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KEY TAX ISSUES FOR
NON-RESIDENTS WHEN INVESTING
IN THE SPANISH REAL ESTATE
MARKET AND A BRIEF NOTE
ABOUT THE LATEST TAX NEWS
When investing in the real estate market in Spain, it is highly
advisable to obtain professional and independent tax legal advice
to avoid potential pitfalls.
For Buyers
The first decision to be made comes at the time of
determining the most appropriate legal structure
for the investment, namely:
i. Buying as an individual; or
ii. through a company (i.e., non-resident company
or by setting up a new company in Spain).
• VAT or Transfer Tax
The purchase of a brand new off-plan property is
subject to Value Added Tax (10%) and Stamp Duty
Land Tax (1.2%). In Andalucia, Transfer Tax (7%) is
levied on the transfer of second-hand properties.
However, this can be reduced to 2% if the buyer
intends to sell within 5 years and certain
requirements are met.
The above taxes are levied on the basis of a
minimum taxable value, set by the administration
and known as the “valor de referencia”.
• Withholding Taxes
When buying a property owned by a non-resident,
the buyer is required to withhold a 3% of the sale
price, and remit to the Spanish tax authorities on
behalf of the seller.
The same applies to the municipal capital gains tax
(“plusvalía municipal"), a local tax levied on the
increase in the value of the land.
• Income imputation
Please note that when owning a property in Spain
which is not rented out nor it is the main residence
of the owner, it will be subject to an annual
deemed income tax for non-resident.
• Temporary solidarity Tax on High-Net-Worth
Individuals
From September of 2022, the region of Andalucia
applied a 100% tax relief on Wealth Tax, which
means that taxpayers in this region no longer pay
the tax.
For this reason, the Temporary solidarity Tax on
HNWIs was introduced at the national level to
replace the wealth tax in those regions that had
decided to remain exempt from the wealth tax. The
tax was designed to be temporary and will only be
in force in 2022 and 2023, unless it is postponed.
In practice, non-residents in Spain would be
obliged to pay the tax if the value of their net
assets in Spain exceeds EUR 3 million.
Although some aspects of the Solidarity Tax were
challenged at Courts, on 7 November 2023, the
Constitutional Court confirmed that the Temporary
Solidarity Tax on HNWIs does not infringe any
constitutional provision. As a result, the Andalucia
government is analysing the potential reintroduction
of the Wealth Tax, so it will be necessary to be
aware of any changes made in this regard.
For sellers:
• Capital Gains Tax
Non-resident sellers are subject to capital gains
tax on the sale of property in Spain. Capital gains
are calculated on the difference between the
purchase price and the sale price, considering
any expenses related to the sale and purchase of
the property, as well as any improvement costs
(not just repairs costs). The 3% withheld by the
buyer will be deducted from the resulting capital
gains tax.
• Municipal capital gains tax
As stated above, this is paid directly by the buyer
to the Town Hall, on behalf of the seller.
Given the frequency of changes in tax legislation,
it is crucial for property owners and investors to
keep abreast of legal developments.
Elisa Negro
Tax Law Attorney at Martínez-Echevarría Law Offices
(+34) 952 765 000
elisa.negro@martinezechevarria.com