1) What are the purchase related costs?
Property prices you see in brochures are always net prices. Above the net price you shall calculate with the following costs when buying a property in Spain:
|VAT or ITP||10%|
|Land Registry Fee||~0.5%|
In case of bank financing: Mortgage cost of approx. 400 EUR + Notary and Land Registry Fees of Mortgage Deed
Other costs to bear in mind are:
- Property Ownership Tax (IBI): This is the local tax which is paid annually and based on the cadastral value “valor catastral” (0.5-1%).
- Income Tax for Non-Residents & Residents.
- Wealth Tax: Payable annually, based on the value of total net assets as of 31st December of each year after the free allowance of 700.000€ (only 500,000€ in the Valencian Commnity and Cataluña).
- Rubbish Collection Tax.
- Water supply and Sewage Tax.
- Community expenses – if you are in a community of owners.
2) For how many years can I apply for a loan? How about interest? Is it a floating or fixed rate?
It depends on the applicant’s age. The maximum age to complete the mortgage is usually 65 years old.
The mortgage can be of fixed, variable or mixed interest rate. In the first case it could be between 2,5% and 3.5%, depending on the term and the client. In the second case it could be EURIBOR + 3-4 %.
Nowadays the banks are offering the first 10 years fixed and the rest variable.
3) What items can be deducted from rental income tax?
All costs related to renting activity, like IBI tax, employers or real estate agent commissions, cost of maintenance and – in case of long-term renting – there is also a 60% bonification on incomes. Nevertheless, if you are a non-EU/EEA citizen, no deductions can be applied.
4) What property taxes do I need to pay if I sell the property? How is the capital gain tax calculated?
If you are a non-resident and sell a property, there is a retention for the buyer of 3% of the purchase price.
After that, you should declare in 3 months after the retention if you have obtained a capital gain or not.
That is calculated of 24.5 % of your gain, if it is more than the 3% of the price you should pay the difference. If it is less, then apply for refund.
Purchase price: 100.000 euros
Selling price: 120.000 euros
Retention 3% x 120.000 = 3.600 euros
Capital gain: 120.000-100.000 = 20.000 *24.5%= 4.900 euros
You should pay 4.900 -3600 = 1.300 euros
5) What is the Spanish estate tax policy?
Regardless of your residence position, if you have a Spanish property that is not your main home and you are not renting it out, the Spanish deem a notional rental income to arise, and you should declare it among your NON-RESIDENT TAXES. This is generally calculated as 1.1% of the official value of the property (valor catastral) if the value has been revised during the previous 10 years, or 2% if not. This income is called imputación de rentas inmobiliarias and, even though it is not actual income, it is taxable in Spain. Any such income is added to the rest of general income and taxed at the scale rates for residents, a flat rate of 19% for non-residents who live in the EU/EEA, or 24% for those resident outside the EU/EEA.
For a property worth about 150.000 euros, with a cadastral value of 90.000 euros, this tax will be around 400 euros per year.