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What you need to know about

Property In Spain
Property Taxes & Charges in Spain
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Legal Note - It should be remembered that the application of Spanish law varies considerably according to region and the circumstances of each individual and so this report can be treated as a general guide only and not as a substitute for qualified legal advice regarding any particular situation. Responsibility for acting on foot of this guide alone is entirely personal and no liability can be accepted by myAdvocate Spain. For a link to where you can get advice on your specific situation from expert legal practitioners in Spain please see the end of the guide.

Property Taxes and Charges In Spain


Anyone who has owned a property in another country will be aware that there are (unfortunately!) a number of taxes and charges relating to home ownership that must be paid. In general the principal taxes or charges in Spain can be grouped as follows: IVA (VAT) ITP (Impuesto Transmision Patrimonial) IBI (Impuesto de Bienes Inmuebles) Plusvala tax La Comunidad Other Charges

IVA (Impuesto de Valor Aadido - VAT)


The purchase of a new property in Spain currently attracts a VAT or sales tax rate of 8%. IVA is paid instead of ITP below as the vendor is a company (the promoter or constructor). The buyer of the property pays the tax directly to the promoter of the development or urbanization together with the monies to pay for the purchase of the property and the promoter is responsible for passing it on to the government in the usual way.

ITP (Impuesto Transmision Patrimonial)


The purchase of a second-hand property in Spain from another individual (as opposed to a legal entity such as a company) attracts ITP sales tax which varies across Spain but is typically between 7% and 8%. The reason the tax rate varies is because it is set by the regional rather than central government. At the moment it seems that regions which are run by the current socialist government party charge 8% whereas areas run by the opposition PP party charge 7%. The tax should be paid within one month from having purchased the property at the local tax office and it is the responsibility of the purchaser of the property to ensure that this is carried out.

IBI (Impuesto de Bienes Inmuebles)


This is a charge that is similar to Council Tax or rates in the UK. It is normally payable once a year (occasionally it is billed quarterly) at the 'ayuntamiento' or town hall and the specific date that the charge falls due depends upon the individual town hall though is often towards the end of the calendar year. Care should be taken when buying a property given that the purchaser should pay for only those months of the year that they own the property. If the previous owner has paid for the full year then they may claim return of that portion which they will not use. The amount payable is expressed as a percentage of the 'catastral' value of the property. The catastral value is the value of the property expressed in Euros as appears in the catastro registry. This registry is like a census of all properties in an area and the value the registry attributes to a property is taken as a reference when determining certain local administrative issues such as the IBI tax payable. Once the catastral value is found, the tax payable is determined by multiplying the catastral value by a coefficient or percentage. For urban property this oscillates between 0.4% and 1.1% though may be more depending on whether the property is located in the municipal capital or if more services than normal are provided.

Plusvala Tax
This is a tax payable upon income derived from the sale of property. As such, it is similar to Capital Gains Tax in other jurisdictions. The tax is payable on the increase of the value of the property as compared to when it was bought. When looked at this way it can be seen that care must be taken when a vendor requests that part of the purchase price be paid 'under the table' as the lower the stated price, the greater any potential gain when the buyer seeks to sell the property in the future. The seller of the property has the responsibility to pay the tax and so once again care should be taken that there is no clause in the contract for purchase that states that the buyer is responsible for the plusvala tax. That said, this does not apply where the person selling the property is not resident in Spain whereupon responsibility shifts to the purchaser. The tax rate is 30% of the following value:

value of the property x number of years held x (between 2.8% and 3.7% depending on number of years the property owned). Exemptions and Discounts from plusvala tax There are some important exemptions from paying the plusvala tax. For example the transfer of a property pursuant to a court order in a divorce does not attract the payment of tax. If you bought the property before 1986 or if the property is your habitual residence and you are more than 65 years old then you are exempt from the tax. Perhaps the most important exemption that exists is the 'exencin por reinversin' or exemption where the proceeds of the sale of a property are reinvested in another property. In order for the exemption to apply the property must have been your habitual residence (as legally defined) and the proceeds must be reinvested within a period of two years following the sale of the old property. Discounts are also possible such as when a property is inherited by a close family member. In such a case any plusvala tax payable may be reduced by 95%. There are conditions attached to this discount such as not selling the property for a period of time following the death of the original owner.

Comunidad
Spain, similar to other mainland European countries has a much higher proportion of apartment style properties than in the UK or Ireland. When multiple proprietors share common parts of a property such as the lifts in the building, porter facilities, the building edifice, the car-park or swimming-pool there is a cost associated with the upkeep of such shared amenities. Accordingly each proprietor is required to contribute financially to the upkeep by way of a community charge, known in Spain as 'la comunidad'. The amount payable varies from building to building or urbanization to urbanisation but will also be determined by the property owned within the building (some properties are larger than others and therefore should pay a larger share). For purchasers of property, an important point to note is that the purchaser of a second-hand apartment within a building or community assumes the debts and pending community charge for the previous and current years. For this reason the seller is required to present the purchaser with a certificate of proof of payment of the community charge unless the purchaser has expressly waived this requirement. Other Charges 3

In addition to the main taxes and charges outlined above it may be necessary to make provision for other ancillary charges such as rubbish collection and water rates. If a community charge is being paid then this will most likely include the charge for collection of rubbish but if the property is a separate building such as a villa with its own rubbish bins then it may not be. Likewise the supply of water may be included in any community charge but in the absence of one will need to be paid for as is the case with other utilities. Some autonomous communities are introducing water meters in an effort to reduce consumption.

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