Taxes on Owning Property

Every property owner in Spain has a responsibility to pay property taxes every year. Depending on your residency status will vary the type and amount of taxes that you have to pay.

Every person that owns a property in Spain is responsible for paying IBI (Impuestos Bienes Inmuebles) this is the basic property tax and your local town hall (Ayuntamiento) will send you an invoice every year.

As a property owner in Spain you are also responsible for Property Tax (form 210) very often called an “income tax” – this “income” is based on the catastral value of the property (as shown on your IBI bill and s a value used by the Town Hall and is considerably less than the real value!) and a calculation is made at 2% as being the “income” and you pay 25% tax on that. The percentages can vary from region to region, but the 2% is a widely used figure.

If you are a non-resident property owner in Spain then you are subject to additional property tax! (form 714). This tax is calculated on the highest of the following:

Catastral value
The value assessed by the Spanish Tax office for other tax purposes
The acquisition price. (The value of the property plus any charges or liens minus any mortgage outstanding).

If you rent out your property in Spain in addition to the IBI you have to complete the tax form 210 for the “income tax” on the property and on this form indicate that you have received income in the form of rent and you will have to pay 25% tax on the rental income. The 25% tax on rental income should be paid every quarter and at the end of every rental agreement.

Sometimes when you are renting out one or more properties it may be more tax efficient to form a company to own and run the property. In this way you can off-set certain expenses against the rental income and as such pay less taxes. Of course there are expenses involved in forming and maintaining a company, so if you think this may be an option for you then please call us so that we can talk you through the various options.