When assessing your taxation after purchasing property in Spain, the best piece of advice the Spain Buying Guide can offer is to speak to a qualified tax lawyer who will be able to offer you guidance and explain how everything will affect you.
Unlike in the UK, the Spanish tax year runs from 1st January to 31st December, and the annual tax return must be made between 1st May and 20th June of the next year. The tax you pay may well be affected by your residency status; if you spend less 183 days a year in Spain, you are a non-resident – but will still have to pay tax on any income earned in Spain. If you own a property or have a business in Spain, you must complete a tax return each year – even if your property isn’t rented out, you will still earn ‘imputed income’ on this property, and must pay tax on this. Spain has a double taxation agreement with the UK, meaning you will never be taxed by the UK on any money that you have already paid tax on in Spain.
The main property tax payable in Spain by all property owners is IBI (impuesto sobre biene inmeubles urbano); this is similar to council tax in the UK, and is a contribution towards street cleaning, education, amenities and so on. This tax is calculated based on the rateable value of a property (the valor catastral). Paid alongside the IBI, on an annual basis, you will need to pay a second tax that goes towards waste collection and drainage (basura y alcanarillado).
If you fail to pay this tax when its due, you will receive a fee of 3% of the sale price of your property (in addition to the tax itself) – and you will generally find that the Spanish authorities do not accept any excuses for those who do not pay taxes. What’s more, residents who fail to pay Spanish income tax will be required to pay a sancion on top of this tax, usually between 50-150% of the original cost.
Aside from property and income tax, there is also annual motor vehicle tax paid by those who own a vehicle in Spain. This is paid directly to your local town hall, and will depend on both the power and age of the vehicle, and your location – for example, you should expect to pay more in a large city than you would in a small village.