Buying a second home in Spain is a profitable investment. Not only is it one of the major international tourist destinations, ideal for leisure, relaxation, and culture, but it also offers advantageous tax rates for foreign buyers in some cases.
Understanding the taxes associated with a home purchase is essential to planning the investment well and obtaining the maximum tax benefits from the transaction.
Taxes When Buying a Second Home in Spain
Buying a property in Spain involves paying taxes that vary depending on whether the home is new or resale. The buyer's tax status also counts.
Taxes Applicable to New Construction
When buying a newly built second home, we must pay the following taxes:
• Value Added Tax (VAT): 10% of the purchase price.
• Stamp Duty (TAX): between 0.5% and 1.5%, depending on the autonomous community.
Taxes on Second-Hand Homes
The buyer must pay the Property Transfer Tax (ITP). It varies depending on the location and ranges from 6% to 10%.
Resident or non-resident? How taxation changes
When purchasing a second home, taxation also varies depending on the buyer's residence:
Buyers residing in Spain
People who reside in the country for more than 183 days a year are taxed as tax residents and are eligible for certain deductions. For example, if you rent out a home, certain expenses may be deductible under personal income tax.
Non-Resident Buyers
If the buyer resides in another country, they are subject to Non-Resident Income Tax (NRIT).
• If the property is not on the rental market, a percentage of the estimated imputed income is paid (1.1% or 2% of the cadastral value). A tax rate gets applied to this base depending on the country of residence:
◦ 19% if it is an EU country, Norway, or Iceland.
◦ 24% if it is a country outside the EU or with which Spain does not have a tax agreement.
• If the property gets rented, tax is paid on the income earned. Nationality also plays a role:
◦ Residents of the EU, Norway, or Iceland can apply deductions to rental-related expenses (repairs, utilities, property tax, etc.) before applying the 19% tax rate.
◦ For all other countries, the tax is 24% on gross income, with no deductions.
Renting a Second Home: A Profitable Option
Spain is a tourist powerhouse with a high demand for holiday homes. This demand is also stable throughout the year. Therefore, buying a second home can be very profitable if you rent it out when it's empty.
This option generates extra income and helps offset taxes and fixed costs of that second home, maximising the return on your investment.
Furthermore, Spain has double taxation agreements with numerous countries such as France, Germany, and the United Kingdom. That means that, in the case of rentals, you don't have to pay taxes on the same income twice and in two different countries.
If you're looking for a second home in Spain, Spainhouses.net brings together the best real estate offerings. You'll find properties with different characteristics in the most in-demand areas. Start searching now.