Buying property in Spain is straightforward once you understand the tax system. While most foreign buyers are not surprised by the process itself, they are often taken aback by the number of different taxes involved.

As we work daily with international clients, lawyers and notaries in the Costa del Sol, we often find that the same questions arise:

“What taxes do I pay when buying? What will I pay every year? What if I rent or sell?‘”

This guide provides clear explanations using simple language and real-life examples from Andalusia and Málaga.

Do You Pay Property Tax in Spain?

Yes, Spain has one-off taxes when you buy a property, as well as ongoing annual taxes for property owners.

These can be grouped into three categories:

– Taxes when buying a property

– Annual ownership taxes

– Taxes when renting or selling

Taxes When Buying Property in Spain

The tax you pay depends on whether you are buying a new property from a developer or a resale property from a private owner.

1. ITP (Impuesto de Transmisiones Patrimoniales)

This is the property transfer tax for resale properties.

It applies to second-hand properties and is typically around 7% in Andalucía. It is paid once after purchase.

Example:

Villa price €500,000 → ITP ≈ €35,000

2. VAT (IVA – Impuesto sobre el Valor Añadido):

This applies to new builds.

Applies to: properties bought from developers.

Standard rate: 10%

Paid instead of ITP (For Resale Properties).

Example:

New villa: €500,000 → VAT: €50,000

3. AJD (Actos Jurídicos Documentados)

This is a stamp duty tax on new properties.

It applies together with VAT and is around 1.2% in Andalucía. It is paid once at purchase.

Example: €500,000 → AJD ≈ €6,000

Summary of buying costs:

Resale property: ~9–10% of total costs

New build: 12–14% of the total cost.

This includes taxes, notary fees, legal fees and registration fees.

Annual Property Tax in Spain

Once you own a property, you have to pay ongoing taxes.

1. IBI (Impuesto sobre Bienes Inmuebles):

This is the main annual property tax, similar to council tax.

It is paid yearly to the local town hall and is based on the cadastral value (which is usually lower than the market value).

The typical range is: 0.4–1.1%

Example:

A villa with a cadastral value of €200,000 would incur an IBI of approximately €800–€2,000 per year.

2. Non-Resident Income Tax (IRNR):

If you are not a Spanish resident, you must pay an annual tax, even if you don’t rent out the property.

This is based on imputed income (not real income) and is approx. 0.19% (EU) or 0.24% (non-EU).

If you rent out the property, you will pay tax on the rental income instead.

3. Wealth Tax – Impuesto sobre el Patrimonio

This only applies to higher-value properties.

The threshold varies by region. In Andalucía, for example, the effective exemption is high, but the rules can change. It applies to net assets, not just the property.

Typical case:

Most buyers below €700,000–€1m (depending on the property’s structure) do not pay wealth tax.

Taxes When Renting a Property

If you rent out your villa, you will have to pay income tax.

EU residents:

Tax rate: 19% on net income.

Expenses such as maintenance and management can be deducted.

Non-EU residents pay a tax rate of 24% on gross income and cannot deduct any expenses.

This is one of the biggest differences that foreign buyers need to understand.

Taxes When Selling Property

When selling, two main taxes apply:

1. Capital Gains Tax (CGT)

Paid on profit. Rates are progressive for residents (19–47%) and flat (19%) for non-residents.

2. Plusvalía municipal

A local tax based on land value increase, paid to the municipality.

Summary: All Key Taxes Explained Simply and Final Thoughts

– IBI: annual property tax (similar to council tax)

– ITP: transfer tax for resale properties

– VAT (IVA): tax on new properties

– AJD: stamp duty on new builds

– IRNR: non-resident ownership tax

– Wealth tax: applies to high-value assets

– CGT: tax when selling for a profit

Breaking it down, property tax in Spain is not complicated.

You pay:

– around 10–14% when buying;

– a moderate annual tax (IBI);

– additional taxes only if you rent or sell.

The key is to understand the difference between buying new property and buying resale property, and to know whether you are a resident or a non-resident.

If you plan correctly from the outset, Spain remains one of the most attractive and tax-efficient real estate markets in Europe, especially in areas such as the Costa del Sol, Málaga and the wider Andalucía region.

FAQ’s