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Property ownership

The costs of owning a property in Spain differ depending on the type and size of the property, the location and other individual circumstances. However, as a general guide, owners should bear in mind the following:

• Income tax – non-resident property owners must pay income tax. For those who have no income from renting the property or any other source pay tax on the value of their property at a rate of 25% of the taxable percentage (1.1 - 2%) of the ‘valor catastral’. This is the cadastral value, an administrative value of the property which is often much lower that the property value. If the property is rented, the owner must pay tax on the income from it. The rate will depend on individual circumstances, but a 25% flat rate will usually apply.
• Property ownership tax - calculated at 0.4 - 1.1% (depending on the region – the rate is set by the town hall) of the cadastral value.
• Wealth tax - payable on all assets located in Spain. For a non-resident who has no other assets in Spain aside from the property, this is based on whichever is highest out of the escritura value, cadastral value or a value assigned by the tax office for other taxes. The rate will normally be between 0.2 - 2.5%.
• Community fees – owners of buildings in any developments or complexes where the communal areas are maintained are charged community fees. The amount depends on their size and costs of maintaining them, and a budget will be agreed at an annual meeting for owners of properties in the community.
• Land appreciation tax – known as ‘plusvalia’, this is a municipal form of capital gains tax applied to the increase in value of the land on which urban property is built, payable at the time of transfer and to be calculated on the basis of the duration of ownership and the cadastral value. The seller must pay this tax, though in some cases the seller will try to pass the tax on to the buyer.
• Capital gains tax - another exit cost which in January 2007 dropped from a hefty 35% of taxable gains for non-residents to a more manageable 18%, as long as the property has been owned for a year or more. If the property has been owned for less than a year, the gain will be taxed at a progressive rate.

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