Asset deals and share deals are the two ways in which an individual/organization/company can invest in real estate in Spain. An asset deal can be a direct acquisition from abroad, a direct acquisition from abroad through a local permanent establishment, an indirect acquisition through a local holding company or an indirect acquisition through a local partnership.
Last modified 13 Mar 2025
Asset deals are subject to:
and (in both cases) tax on the increase in the value of urban land (Impuesto sobre el Incremento de Valor de los terrenos de Naturaleza Urbana) if urban land is transferred.
The transfer of land for development or land which has already been developed is subject to VAT at the rate of 21%, except in the case of residential property. With regards to residential property the rate of the VAT applicable to an acquisition is 10%.
The first transfer of a new building, and the second and subsequent transfers of a building which has been or is transferred with a view to being substantially refurbished, as well as transfers resulting from the exercise of a call option by a lessee in a financial lease contract, are all subject to VAT.
A transfer of rural land and land which cannot be developed, second and subsequent transfers of buildings, and the first transfer of buildings that have been continuously used for a period of over two years (under a lease agreement), are exempt from VAT but subject to Transfer Tax at the standard rate ranging between 6% and 11%. The taxable base is the reference value (valor de referencia) of the real estate property established by the General Directorate of Cadastre (Dirección General del Catastro). However, if the value declared by the parties, the price agreed or both are higher than the reference value, Transfer Tax will be calculated on the higher of these values. If there is no reference value or the reference value cannot be certified by the General Directorate of Cadastre, the taxable base, shall be the highest of: (i) the value declared by the parties, (ii) the price agreed or (iii) the market value.
This does not apply if the buyer is a VAT taxpayer, entitled to a full or partial deduction of input VAT from the acquisition. In this case an option may be exercised to waive the VAT exemption and subject the transaction to VAT.
If the transaction qualifies as a transfer of a going concern, Transfer Tax would be payable on the reference value of the real estate properties included in the going concern.
Notarial deeds that record land and building transactions subject to VAT, are subject to stamp duty. Rates vary from 0.5% to 3% depending on the location and type of transaction.
Land and building transactions which are exempt from VAT are subject to Transfer Tax at the standard rate ranging between 6% and 11%.
The transfer of property other than rural land is generally subject to a tax on any increase in value, calculated by the town council at the time of the sale.
The buyer pays the VAT or Transfer Tax. The seller pays the tax on the increase in value of urban land.
Share deals are subject to and exempt from Transfer Tax and VAT.
The purchase of shares in an SPV holding real estate, or owning shares in another company holding real estate, is subject to VAT or Transfer Tax at the standard rate ranging between 6% and 11% of the reference value of the property, when the transfer of the shares is made with the purpose of avoiding the payment of the tax that would have been paid in case of transfer of the real estate. The law considers there are tax avoidance reasons when at least 50% of the transferred assets consist of real estate located in Spain and are not used for business activities, provided that as a result of the purchase, the recipient of the shares acquires control or increases control over the entity.
Last modified 13 Mar 2025
VAT is payable on completion of the acquisition of the real estate when the seller is a VAT taxpayer, although the purchase of rural land or land which cannot be developed, the first transfer of buildings that have been continuously used for a period of over two years (under a lease agreement), and second and subsequent transfers of buildings are all exempt from VAT.
VAT exemption may not apply if the buyer is a VAT taxpayer entitled to a full or partial deduction of input VAT incurred on the acquisition. In this case, the VAT exemption may be waived and the transaction made subject to VAT
If the transaction qualifies as a transfer of a going concern, Transfer Tax would be payable on the reference value of the real estate properties include in the going concern.
Sociedad Limitada/Sociedad Anónima/Sociedad en Comandita/Sociedad en comandita por acciones: the transfer of shares is exempt from VAT and Transfer Tax . Nevertheless, Transfer Tax/VAT can be incurred on the transfer of shares in companies, when the transfer of the shares is made with the purpose of avoiding the payment of the tax that would have been paid in case of transfer of the real estate. The law considers there are tax avoidance reasons where 50% or more of the assets consist, directly or indirectly, of real estate located in Spain and are not used for business activities, and, as a result of the transfer, the buyer acquires control over the company (ie more than a 50% stake in its share capital) or increases its stake once it has obtained control.
Transfer Tax is payable at a rate ranging between 6% and 11% of the value of the underlying real estate assets at the time of the transfer.
Last modified 13 Mar 2025
Costs include the notary's fees, the property registration fee (when buying real estate) and any fees for professional advisors.
Stamp duty is payable by the lender on the creation of a mortgage securing a loan at the rate ranging from 0.5% to 1.5% of the guaranteed debt.
The notary's fees are determined by law and payable by the seller. Fees for the first and subsequent copies of notarial documents are payable by the buyer, unless otherwise agreed by the parties.
The registration fees are payable by the buyer.
In the case of the purchase of a newly constructed or fully refurbished hotel, the seller must obtain a licence to open from the tourism board of the relevant regional government before the hotel can start to operate. There is also a fee for this service.
Costs include the notary's fees and fees for professional advisors. The notary's fees are determined by law and payable by the seller. Fees for the first and subsequent copies of notarial documents are payable by the buyer, unless otherwise agreed by the parties.
Last modified 13 Mar 2025
Owners of real estate must pay real estate tax (Impuesto de Bienes Inmuebles). This is a local tax payable by owners of real estate and the holders of certain other property rights. Real estate tax is calculated on the basis of the cadastral value (valor catastral). This is set by the municipality in which the property is located on the basis of certain criteria established by law. The tax is calculated by applying a certain multiplier to the cadastral value as recorded in the cadastral register. This tax cannot be reduced or offset in any way.
A special tax on real estate owned by non-resident entities applies in Spain. Non-resident entities resident in a tax haven owning real estate or rights over property are subject to a special tax of 3% of the cadastral value (valor catastral) which accrues at 31 December each year. In the case of transfers of real property situated in Spanish territory by entities subject to the special tax, the assets transferred will be subject to the payment of this special tax.
This special tax is not payable provided that the real estate properties are continuously or habitually linked to a business activity in Spain other than the mere holding or leasing of the properties.
Last modified 13 Mar 2025
The owner of a residential property (independently of the investment vehicle used to acquire ownership of the property) must pay costs related to the building's Property Owners' Association. These costs cover the maintenance of the elevators, the cleaning service, doorman, repair costs etc and vary depending on the nature of the property.
The amount to be paid depends on the share allocated to each property in relation to the building as a whole. If industrial operations carried out on the premises cause contamination or generate waste, a fee must be paid to the town/city council for special services relating to the removal of garbage and/or the cleaning of water or sewage. If the volume of waste generated by a retail property, office building or hotel is substantial (as is often the case) the owner is required to pay the town/city council a special fee for special services relating to the removal of garbage.
Last modified 13 Mar 2025
Income can be generated from the ownership of real estate through:
Last modified 13 Mar 2025
Income generated from the ownership of real estate in Spain is taxed as follows:
Business profits generated by a permanent establishment in Spain are subject to Spanish non-resident income tax (Impuesto sobre la Renta de No Residentes) at a rate of 25% in 2022.
The taxable income is the net profit after deducting costs, as shown in the annual profit and loss account. With some minor exceptions, all costs relating to the activities of the permanent establishment are tax deductible, apart from interest, royalties or commission paid to the head office in exchange for technical assistance or for the use of other goods or rights.
Many of the management and general administration expenses are deductible.
Depreciation of property is tax deductible to the extent permitted under the relevant regulations.
If the investor does not have a permanent establishment in Spain, income derived from letting property is subject to Spanish non-resident income tax at the standard rate of 24% (19% if the taxpayer is resident in the EU or in the European Economic Area). The basis for calculating taxable income is the gross income received. However, if the taxpayer is resident in the European union expenses are deductible in accordance with the Spanish corporate income tax law, provided that the taxpayer proves that they are linked to the economic activity developed in Spain.
Note that investment in real estate, could create a permanent establishment, in which case income generated from letting is taxed as above.
Income from letting is subject to Spanish corporate income tax (Impuesto sobre Sociedades) at 25%. Taxable income is the net income after the deduction of expenses, as shown in the annual profit and loss account.
Since a partnership is deemed to be transparent for tax purposes, any profits generated by the partnership are attributed to the individual partners.
Income derived from letting property is taxed as above, depending on whether or not the property is deemed to constitute a permanent establishment in Spain.
Last modified 13 Mar 2025
The distribution of dividends to shareholders is subject to Spanish non-resident income tax at the rate of 19 percent, unless the EU Parent-Subsidiary Directive applies (in which case no tax is payable) or an applicable tax treaty reduces the tax to a lower level.
If tax is payable and a tax treaty applies, an equivalent tax credit will be received in the shareholder's country of residence.
If the permanent establishment carries out business activities in Spain and income is transferred abroad, a supplementary tax at the rate of 19% is payable. This does not apply to income obtained in Spain through a permanent establishment by an entity which is tax-resident in another EU member state or in a state with which Spain has signed a tax treaty.
Last modified 13 Mar 2025
The owner may incur further costs and expenses necessary to generate income, ie water and electricity charges, and the cost of maintenance and repair of the property. These are payable to the relevant suppliers.
Last modified 13 Mar 2025
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Last modified 13 Mar 2025
Capital gains from the sale of real estate assets in Spain are taxed as follows:
Capital gains realized by foreign investors with a permanent establishment in Spain are subject to Spanish non-resident income tax at a rate of 25 percent.
Capital gains realized by foreign investors without a permanent establishment are subject to Spanish non-resident income tax at a rate of 19 percent unless an applicable tax treaty provides otherwise. The buyer is obliged to withhold tax at 3 percent of the agreed price, or make an equivalent payment on account, as part payment of the tax. This does not apply to contributions of real estate made to companies resident in Spain when they are incorporated or if they increase their capital.
Capital gains from the sale of shares or an interest in a Spanish property company or partnership are subject to Spanish non-resident income tax at a rate of 19 percent, unless an applicable tax treaty provides otherwise.
Last modified 13 Mar 2025
Costs related to the delivery of the property, including the notary's fees for the public deed of sale and purchase, delivery of the keys, professional advisors, etc, are paid by the seller, unless otherwise agreed by the parties.
Last modified 13 Mar 2025
How can investment in real estate by an individual/organization/company be set up?
Asset deals and share deals are the two ways in which an individual/organization/company can invest in real estate in Spain. An asset deal can be a direct acquisition from abroad, a direct acquisition from abroad through a local permanent establishment, an indirect acquisition through a local holding company or an indirect acquisition through a local partnership.
Last modified 13 Mar 2025