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Economy/Tax Authority). The effective tax rates vary from each Town Hall as they are entitled to fix their own final rates within the range from 0,4% to 1,1% of the cadastral value. Non- payment can lead to legal action, as it is a tax with real affectation, i.e., if it is not paid, the property can be seized by the Town. - Special Tax on Property of Non-Resident Entities. Foreign entities holding real estate which do not fall within the following categories shall pay this annual tax. The taxable consideration is 3% of the real property cadastral value. Foreign entities exempt from this tax are: i) international public Institutions and foreign States, ii) entities entitled to apply a double tax treaty entered into with Spain containing information exchange clause, provided that the final individuals direct or indirectly holding the share capital of such entity are also resident in a country with a double tax treaty entered into with Spain containing information exchange clause, iii) foreign entities carrying out economic activities (other than mere holding or leasing of immovable property) in Spain on a regular basis; iv) listed companies and v) non-profit organizations recognized by countries with a double tax treaty entered into with Spain. - Wealth Tax ( “Impuesto sobre el Patrimonio” ). Under certain circumstances when the commercial real estate cannot be regarded as engaged in business or economic activities for the purposes of the Wealth Tax, this fiscal charge is imposed annually on individuals holding property in Spain. The effective tax rate varies
depending on the value of the estate wielded by the individual in Spain. The tax is only applicable to individuals, not to entities holding the commercial property. However, there is some controversy at the moment between the Spanish Government and certain regions like Madrid and Andalucía where they had implemented certain tax allowances which are now challenged by the Spanish Government. - Local Taxes for public services such as i.e., garbage collection; right of use of public property, etc. are generally payable annually. Considerations and prices vary from each Town Hall where the property is located. These local taxes are payable by the real estate owner. Owners’ Association Costs (Gastos de Comunidad): Applicable to condominium ownership, these complies costs of maintenance of common areas and services. They can significantly impact the profitability of the investment. Rental income tax on rental income Property Insurance
VIII. FOREIGN INVESTORS Relevant regulations
When acquiring Spanish real estate properties, either for personal or investing purposes, foreign investors must navigate several crucial regulations: Spanish Civil Code (Código Civil Español): Provides the foundational legal framework for property rights and contractual obligations. Understanding its provisions is essential for ensuring compliance in property transactions.
ILN Real Estate Group – Buying and Selling Real Estate Series
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