Real Estate Tax in Spain: What to Know

Worried about real estate tax Spain and unsure where to begin? This guide is designed for UK citizens who are buying, owning, or selling property in Spain, and want a clear understanding of their tax obligations. We explain the various types of real estate taxes, how they apply to non-residents, and what’s changed after Brexit. Whether you’re an investor, a homeowner, or planning a move, this article will help you avoid costly mistakes and make informed decisions.

Real Estate Tax in Spain: What to Know

Worried about real estate tax Spain and unsure where to begin? This guide is designed for UK citizens who are buying, owning, or selling property in Spain, and want a clear understanding of their tax obligations. We explain the various types of real estate taxes, how they apply to non-residents, and what’s changed after Brexit. Whether you’re an investor, a homeowner, or planning a move, this article will help you avoid costly mistakes and make informed decisions.

Why Understanding Spanish Property Taxes is Important

Understanding the Spanish property tax system is essential for any UK citizen who owns or plans to buy real estate in Spain. Taxes apply not only at the time of purchase or sale, but also throughout the year, including annual property taxes, municipal charges, and reporting obligations that affect both residents and non-residents.

Many foreign property owners are unaware that even an unoccupied home may generate tax obligations. Learning how real estate tax works helps you avoid fines, reduce unexpected costs, and make informed decisions when buying or selling. It’s also critical for tax planning, especially after Brexit, which changed how UK citizens are classified under the Spanish Tax Agency (Agencia Tributaria).

Key Differences Between UK and Spanish Tax Systems

One major difference for UK buyers is how real estate taxes in Spain are divided across government levels. While the UK’s tax structure is more centralized, Spain delegates many taxes to regional governments and local councils, meaning that ITP, AJD, and IBI rates may vary by location.

Another notable difference is the municipal capital gains tax (Plusvalía Municipal), which can apply even when there’s no real profit from the sale. Furthermore, non-residents are subject to Non-Resident Income Tax (IRNR) even if they don’t generate rental income—something unfamiliar in the UK system. Finally, the Agencia Tributaria requires property owners to submit specific tax forms annually, a detail that often goes unnoticed without proper legal advice.

Types of Real Estate Taxes in Spain

Real estate taxes in Spain vary depending on the type of property, the nature of the transaction, and whether the owner is a resident or non-resident. Below is a breakdown of the main taxes you need to understand if you're planning to buy, own, or sell property in Spain.

Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales – ITP)

ITP applies when purchasing resale properties (not new builds). It is managed by each autonomous region, and the rate generally ranges between 6% and 10% of the property's price. This tax is paid by the buyer shortly after signing the public deed and is one of the largest up-front costs when buying a second-hand home in Spain.

VAT (IVA) on New Build Properties

If you're buying a new build property from a developer, you must pay VAT (IVA) instead of ITP. The general VAT rate is 10%, reduced to 4% in some special cases like subsidized housing. This tax is accompanied by Stamp Duty (AJD), making the initial tax burden higher for new builds than for resales.

Stamp Duty (AJD – Actos Jurídicos Documentados)

AJD is paid when buying new build properties and also when registering mortgages. It's calculated as a percentage of the declared value in the deed and varies by region, typically between 0.5% and 1.5%. It's required to register the property in the official land registry.

Annual Property Tax (IBI – Impuesto sobre Bienes Inmuebles)

IBI is an annual municipal tax levied on all urban or rural properties. It is paid to the local council based on the cadastral value of the property. While paid by the current owner, it can be prorated in the year of sale depending on the purchase agreement. It's a recurring cost that affects homeowners and investors alike.

Wealth Tax

The Wealth Tax is a national tax applied to the net value of an individual’s assets, including real estate. It only affects individuals whose total assets exceed a certain threshold, which varies depending on the region. Non-residents are only taxed on assets located in Spain. It’s often overlooked, but relevant for those with high-value property portfolios.

Municipal Capital Gains Tax (Plusvalía Municipal)

The Plusvalía Municipal is a local tax on the increase in land value between the time of purchase and sale. It’s managed by the city council and is based on the number of years the property was owned and the cadastral land value. Typically paid by the seller, it may still apply even if the property was sold at a loss, which has sparked legal challenges in recent years.

Buying Property in Spain: Tax Implications for UK Citizen

For UK citizens looking to buy property in Spain, understanding the tax implications is essential to avoid unexpected costs. After Brexit, British nationals are now considered non-EU citizens, which affects their residency status, tax rates, and obligations before the Spanish Tax Agency (Agencia Tributaria).

Taxes When Purchasing a Resale Property

When purchasing a resale home, the main tax is the Property Transfer Tax (ITP), which ranges from 6% to 10% depending on the region. Buyers also face additional costs such as notary fees, administrative charges, and property registration. UK buyers may need to obtain an NIE and declare the purchase with the Agencia Tributaria, even if they’re not considered Spanish tax residents.

Taxes When Buying a New Build Property

For new build properties, buyers must pay VAT (10%) and Stamp Duty (AJD), which typically ranges between 0.5% and 1.5%. These are paid to the developer and land registry, respectively. As a British non-resident, it’s advisable to seek legal guidance to ensure compliance with Spanish tax laws and avoid issues when transferring funds or declaring ownership. Working with the legal team at Enrique Sánchez can streamline the process and help you fully understand your tax obligations in Spain.

Ongoing Taxes for UK Property Owners in Spain

Owning real estate in Spain as a UK citizen comes with ongoing tax obligations, even if you’re not a Spanish tax resident. Many buyers are unaware that simply owning property triggers annual reporting and payment responsibilities with the Spanish Tax Agency (Agencia Tributaria). Below are the key taxes that apply to non-resident owners.

Non-Resident Income Tax (IRNR – Impuesto sobre la Renta de No Residentes)

IRNR is a tax imposed on non-resident property owners in Spain. Even if you don’t generate rental income—such as when using the home for personal holidays—the Agencia Tributaria imputes a notional income and requires an annual tax payment. For UK citizens, the rate is 24% of the taxable base, due to non-EU status post-Brexit.

Rental Income Tax for Non-Residents

If you rent out your Spanish property while living abroad, you must declare that income in Spain. Deductible expenses vary depending on your residency status. As a post-Brexit UK national, deductions are restricted, and you’ll be taxed at 24% on gross income. Reports are filed quarterly, so keeping accurate records is essential to avoid fines.

Wealth Tax for Non-Residents

The Wealth Tax also applies to non-residents, but only on assets held within Spain. While most regions provide generous exemptions, if your property value exceeds the local threshold, you’ll need to file an annual declaration. This becomes especially relevant if you own multiple homes or high-value properties.

In addition, understanding how the Spain real estate tax applies allows for more accurate annual planning, helps identify possible deductions, and prevents common mistakes when filing with the Spanish Tax Agency.

Selling Property in Spain: Capital Gains and Other Taxes

When selling real estate in Spain, both residents and non-residents must account for several taxes that can significantly reduce their net gain. Tax obligations vary depending on the type of property, how long it has been held, and whether there has been a capital increase.

The most relevant tax is the Capital Gains Tax, which for Spanish residents is part of their Personal Income Tax (IRPF), and for non-residents, it is reported as income from asset transfer. The applicable rate ranges from 19% to 26% based on the amount gained. For non-residents, a flat rate of 19% applies, and buyers are usually required to withhold 3% of the sale price as an advance payment toward the final tax.

In addition, the seller must pay the Municipal Capital Gains Tax (Plusvalía Municipal), a local tax that applies to the increase in land value over the period of ownership. Even if the property has not appreciated, this tax must be calculated and reported to the local authorities.

It’s also essential to evaluate potential deductions, such as reinvestment in a primary residence (available to residents) or relief through double taxation treaties, particularly relevant for UK citizens who may also have obligations in the United Kingdom.

How Brexit Affects UK Citizens Owning Spanish Property

The UK’s withdrawal from the European Union significantly changed the tax landscape for British citizens who own property in Spain. Before Brexit, UK nationals enjoyed similar tax treatment to other EU citizens, including access to deductions, reduced tax rates, and streamlined reporting with the Spanish Tax Agency.

Since January 1, 2021, UK citizens are classified as non-EU residents, losing many of the tax advantages previously available under EU membership. For example, certain deductible expenses for rental income are no longer applicable, and the right to equal treatment in regional tax schemes has been limited or removed.

These changes also impact residency, inheritance planning, and eligibility for specific tax regimes. Up-to-date legal advice is essential to navigate the new rules and avoid costly mistakes when maintaining or selling property in Spain.

Double Taxation Agreement Between UK and Spain

Despite the UK’s change in status, the Double Taxation Agreement between the UK and Spain remains fully in force. Its purpose is to prevent the same income from being taxed in both countries and to determine which country has the right to levy taxes on specific earnings, capital gains, or real estate income.

This agreement allows UK taxpayers to offset taxes paid in Spain against their UK tax liability and vice versa. For instance, if a British citizen sells property in Spain and pays the applicable capital gains tax, that payment can be reported to HMRC to avoid being taxed again on the same income. To benefit from the agreement, full disclosure and accurate documentation are essential.

Tips for Minimizing Real Estate Taxes in Spain

Reducing your real estate taxes in Spain is not about avoidance—it’s about strategic legal planning. Whether you’re a resident, non-resident, or simply an owner, there are several legal methods to reduce your tax burden while staying compliant with the Spanish Tax Agency (Agencia Tributaria).

• Choose the right ownership structure: Purchasing as an individual, jointly with a spouse, or through a company can significantly affect your obligations under Wealth Tax, IRNR, or future capital gains.
• Time your sale wisely: Selling before reaching certain holding periods or reinvesting in another property may allow tax reductions, especially for residents.
• Review cadastral values: An outdated cadastral value may result in an inflated IBI. You may be eligible to request a reassessment.