Real Estate Taxes in Spain: What Taxes Apply When You Buy and Own a Property?

Many people ask what the real tax impact of owning property in Spain actually is. The reality is that real estate ownership involves several taxes at different stages: when purchasing, during ownership, and when selling the property.

Understanding these taxes in advance helps avoid unexpected costs and allows for better financial planning.

Let’s break it down.

1. Taxes When Purchasing a Property

In addition to purchase-related expenses such as notary fees, registry costs, and agency commissions, taxes vary depending on whether the property is new or second-hand.

✅  New-build properties

When purchasing a newly built property from a developer, buyers must pay:

• VAT (IVA): 10% of the purchase price.

• Stamp Duty (AJD – Actos Jurídicos Documentados): the rate depends on the Autonomous Community but typically ranges between 0.5% and 1.5%.

✅  Second-hand properties

If the property is being purchased from a private owner, the applicable tax is:

• Property Transfer Tax (ITP – Impuesto sobre Transmisiones Patrimoniales), which varies by region but usually ranges between 4% and 10% of the purchase price.

2. Taxes While You Own the Property

Tax obligations depend on how the property is used.

🏠  Primary residence

If the property is your habitual residence, no income tax is payable for owning it.

However, parking spaces or storage rooms must be purchased within the same deed as the home to be considered part of the primary residence. If acquired separately later, they may generate taxable imputed income.

🏢 Rental property

If the property is rented, rental income must be declared under real estate capital income.

Key aspects include:

• Tax is paid on net rental income, meaning income minus deductible expenses.

• Deductible expenses include community fees, property tax (IBI), maintenance, insurance, and utilities paid by the owner.

• A 50% general reduction applies to net income in many cases, with possible reductions of 70% or even 90% in specific situations under current regulations.

🏖 Vacant second homes

If you own a property that is neither rented nor your primary residence, Spanish tax law applies an imputed income tax, calculated as:

• 2% of cadastral value, or

• 1.1% if the cadastral value has been recently revised.

This amount is declared annually in personal income tax.

3. Taxes When Selling a Property

When selling real estate, two main taxes may apply.

💰  Capital gains tax (IRPF)

The gain or loss is calculated as the difference between:

• Sale price, and

• Acquisition cost (including taxes and purchase expenses).

If there is a gain, it is taxed under savings income in personal income tax.

However, there are important exemptions:

• Selling a primary residence and reinvesting in another primary residence can exempt the gain.

• Sellers over 65 years old selling their habitual residence are generally exempt from capital gains tax.

🏙  Municipal Capital Gains Tax (Plusvalía Municipal)

Formally known as IIVTNU, this tax is paid to the local council and taxes the increase in land value during the ownership period.

Final Thoughts

Property ownership in Spain involves taxation at multiple stages. The intended use of the property—primary residence, rental investment, or secondary home—has significant tax consequences.

Proper planning before buying, renting, or selling property can prevent unpleasant surprises and significantly optimize tax outcomes.

Understanding the tax framework is not just advisable—it is essential for anyone investing in real estate.

📞 Thinking About Buying Property in Spain?

At American&Legal Spain, we assist international clients and expatriates with property purchases, tax planning, immigration, and all legal matters related to relocating or investing in Spain.

If you are planning to buy, rent, or sell property, getting legal and tax advice before making decisions can save you thousands of euros and many headaches.

Contact American&Legal Spain today and let us guide you safely through your property investment in Spain.