Private Clients
Spanish Property Tax
If you are purchasing a property in Spain, you need specialist legal and tax advice to ensure a smooth and cost-effective transaction. In 1998, the Spanish non-resident income tax law introduced a tax liability on property in Spain owned by non-residents. To avoid excessive duties, make sure that you hire specialised legal advisors like those at Del Canto.
Purchasing Property in Spain
If you are buying a residential property in Spain the amount of tax you will pay will depend on where you are buying and whether it is a new or resale property:
- If you purchase a new build property, which has never previously been occupied, you need to pay the equivalent of VAT (Impuesto sobre el Valor Añadido – IVA – in Spanish) which is 10% of the price, and Stamp Duty, 1.5% Legal Documentation Tax (Actos Jurídicos Documentados – AJD – in Spanish).
- If you’re buying a resale property that has previously been occupied, you need to pay transfer tax (Impuesto sobre Transmisiones Patrimoniales – ITP – in Spanish) which is calculated on a sliding scale depending on the purchase price. The national rule of ITP is 7%, but many of the autonomous regions have applied higher local rates.
Get in touch for an accurate estimate on your Spanish property taxes
The figures above are indicative of the tax payable during a Spanish property purchase but the actual costs will depend on your particular circumstances and the region you are looking to purchase in, so please contact us for an accurate estimate.
Buying Spanish Property Through a Company
To mitigate their tax liabilities, some people buy their Spanish Property through a company. Whilst this can be effective it obviously has tax and legal implications that need to be considered. The most suitable solution will depend on the particular circumstances but some considerations include:
- International property structures are not cheap to set up and maintain, so the potential savings in terms of tax must be substantial if they are to be financially viable. If a property is worth £1m or more then this may be a good route to consider.
- You must be able to demonstrate a controlling stake in the company e.g. direct or indirect control over the voting rights and the power to name/remove the majority of board members.
- If a foreign property has been owned through a limited company or other corporate structure, which has conducted basic tax-planning for a number of years.
- If the company’s tax obligations have not been complied with, the structure might fall within the definition of aggressive tax planning
If you are considering purchasing a Spanish property through a company, it is essential that tax and legal professionals should review the structures used to buy property to ensure compliance.
Unfortunately, many Spanish property owners who created corporate structures to purchase their property years have given them little consideration since. The Spanish tax authorities are aware of this, and if a company was created before 2018 and the tax position has not been assessed recently, they may investigate.
How can we help you with Spanish Property Tax?
We at Del Canto Chambers are specialists in international private law, including taxation, and have broad experience in multilateral jurisdictions. Contact us to see how we can help you manage your property and other tax efficiently, both in Spain and the UK.
