Investing in New-Build or Resale Property: Which Strategy Should You Choose?

Spanish property taxation: general concepts

Property Taxation in Spain: Essential Knowledge

Taxes on property purchase

• New properties: VAT (IVA) 10% + AJD 0.5–1.5% (Costa Blanca 1.5%)

• Resale properties: ITP 6–10% (Costa Blanca 10%)

Other fees:

• Notary fees: 0.2%–0.5%

• Property registry fees: 0.1%–0.25%

• Lawyer fees: 0.5%–1%

The total estimated purchase costs on the Costa Blanca are 11–12% of the property value.

Taxes for property owners

• Local Property Tax (IBI): Calculated by applying a municipal rate to the cadastral value of the property. This rate varies depending on the property location and the range of public services provided by local authorities. Typical IBI rates range from 0.4% to 1.3%.

• Rental Income Tax:

  • Residents: Subject to progressive personal income tax (IRPF), with possible deductions for expenses and renovations.

  • Non-residents: Subject to Non-Resident Income Tax (NRIT)

    • EU citizens: rental income taxed at 19%, with certain deductions possible

    • Non-EU citizens: rental income taxed at 24%, with certain deductions possible

• Other owner obligations:

  • Waste collection tax: varies depending on property size

  • Community fees: for shared facilities (pool, gardens, security)

• Wealth Tax: Applies to net assets exceeding a certain threshold. For residents, calculated on the net value of worldwide assets. For non-residents, only applies to assets located in Spain. Rates vary significantly by autonomous community.

Taxes on resale

1. Municipal capital gains tax: a local tax that varies depending on the municipality.

2. Capital gains subject to income tax: municipal capital gains tax is deductible.

   • Residents: subject to progressive personal income tax (IRPF)

   • Non-residents:

     • EU citizens: 19%

     • Non-EU citizens: 24%

Several taxes must be considered in Spain, and anticipating them is crucial to correctly evaluate the return on your investment in Spain.

Property taxes vary considerably depending on the following factors: cadastral value and market value of the property, property location (autonomous community), owner’s residency status, and type of property: primary residence, secondary residence, or rental property.

While calculators exist to help estimate your tax liability, only a specialized tax advisor can provide an exact estimate. They can also advise on legal strategies to minimize your tax burden: structuring through a company, optimizing deductible expenses, or exploring regional exemptions. I Invest In Spain works with experienced tax advisors to provide tailored support.