Parastoo Legal Group
Real Estate Tax in Spain: A Guide for Middle Eastern Buyers and Investors
Understanding the taxes involved in buying, owning, and selling property in Spain as a non-resident.
Real estate is the most common investment category for Middle Eastern clients in Spain — and it comes with a complex tax landscape that varies depending on whether you are buying new or resale property, whether you are a resident or non-resident, and which region the property is located in. This guide summarises the key taxes you need to be aware of before purchasing.
Taxes on Purchase
New property (directly from developer): 10% VAT (IVA) plus 1.5% Stamp Duty (Actos Jurídicos Documentados). Resale property: Transfer Tax (Impuesto de Transmisiones Patrimoniales — ITP) at rates between 6% and 10% depending on the region (Madrid: 6%, Marbella/Andalucía: 7%, Mallorca/Balearics: 8–11.5%). Legal fees, notary, and registry fees add approximately 1–2%.
Annual Property Taxes
All property owners pay the IBI (Impuesto sobre Bienes Inmuebles) — a municipal property tax of 0.4–1.3% of the cadastral value annually. Non-residents who do not rent out their property must also file an annual IRNR return on "imputed income" (approximately 1.1% of cadastral value, taxed at 24% for non-residents from non-treaty countries).
Rental Income Tax for Non-Residents
Non-resident landlords pay tax on Spanish rental income at 24% (for non-EU, non-treaty residents — this applies to most Middle Eastern clients). Residents pay at marginal income tax rates but can deduct expenses. We advise clients on whether establishing Spanish residency (and applying the Beckham Law) improves their rental income tax position.
Capital Gains Tax on Sale
When selling Spanish property, non-residents pay 19% on the capital gain. The Spanish buyer must withhold 3% of the sale price and pay it directly to the tax authority as a prepayment. Residents pay capital gains tax at 19–28% depending on the gain amount, but can benefit from primary residence exemption if applicable.
Wealth Tax and the Solidarity Tax
Spanish residents and non-residents with assets in Spain above €700,000 may be subject to Wealth Tax (rates 0.2–3.5%). The temporary Solidarity Tax (Impuesto de Solidaridad de las Grandes Fortunas) applies to assets above €3,000,000. We advise on structuring real estate holdings to manage these obligations effectively.