The 3 Taxes Every Property Owner in Spain Must Know
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Owning a home in sunny Spain is a dream for many, but navigating the annual tax obligations can quickly become a complex nightmare. Are you unsure which forms to file, what deadlines you need to meet, or how your residency status impacts what you owe? The Spanish tax system is notoriously intricate, and a simple oversight can lead to significant penalties.
In this guide, we will break down the three core taxes every property owner in Spain must understand. We provide clear, actionable steps to ensure you remain fully compliant with the Spanish Tax Agency (AEAT) and avoid costly mistakes. We will cover the local IBI tax, the crucial income tax declaration for your property (even if you don't rent it out), and the requirements for the Spanish Wealth Tax.
Tax 1: Impuesto sobre Bienes Inmuebles (IBI) – Your Local Council Tax
Think of the IBI as the equivalent of a council tax or local property tax. It is a municipal tax that every single property owner in Spain must pay, regardless of whether you are a resident or non-resident.
This tax is managed directly by your local town hall (Ayuntamiento) and is fundamental to funding local services.
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Who Pays It? The person who owns the property on the 1st of January of the tax year.
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How Is It Calculated? The amount is based on the property’s official value as registered in the land registry, known as the valor catastral. The town hall applies a specific tax rate (a percentage) to this value to determine your IBI bill.
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How Do You Pay It? You will receive a bill directly from your local Ayuntamiento. Most property owners set up a direct debit from a Spanish bank account to ensure it's never missed. Deadlines vary by municipality but are typically in the autumn.
Tax 2: Income Tax (IRPF vs. IRNR) – The Tax on Owning Property
This is where most confusion arises. The Spanish government considers that owning a property provides a benefit to the owner, even if it's not rented out. This benefit is taxed as a form of income, but the way you declare it depends entirely on your residency status.
For Non-Residents: The Non-Resident Income Tax (IRNR)
If you live in Spain for less than 183 days a year, you are considered a non-resident for tax purposes. You must pay an annual "imputed income tax" on your Spanish property if it is for your personal use.
This tax is declared using Modelo 210. It is a tax on the potential income your property could generate.
The calculation is straightforward:
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Find the valor catastral of your property on your IBI receipt.
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Calculate the taxable base. This is typically 1.1% of the catastral value if it has been revised in the last 10 years, or 2% if not.
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Apply the tax rate. The rate is 24% for non-EU/EEA residents or 19% for residents of the EU, Iceland, Norway, or Switzerland.
Example: Let's say your property's cadastral value is €250,000. Your taxable base is €2,750 (€250,000 x 1.1%). If you are a UK resident (non-EU), your tax due would be €660 (€2,750 x 24%). This amount must be filed and paid via Modelo 210 before December 31st of the following year.
For Residents: The Personal Income Tax (IRPF)
If you are a tax resident in Spain, your main home is exempt from this imputed income tax. However, if you own a second home in Spain (e.g., a holiday apartment), you must declare imputed income for it on your annual Spanish tax return (Declaración de la Renta), filed using Modelo 100. The calculation rules are the same as for non-residents.
Tax 3: Impuesto sobre el Patrimonio (Wealth Tax)
Spanish Wealth Tax is an annual tax on your net assets. Both residents and non-residents are potentially liable, but the rules differ.
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Non-Residents: You are only taxed on the net value of your assets located in Spain (e.g., property, bank balances, investments).
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Residents: You are taxed on your worldwide net assets.
There are significant tax-free allowances. The standard state-level allowance is €700,000 of net assets. For residents, there is an additional €300,000 exemption for their main home.
This means a non-resident individual owning a property worth €800,000 with a €50,000 mortgage would have net assets of €750,000. They would be liable to file for wealth tax as they exceed the €700,000 threshold. The tax is progressive, with rates typically ranging from 0.2% to around 3.5%. It is declared using Modelo 714.
Take Control of Your Spanish Tax Obligations
Keeping track of IBI payments, filing Modelo 210 for imputed income, and assessing your wealth tax liability can be a significant burden. Missing a deadline or making an error can attract the attention of the AEAT and lead to unnecessary fines.
Feeling overwhelmed by these obligations? Schedule a consultation with our expert team at InnoTaxes today. As an official partner of the Spanish Tax Agency, we simplify tax management for expats and entrepreneurs, ensuring you remain fully compliant while optimizing your tax position.
What is your biggest concern about property tax in Spain? Let us know in the comments below!