How Does Taxation Work in Spain?

When purchasing property in Spain, it’s important to keep in mind that the tax system and the way of filing declarations can differ significantly from the system in your country. Tax obligations are crucial, and no property owner would want to receive an unexpected visit from the Spanish tax authorities.

Tax filing can be overwhelming even in one’s home country, let alone abroad, where communication is in a foreign language, and regulations and practices may be different. To avoid surprises, it’s useful to understand a few basic differences between the systems in various countries.

Trusted Tax Advisors are Essential

In Spain, due to the greater complexity of the tax system and regional differences, tax advisors play a larger role in everyday life, especially for those running a business. Many people have a "gestor" or "asesor" whom they contact when they have questions. This should be a trusted person, akin to a reliable hairdresser or doctor—someone you can consult with confidence that they are well-versed in the matter at hand.

In many countries tax advisors are also a common option, but primarily in more complex cases, such as services for businesses. Typically, they are accountants with the necessary certifications. In Spain, these advisors are often trained in the field, though holding a license or a relevant degree is not always a strict requirement.

Property Tax

A key difference between Spain and other countries regarding property ownership might lie in the taxation structure. In other parts of the world it’s quite popular that the tax is based on the area (size) of the property, while in Spain, it’s based on the cadastral value of the property.

Many people assume that paying just the property tax (IBI), which is regulated by the local municipality, is sufficient. However, this isn’t true if you’re not the Spanish resident. Both taxes need to be accounted for. The second tax, IRNR, is also obligatory.

What is a Resident?

To put it briefly, a resident is someone who meets at least one of the following conditions:

• Spends more than 183 days a year in Spain,

• Has their center of life interests there,

• Is a spouse or parent of Spanish residents.

It’s also important to remember that the type of tax filing depends on the purpose of the property. IRNR tax is calculated differently if the property is rented out for part of the year or if it generates capital gains, such as from a sale.

Key Question: Are You a Resident of the EU and/or EEA?

In Spain, whether a property owner is a resident of the European Union and/or the European Economic Area matters a lot. For instance, EU and EEA citizens pay a 19% tax on rental income on the Iberian Peninsula, whereas non-residents from outside these areas pay 24%. There is also an option to deduct costs (e.g., for renovations or property management), but this is only available for EU and EEA non-residents.

Time to File Your Declaration

You can fulfil your declaration either online or in paper form. Spain’s Agencia Tributaria has an online platform where you can submit the Modelo 210 form, and you don’t have to do it personally if you authorize a third party, like a tax specialist, to submit it on your behalf. The deadline it’s at the end of the year (though deadlines can vary and may differ in specific cases, so it’s advisable to check the Spanish tax office’s website regularly or use reminder services offered by tax agencies).

Of course, these general rules apply to standard cases. If you have a more complex situation, or if you simply prefer to leave the entire process in the hands of someone more experienced, it’s worth consulting with a tax advisor who knows the Spanish language and local laws.