If you own, or are thinking of buying, property here in Barcelona, you need to be aware of all the tax implications and what your tax liabilities are, both in Barcelona and your home country if you are not resident in Barcelona, or in spain in general. These vary depending on where you are tax resident and what you intend to do with the property: holiday home, to rent out, an investment to be sold on, or as a future main home.
On buying the property, there will be purchase tax (ITP) at 8% depending on the particular region (8% applies in Cataluña,). On new properties acquired from a developer, however, there is no ITP but Spanish IVA (VAT) at 8% is payable.
If a residential property, IBI tax (equivalent to UK council tax) is paid by the person who occupies it on the 1st January in any year (you if it is a holiday home or only rented for short lets). IBI is calculated on the basis of the notional rental value (valor catastral) of your property multiplied by the tax rate fixed in your locality.
There may also be other local taxes raised annually by the town hall, which can incur a 20% penalty if unpaid by the due date.
Tax on rental income
Where the property is to be let, the rental income is taxable in Barcelona, regardless of your residence status.
Spanish residents will pay tax on the income and any rental income from abroad at the progressive scale rates from 24% to 45%. There is a reduction of 60% available against net rental income applicable to long-term lets which would normally be for at least one year in duration.
Non-Spanish residents are taxed on at 24% on the gross income. The tenant is obliged to withhold 24% from the rent and pay it to the Spanish tax authorities.
Where the property is not used as your main home, a purely notional income is deemed to arise for periods where the property is not actually let, normally based on 2% of the valor catastral as shown in the IBI notice for the year, taxed at the scale rates for Spanish residents, and 24% for non-residents.
If you are UK or European resident, the income will also be taxable in your own country. Both countries will apply their own rules to calculate the tax, so the taxable amount is likely to be different in each country. You can offset the Spanish tax actually paid against your own liability to avoid double taxation, but if the tax in your own country is higher, further tax will be due in your country.
Capital gains tax
Looking ahead, when you eventually come to sell your Spanish property capital gains tax will be due on the gain, at 19% on the first €6,000 and 21% on the balance. Spanish residents will have to add in other gains and investment income when calculating the tax due.
For Spanish residents, gains on disposal of the main home are exempt where you have lived in the property for at least three years and you are:
1.Over the age of 65; or
2.The full proceeds of sale (i.e. the selling price) are reinvested in a new main home within a certain period.
There is also a local tax known as the “Plusvalia” and raised in urban areas on the growth in the value of land, and which is allowed as a cost of disposal in calculating the mainstream capital gains tax.
For European residents, the gain would be taxable in your European country, but as with rental income, under the terms of the double tax treaty, any tax paid in Barcelona by European residents can be credited against the tax due in your European country.
Taxes on death
If you die owning the property, or gift it during your lifetime, Spanish succession tax will apply, regardless of your residence position. If non-resident in Barcelona or you have lived here for less than five years as a declared resident, the State rules will apply, and these are not generous – spouses and children are entitled to a deduction of just under €16,000 per beneficiary, and pay tax at progressive rates from 7.65% to 34% on the excess. Taxes are much higher for unrelated individuals, such as unmarried partners or stepchildren.
If Spanish resident, each Autonomous Region can set its own rates and exemptions, and in some Regions, succession tax has been significantly reduced, whilst in others, it is still significant.
know you know all about takes you may want to know how to find a flat:
Finding a flat
It is important to go and visit as many flats as possible within the price range you have selected. There are two ways of doing this. Firstly, you can visit an estate agent. Normally Spanish speaking, the estate agent will show you a selection of flats within your price range, most of them on the internet.
we would not recommend dealing directly with the owner if your spanish is not very good, prefer dealing with an estate agent since at the end his comission will be deduceted from the final price. ( the realter will help you negociate)
Deposit
When you have decided upon a flat make sure you visit twice as first time opinions can be deceptive. The next stage is to put down a deposit (Paga Señal) on the flat.The deposit constitutes 10% of the total value of the property. this deposit will serve as a contract (Contrato de Arras) reserving the property for a period runnig from one and three months. In this time period, you must secure a mortgage and if you are unable to do this you will lose the deposit. Some mortgages ( much less now) give 100% financing which means that you do not have to put down a deposit from your own savings. Some banks, however, will only give 70% of the total property value as a mortgage loan.
