Owning property in Andalusia can be an exciting and rewarding experience, whether you’re looking for a second home, a holiday retreat, or an investment property. However, like any major financial commitment, owning property in Spain comes with tax responsibilities. It’s crucial to understand the tax implications of property ownership, especially in Andalusia, to effectively manage your investment and stay compliant with local laws. This blog will guide you through the key taxes and charges associated with owning property in Andalusia, and it reflects the current rules and known updates as we head into 2025.
1. Property Ownership Tax (Impuesto sobre Bienes Inmuebles – IBI)
What Is It?
IBI is an annual municipal property tax that applies to all property owners in Spain, including Andalusia. The amount owed depends on each property’s rateable (cadastral) value and the local council’s tax rate.
Key Points:
• Varies by Municipality: Different towns (e.g., Marbella, Seville, Granada) set their own tax rates.
• Annual Payment: Typically billed once a year.
• Budgeting for IBI: Although often modest compared to some other European countries, it’s a recurring expense you must factor into ownership costs.
2. Non-Residents’ Income Tax (Impuesto sobre la Renta de No Residentes)
Who Pays?
Non-residents who own property in Andalusia (and elsewhere in Spain) must pay tax on rental income or on an “imputed” (deemed) rental income if the property is kept solely for personal use.
Current Rates (expected to remain into 2025 unless changed by new legislation):
• EU/EEA Residents: 19%
• Non-EU/EEA Residents: 24%
Rental Income vs. Personal Use:
• Rental Income: Tax is calculated on your net rental profits if you’re an EU/EEA resident (you can deduct certain expenses), or on gross rental income for non-EU/EEA owners.
• Imputed Income: Even if you don’t rent out the property, you pay tax on a notional income based on the property’s cadastral value.
3. Wealth Tax (Impuesto sobre el Patrimonio)
Important Update in Andalusia
Historically, Andalusia had one of the most generous Wealth Tax thresholds in Spain (e.g., a €700,000 personal allowance, plus €300,000 for a main residence). However, since late 2022, the Andalusian regional government introduced a 100% relief on Wealth Tax for most taxpayers—effectively eliminating this tax in Andalusia for the foreseeable future.
Points to Note:
• Who Benefits? The 100% relief (bonificación) applies to Spanish tax residents in Andalusia and, under EU law, generally extends to EU/EEA residents who own property in the region.
• Non-EU/EEA Owners: The application of regional relief to non-EU/EEA owners can be more complex. Confirm your specific status with a tax advisor, as national rules and EU legal principles may limit or extend regional benefits differently.
• Check for Changes: Although no changes are officially announced for 2025 at the time of writing, always verify whether the relief remains in place, as regional policies can shift.
If you do not qualify for the Andalusian relief or have assets in other Spanish regions without such relief, you might still be subject to the national Wealth Tax rules. Consult a specialist to be sure.
4. Capital Gains Tax (Impuesto sobre la Renta de las Personas Físicas – IRPF)
When Does It Apply?
If you sell your property in Andalusia at a profit, you may owe Capital Gains Tax on the difference between the sale price and your original purchase price (minus allowable costs like notary, agency fees, and improvements).
Current Rates (National)
• Non-Resident Sellers
• EU/EEA Residents: 19%
• Non-EU/EEA Residents: 24%
• Spanish Tax Residents
• 19% on the first €6,000 of gain
• 21% on €6,001 to €50,000
• 23% on €50,001 to €200,000
• 27% on €200,001 to €300,000
• 28% above €300,000
(Note: These bracket thresholds and rates have changed in recent years; confirm the precise figures if you’re selling in or after 2025.)
Withholding for Non-Residents
Upon sale, Spanish authorities generally withhold 3% of the sale price as a prepayment towards any capital gains tax due. If too much is withheld, you can apply for a refund.
Exemptions for Residents
Primary residence exemptions can apply if you reinvest proceeds in another main home in Spain (subject to conditions).
5. Inheritance and Gift Tax (Impuesto de Sucesiones y Donaciones)
What Is It?
This tax applies when property is transferred upon death or given as a gift.
Andalusian Reductions/Exemptions
• Close Relatives (Groups I and II, e.g., spouses, children): In recent years, Andalusia has introduced extremely high reductions—often up to 99%—for direct family members.
• Distant Relatives or Non-Relatives: May face higher rates and fewer reductions.
Because rules can vary significantly depending on your relationship to the recipient and your total inherited assets, it’s wise to plan inheritance or gifting strategies in advance.
6. VAT on New Builds (IVA) and Transfer Tax (ITP)
Buying a New Build:
• VAT (IVA): For residential property, the VAT rate is 10% (in most standard cases). This is added to the purchase price at completion.
Buying a Resale Property:
• Transfer Tax (ITP): In Andalusia, there have been reduced flat rates in recent years—often 7%—for property transfers, replacing the older progressive rates of 8–10%. However, rates can still vary (e.g., if you’re buying an officially protected home, or if certain regional incentives apply). Always confirm the applicable rate before purchase.
Finally…
Owning property in Andalusia offers many opportunities, but it’s essential to understand the tax implications and responsibilities that come with it. From annual property taxes to capital gains and inheritance tax, there are several taxes that may affect your property ownership.
At Hygge Luxury Real Estate, we offer expert advice to help you navigate the Andalusian property market, including understanding the tax implications for residents and non-residents alike. We are committed to providing you with the information you need to make the best investment decisions, all while ensuring that you stay compliant with Spain’s property laws and taxes. Whether you’re looking to buy your dream home or make an investment in this beautiful region, we’re here to guide you through every step of the process.