Are you the owner of a holiday home in Spain or thinking of buying a holiday home? Due to the double taxation treaty between Spain and the Netherlands, you only have to pay taxes in Spain. However, do not forget to declare your property to taxes in the Netherlands as it counts towards your total assets.

Double tax treaty

Dutch people who buy a holiday home in Spain pay taxes in Spain on the ownership of that home and any rental income they derive from it. In addition, as a Dutch taxpayer, they pay taxes on their worldwide assets in Box 3 (benefits from savings and investments) of their tax return. So in principle, they also have to pay taxes in the Netherlands on the returns from that Spanish property. However, thanks to the double taxation treaty between the Netherlands and Spain, as the owner of a Spanish property, you only have to pay taxes once, in Spain. In the Netherlands, you will be exempt.

So why do you still have to declare your Spanish holiday home in the Netherlands? This is because the Dutch tax authorities take into account all your income, including foreign property, to determine the tax rate for your Dutch income.

We clarify this with an example

Suppose you own an apartment on the Costa Blanca. This property accounts for a third of your assets. If on your total assets in Box 3, including your holiday home in Spain, you have to pay a tax of 6,000 euros in the Netherlands, you will get a rebate of one third. This rebate corresponds to the share of the Spanish property in your assets. Result: you get a reduction of 2,000 euros on your Dutch taxes (one-third of 6,000 euros) and thus pay 4,000 euros in taxes.

How does the Dutch tax authorities determine the value of a Spanish holiday home?

What value should you now enter in Box 3 for your property in Spain? While for a Dutch holiday home, the WOZ (Valuation of Immovable Property) value is taken into account, for a Spanish holiday home, the tax authorities look at ‘the value of the house in the market economy’. This value equals the price the property would cost if it were sold. So the sale value, and sometimes this is an estimate. The value of your assets must be determined on the reference date. The reference date is 1 January of the year of the tax return.

Make sure you are well informed about taxes when buying a holiday home abroad. That way, you avoid unpleasant surprises after the purchase. It is wise to let an expert guide you.