Taxes in Spain

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3. FAQ about Taxes in Spain and Fiscal obligations of Investors




Taxes in SpainTax advice service to our clients © Photo: Ernst Lalleman
A. How much are the Taxes in Spain to be paid by an individual or company when buying a property in Spain?

Company:

Direct taxes: None.

Indirect Taxes: Depends on the usage of the real estate: 

  • New or bought for rehabilitation: 10% VAT (if it is a house) or 21% (others cases).
  • Second hand real estate: 10% of Transfer tax.    

Individual Person:

The same as above for companies.

Also there is an alternative way to buy the real estate through a company. Thus, if the real estate is affected to a business activity you can avoid all the indirect taxes. However, you have to take into account that in a future sale of the real estate (not selling the company) the company will have to pay some latent goodwill in Corporate Tax.   

Besides there is a withholding tax concerning sales of real estate, under which purchasers of Spanish real estate from non-resident owners without permanent establishment must withhold 3% of the price.

B. What other expenses will incur?

Approximate Notary and Registry Fees for an Investment between half a million to one million €:

  • Notary, between 700 and 900 €.
  • Property registry, around 300 €
C. What are the Annual Tax obligations?

Non Resident Income Tax:

Taxes in SpainFiscal & Tax advice service to our clients © Photo: Ernst Lalleman

In case the foreign client obtains income for renting the real estate the tax obligations will vary depending on:

  • If the tenant do a business activity, the tenant will have to withhold every quarter the 24,75% in the name of the owner nonresident. The taxable base will be the amount of the rents paid (without the possibility to deduct any expense). Also the tenant will have to do a Tax declaration with the resume of the whole year. In this case, nonresidents will not have to present any tax declaration the tenant will do it in his/her behalf.
  • If the tenant doesn’t do any business activity, will be the nonresident who will have to present tax declarations every quarter and the annual resume of all the income. The withholding tax and the taxable base will be the same as above.

◆ foreign individuals (not companies) that own the real estate without renting will have to declare a presumed income. The taxable base will be 2% or 1,1% (if it is revised) of the cadastral value. The result will be taxed at the tax flat rate of 24,75%. Nonresident will have to present an annual declaration before the 31st of December of the following year.  

Taxes in SpainFiscal & Tax advice service to our clients © Photo: Ernst Lalleman

Wealth Tax:

Non-residents individuals (not companies) who own real estate or other assets located in Spain with a value from 700.000 € will have to present an annual tax declaration of Wealth Tax. The period of presentation is from 1st of May to 30th of June.

Local Real Estate Tax:

This tax is levied annually on the possession of a real estate. The general tax rates are 0.4% on the cadastral value for urban property and 0.3% for rural property, but higher rates may be applied depending on the municipality.


Companies Special Real Estate Tax:

Non-resident Companies who acts without Permanent Establishment resident in tax havens holding a Spanish real estate or usufruct must pay annually the 3% of the cadastral value. 

D. After expiration of first year Visa, will there be a difference in forthcoming years when obtaining residency in Spain?

No! There won't be any difference.

E. Are there any tax benefits for individual Non-Residents when buying real estate under the new law?

There are no tax benefits under the New Law for non-residents. From the labor law point of view, non-residents can obtain a resident permit during one year if the investment of the real estate is 500.000 € or more. 

F. In the event a Foreign Company invests in a Spanish Company more than 1 Million €, how much will be the tax limit? What will be the tax obligation as an investor? Is there any tax benefit under the new law?

There is no tax benefit under the new law for foreign investors. 

There is no tax limit for the investment. 

Any investment or disinvestment in a Spanish Company on behalf of a foreign company or an individual has to be communicated to the Economy Ministry. 

Annual Tax obligations: only in the event that the Spanish company distributes dividends or pays interests to the shareholder (see point 7 taxation below). The Spanish company will be the one to pay the withholding tax of dividends and interest. 

G. How much is the tax for dividends earned from an investment in a Catalan Company?

In case the shareholder is an foreign Company or an individual, in line with the Double Tax Treaty between e.g. India and Spain, the withholding Taxes in Spain will be:

➔ Dividends: 15%.

➔ Interest: 15%

If the shareholder is located in a tax haven or in a country without Double Tax Treaty with Spain, the withholding taxes in Spain for both, dividends and interests will be 21%.


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