Taxes for foreigners in Spain
When we think about purchasing property in another country, one of the main concerns that arises relates to tax obligations. In this regard, taxes for foreigners in Spain may seem complex at first, but with the right information and guidance, everything becomes much more straightforward.
In this guide, we’ll explain clearly and concisely which taxes you need to consider if you're a foreigner interested in buying property in Spain—whether for personal use, as a second home, or as an investment. At Olea Home, we not only help you find your ideal property, but also accompany you throughout the entire legal and tax process so you can make informed decisions.
Do foreigners pay taxes in Spain when buying a property?
The short answer is yes. Foreigners must pay taxes in Spain when purchasing property. Both residents and non-residents face a series of taxes, although the tax treatment varies depending on their status.
It's essential to understand the distinction:
Tax resident in Spain: if you live more than 183 days per year in Spain or if your main economic interests are based there.
Non-tax resident: if you reside outside Spain but own property or hold economic interests within the country.
Both scenarios involve tax obligations, though with significant differences that we will explore in the following sections.
Taxes in Spain for foreigners buying property
Purchasing a property involves several costs and taxes that you should be aware of before signing. Here we outline the main taxes foreigners must pay when buying a home in Spain.
Transfer Tax (ITP) or VAT
Depending on the type of property, you will pay one of these two taxes:
ITP (Transfer Tax): If you buy a second-hand property, you must pay between 6% and 10% of the deeded value, depending on the autonomous community where the property is located.
VAT (Value Added Tax): If you purchase a new property directly from the developer, you will pay 10% VAT plus 1.5% Stamp Duty (AJD), although the AJD may vary depending on the region.
Property Tax (IBI)
This is an annual tax that all property owners in Spain must pay. The amount varies based on the property’s cadastral value and the municipality but generally ranges between 0.4% and 1.1% of the cadastral value.
Non-Resident Income Tax (IRNR)
If you are not a resident in Spain but own property there, you are required to declare the IRNR annually. This tax applies to income derived from the property—even if it’s not rented out.
If the property is not rented, the Spanish Tax Agency assumes a “deemed” income and applies a tax rate to a percentage of the cadastral value.
If the property is rented, you must declare the actual rental income. The tax rate is 19% for residents of the EU, Norway, and Iceland, and 24% for others.
Taxes for retired foreigners in Spain
Many European retirees choose the Costa Blanca villas, the Costa del Sol, or the Balearic Islands to retire, and it’s normal to wonder what the tax situation is for foreign retirees in Spain.
Foreign pensions: are they taxed in Spain?
It depends on the country of origin and the type of pension:
Public pension (from government employment): usually taxed only in the country of origin.
Private or contributory pension: if you are a tax resident in Spain, it is taxed here as employment income under Spanish personal income tax law (IRPF).
Double taxation agreements
Spain has signed agreements with over 90 countries to avoid double taxation. This means that in most cases, you won’t pay tax twice on the same income. It's essential to work with a qualified advisor to correctly interpret the applicable treaty.
Taxes for foreigners selling property in Spain
If you decide to sell the property you purchased, you will also face certain tax obligations.
Municipal Capital Gains Tax (Plusvalía Municipal)
This tax applies to the increase in land value between the purchase and sale of the property. It’s collected by the local council and is calculated based on the number of years you’ve owned the property and the cadastral land value.
Capital gains tax for non-residents (IRNR)
If you are not a tax resident, you’ll pay 19% on the capital gain from the sale. The buyer must withhold 3% of the sale price and pay it to the Spanish Tax Agency as a tax advance.
Additional taxes and procedures to consider
In addition to the main taxes, there are other costs associated with the property purchase process that you should keep in mind:
Notary and land registry fees: these vary depending on the property’s price.
Administrative fees: if you hire a gestor (administrative agent) to handle the paperwork, which we recommend.
Legal and tax advisor fees: especially useful if you want a specialized lawyer to represent you throughout the process.
What are the tax benefits of buying property in Spain as a foreigner?
Although paying taxes is unavoidable, investing in property in Spain as a foreigner offers attractive tax and wealth advantages.
Profitability and appreciation
Highly sought-after areas like the Costa Blanca offer excellent value for money. Buying now means securing a solid investment with great potential for medium- and long-term appreciation.
Rental opportunities
If you don’t plan to live in your new home permanently, you can rent it out either for holidays or long-term. Even after paying the IRNR, the income usually yields an annual return of over 5%.
Legal and tax stability
Spain is a safe country with clear regulations and legal protection for investors. Plus, as part of the European Union, it offers many guarantees for EU citizens who want to invest or live here.
At Olea Home, we’re ready to help you. Whether you’re looking for a seafront apartment, a villa with a private pool, or a country estate among vineyards, we’ll guide you professionally and personally so your investment on the Costa Blanca is a complete success.