also subject to Taxes on Conveyance of Assets and Documented Legal Procedures, 1%. It is necessary to pay the ITP-AJD taxes (taxes on Conveyance of Assets and Documented Legal Procedures), when IVA (Spanish VAT) is not applicable. The rate of ITP is 7% of the property purchase price. Remember the costs associated to a property sale transaction are normally 10% of the purchase price, and one of the mentioned taxes is included in this 10%. TAX ON REAL ESTATE (IBI in its Spanish acronym) The IBI tax must be paid every year, in one payment to be made between September 15 and November 15. Failure to pay this tax may result in the initiation of sanction procedures. We can ensure this payment is made by direct debit from your Spanish bank account, so you can rest assured you will not encounter any problems. WEALTH TAX If you are not resident in Spain, you must pay Wealth Tax (in Spanish, Impuesto sobre el Patrimonio), which is applicable to all the assets you have in Spain. Among these assets are real estate, bank accounts and other goods of a certain value. The rate of this tax is very low, usually around 0.20% (one fifth of a percentage point) of the total value of your assets. PROPERTY INCOME TAX Non-residents who own properties in Spain must file their tax return with the tax authorities. Spanish authorities are only interested in the amount earned by non-residents through their activities in Spain, rather than their global income. Non-residents must pay a single tax rate on any income generated in Spain. A typical example is the interests generated by deposits in accounts held in Spanish banks or the income obtained from renting properties. Any person who owns a property in Spain, but is not resident there the entire year, should designate a "fiscal representative" who will carry out all the procedures necessary before the tax authorities. We also offer this service. CAPITAL GAINS TAX Capital gains tax is payable based upon the increase between the original purchase price of a property and the selling price. This tax applies to the seller is levied at 18% to non-residents. Anyone purchasing a property from a non-resident must withhold 3% of the purchase price which is then paid to the tax authorities on account of any liability by the vendors. The vendor then has around two months in which to pay the Agencia Tributaria (spanish tax authorities) the rest of this tax. However, there are factors that can be taken into consideration to reduce the amount paid such as the costs incurred with the original purchase, and time elapsed between the initial purchase and the new sale etc. Source: Manzanares Abogados – Lawyers http://www.manzanares-es.com