Tax Settlements and Deductions for Property Owners in Spain

If you are a property owner in Spain or planning to buy a home on the Iberian Peninsula, you need to know the local tax regulations. In this article, we explain key issues related to tax settlements and deductions that can help optimize the costs of property ownership. Additionally, if you are just considering an investment, check out our property listings in Spain, where you will find luxury villas, seaside apartments, and attractive investments.

1. What taxes do property owners pay in Spain?

Property Tax (IBI - Impuesto sobre Bienes Inmuebles)

This is the basic local tax that every property owner in Spain must pay. It is levied by municipalities and depends on the cadastral value of the property. Rates usually range from 0.4% to 1.1% of the cadastral value per year.

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Income Tax on Property for Non-Residents (IRNR - Impuesto sobre la Renta de No Residentes)

If you are not a resident of Spain but own property there, you must pay tax on hypothetical income. It amounts to 1.1% or 2% of the cadastral value, multiplied by the tax rate of 19% (for EU citizens) or 24% (for non-EU citizens).

Rental Tax (IRPF - Impuesto sobre la Renta de las Personas Físicas)

If you rent out your property, you must pay tax on the actual income. Residents are subject to a progressive tax scale, while non-residents face a 19% rate for EU citizens and 24% for others.

✅ Good news! You can deduct operating costs such as water, electricity, internet fees, and building depreciation.

2. Possible Tax Deductions and Allowances for Property Owners

Maintenance and Operating Costs

Taxpayers renting out property can deduct operating costs such as:

• Water, electricity, and internet fees,
• Administrative and community costs,
• IBI tax and other local taxes.

Depreciation Deduction

‍If you rent out a property, you can deduct building depreciation (usually 3% per year). This is a beneficial way to reduce the taxable base.

‍Mortgage Interest

‍If you purchased the property on credit, you can deduct the interest as a cost of obtaining income (this applies only to residents and those conducting business in Spain).🛒

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‍Renovations and Modernizations

‍If you are carrying out renovations that increase the energy efficiency of the property, you can benefit from tax deductions. Spain offers allowances for modernizations that improve building insulation or reduce energy consumption.

‍3. Capital Gains Tax on Property Sale

‍If you decide to sell a property in Spain, you must pay capital gains tax (Plusvalía Municipal and income tax on gains). Rates range from 19% to 23% depending on the amount of profit.

‍Tax Allowances on Sale

• If you are a resident of Spain and over 65 years old, you may be exempt from tax.
• Reinvestment in a new property – if you buy a new property in Spain within two years, you can avoid the tax.

‍4. Taxes When Buying Property in SpainBuying property involves the following taxes:

• VAT (IVA) – 10% (when purchasing a new property),
• Property Transfer Tax (ITP) – 6–10% (when buying a property from the secondary market),
• Documented Acts Tax (AJD) – 1–1.5%.

📌 Want to buy property in Spain? Discover our luxury apartment offers and fulfill your dream of living in sunny Spain!5. How to Optimize Taxes and Avoid Mistakes?To avoid tax issues and maximize allowances, it is advisable to:

• Use tax advisory services – Spanish regulations can be complicated, so it's worth consulting an expert,
• File your declaration on time – penalties for delays can be high,
• Keep track of legal changes – Spain regularly introduces new allowances and tax changes.

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‍Summary

‍The Spanish tax system for property owners may seem complicated, but knowing the basic principles allows for legal cost optimization. It is worth knowing the possible allowances and avoiding mistakes that can result in high penalties. If you are planning to buy property in Spain, check out our listings and find the perfect place for yourself! 🏡☀️