Imagine the warm sunlight on your face, the smell of the Mediterranean and a charming Spanish villa as your haven. Buying a vacation home in Spain is a dream come true for many.

But, before you take the plunge, it is essential to familiarize yourself with the Spanish tax system. In this blog, we will take you on a journey through the main taxes you need to consider as a potential buyer.

Income tax for non-residents

One of the first things you need to understand as a prospective owner of a Spanish vacation home is non-resident income tax. Whether you plan to rent out your property or not, you will have to deal with this tax.

If you do not rent out the property then the tax is calculated at a flat rate of 19% of a certain percentage of the cadastral value. This percentage is 1.1% if the cadastral value has been revised within the last 10 years. When this is not the case, 2% is calculated. However, it is always advisable to check the current rates as they may change periodically.

For landlords, it is important to know that the tax is calculated on the gross rental income, with some deductions that may apply. This includes costs such as common expenses, maintenance fees and local taxes. Be sure to keep good records to take full advantage of possible deductions

Paying the income tax

To pay the income tax, you need the document called “Modelo 210. All persons whose names appear on the property deed are required to file a tax return. Are you not comfortable doing this yourself or would you rather outsource it? Many law firms involved in real estate transactions offer this service.

Real estate tax (IBI).

Another financial consideration when owning a Spanish home is the property tax. Also known in Spain as “Impuesto sobre Bienes Inmuebles (IBI).

This tax is levied annually and is based on the cadastral value of your property. Often this value is less than the purchase price or market value. This is usually about 70% of the price listed on the purchase deed.

Tips for being smart about Spanish tax

Keep data clear
All relevant documents, evidence and expenses that you make, keep them well organized. Especially if you rent out the property. It will help you do the returns easily.

Take advantage of deductions
When you rent out the property, you are entitled to certain deductions. Think of items such as repairs, maintenance and financing.

Get advice
It never hurts to seek advice from experts experienced in international property taxation.

Conclusion

It has become clear that non-resident income tax is key, especially if you are considering renting out your property. Good accounting and knowledge of deductions are your allies here. In addition, the annual IBI tax is a financial factor you should not lose sight of. Know the rate and integrate it into your budget planning.

Tax in Spain affects everyone who has property there. The three tips “dealing smartly with the Spanish tax authorities” will take you a long way. Be well informed, get advice from experts and be prepared. This way you will not have any surprises.