PROPERTY TAXES IN MARBELLA AND SPAIN

Many clients often ask about who is responsible for paying taxes and the timing of these payments, as well as what additional expenses they might expect when buying, selling, or owning real estate in Marbella. To provide clarity on these matters, we've created a user-friendly guide on Marbella property taxes.

TABLE OF CONTENTS

01: Purchase taxes and costs to buy a property in Marbella, Spain

02: Property taxes for owners in Marbella, Spain

03: Purchase taxes to buy a plot in Marbella, Spain

04: Taxes for non-residents and fiscal residents in Marbella

05: Vendor taxes and expenses to sell a property in Marbella

06: Taxes and costs for owners when renting a property

07: Taxes and costs for tenants when renting a property in Marbella

01: PURCHASE TAXES AND COSTS TO BUY A PROPERTY IN MARBELLA, SPAIN

Let's explore all the expenses that a buyer needs to consider when purchasing a townhouse, apartment, or villa in Marbella.
Firstly, it's important to understand that the prices you see for real estate, whether online or in brochures, represent net prices to the seller. To arrive at the final cost, you'll need to factor in the purchase taxes and expenses, which vary depending on whether you are buying a brand-new property from a developer or a secondhand property.
For properties bought from developers, there are two main taxes to consider: stamp duty (1.2%) and VAT (10%). VAT must be paid on the day of the notary's signature.
In contrast, secondhand homes are subject to transfer tax (7%), which can be paid up to thirty days after the notary signing.
It's worth noting that there is a significant tax difference between purchasing from a developer and a regular homeowner. For example, on a €2 million transaction, the difference amounts to exactly €100,000.
To determine whether VAT applies, it's crucial to check if the property is entirely renovated or brand new. If no one has resided in the property, the owner may be registered as a developer.
Additionally, it's important to clarify that when purchasing the stock of a Spanish company that solely owns a property as an asset, transfer taxes are still applicable. Taxes are levied when the company is actively conducting business, even if the property is its sole asset.
Now, let's explore other costs associated with buying property in Marbella:
1. Lawyer Fees: Legal expenses typically amount to 1% (+VAT) of the purchase price for a straightforward transaction. Some firms may offer fee modifications for regular clients or high-value transactions. While using a lawyer is not mandatory, it's strongly recommended to ensure a smooth and legally sound purchase process.
2. Notary and Registry Fees: These fees are determined based on various factors and are usually provided as a final invoice after the sale. A rough estimate is to extrapolate 0.25% of the asking price for each. The percentage may be lower for properties exceeding €2 million.
3. Bank Account Fees: When making payments through a notary, banks often charge commissions for issuing banker's drafts. These fees can vary widely depending on factors such as the payment amount, the bank used, and your client profile.
4. Mortgage Fees: If you opt for bank financing, you may incur appraisal fees, which can range from €500 to over €2,000, depending on the property's size and appraised value. The bank typically covers other expenses and taxes.
5. Technical Due Diligence: While not obligatory, it's advisable to inspect the property's systems, such as heating and air conditioning, when purchasing a used property. The cost of this inspection can range from €300 to over €2,000, depending on the property's size and required work.
It's important to remember that the buyer is responsible for taxes and charges, while the seller covers real estate agency fees. Additionally, the taxes, costs, and fees can vary based on the location within Spain where you're purchasing property.
When buying property in Spain, some common pitfalls to avoid include not accurately estimating expenses and taxes, failing to complete necessary paperwork in advance for fund transfers and bank account opening, and not seeking legal advice. Employing a qualified attorney is essential for due diligence, contract preparation, and post-purchase support.
In conclusion, there are various expenses to consider when purchasing property in Marbella, and careful planning and professional guidance are essential to navigate the process successfully.

02: PROPERTY TAXES FOR OWNERS IN MARBELLA, SPAIN

Let's delve into the various taxes and expenses that property owners in Marbella, Spain, need to be aware of:

Non-Resident Tax Owning a Property in Marbella:

This tax is applicable to property owners who are non-residents in Spain. It is essential to pay this tax even if you do not reside in the property or rent it out. Some property owners might not be aware of this tax, and it's possible to postpone payment. However, it's crucial to note that the tax authorities will check for payment when you sell the property, and late payment can result in interest and additional costs.

Wealth Tax When You Own a Property:

There is a wealth tax in Spain, but the Andalusian regional administration has temporarily suspended it to attract more investment. However, the national government introduced the Solidarity tax, initially intended for 2022 and 2023, with a possibility of extension. This tax is applicable to individuals with a net worth exceeding €3 million, and it's based on the net purchase amount. The tax rate varies depending on residency status (resident, non-resident, or corporate entity).

IBI (Impuesto sobre Bienes Inmuebles):

The Municipal Spanish Property Tax (IBI) is an annual tax that varies based on the property's location, cadastral valuation, and other factors. Typically ranging from €1,000 to €10,000, this tax must be paid annually along with other property taxes.

Garbage Tax Costs of Your Property:

The tax for garbage collection is relatively low, usually under €400 per year.

Community Fees of Your Property:

Community fees, which are not taxes but property-related expenses, typically range from €200 to €1,000 annually. Properties within communities are obligated to pay these fees, while properties not part of a community are rare.

Other Permanent Costs of Your Home:

Owners are responsible for monthly payments for utilities like water and electricity, even if there's no consumption. These bills have a minimum fixed amount, with the primary portion based on usage.
It's important to note that property owners are required to pay taxes and fees annually, with the amounts determined by factors such as purchase price, location, property size, and cadastral value. Non-resident property owners should be aware of their tax obligations, and staying informed about tax changes and deadlines is crucial.
If you plan to sell or purchase property in Marbella, seeking professional advice and assistance is highly recommended to navigate the complex tax and legal landscape effectively.
If you are considering relocating to Spain, you may become a fiscal resident and be subject to taxation on your worldwide income. The specific tax rates and rules can vary, so it's important to consult with tax experts to understand your obligations.
In summary, owning property in Marbella comes with various taxes and expenses, and staying informed and compliant is key to a successful property ownership experience

03: PURCHASE TAXES TO BUY A PLOT IN MARBELLA, SPAIN

Are the taxes associated with purchasing a plot of land different from buying a villa or apartment in Marbella, Spain? You might be surprised to learn that they are indeed distinct. Many clients often lack accurate information about this, leading to complications and deals falling through once they become aware of the differences. 
To simplify matters, let's break it down. The taxation of plot sales varies based on the owner's identity and the buyer. We won't delve into the specifics for professional investors, as they typically have a team of legal and financial experts. However, for new foreign buyers in Marbella, understanding these differences is crucial.
Before making an offer or scheduling a viewing for a plot intended for individual villas, it's essential to determine whether the plot owner is a private individual or a Spanish company. If the agent is uncertain about this, don't hesitate to ask for clarification. The tax implications can be significant. 
- If the plot is privately owned, a 7% transfer tax applies.
- If the property is owned by a Spanish company, a substantial 21% VAT and 1.2% stamp duty are applied, totaling 22.2%. This is a significant difference, amounting to an additional €152,000 for a €1 million plot or potentially an additional €456,000 for a €3 million plot. 
Aside from these tax differences, the remaining expenses for purchasing land are similar to those for any other property type. You can find more information about these costs under "purchase taxes and expenses when purchasing a property in Marbella."
In summary, the taxes associated with buying land in Marbella can vary significantly based on the owner's identity (private individual or Spanish company). It's crucial to clarify this information with your realtor before proceeding with any plot purchase to avoid surprises and make informed decisions.
Regarding the cost of land or plots in Marbella, it can vary widely depending on factors such as location, views, size, terrain, access, and more. Generally, prices in Marbella range from €400 to €1,200 per square meter, with variations both above and below this range.

04: TAXES FOR NON-RESIDENTS AND FISCAL RESIDENTS IN MARBELLA

Here's an overview of the tax distinctions between non-residents and fiscal residents in Marbella, as well as how to determine your tax residency status and the potential implications:
When buying property in Marbella, whether it's your first or second property, your annual tax liability depends on whether you are considered a fiscal resident of Spain. Several key factors determine your tax residency, and it's crucial to have accurate information to avoid last-minute tax surprises.
Many second-homeowners in Marbella may consider themselves non-residents or non-fiscal residents, but it's essential to understand the specific taxes you must pay in this status. Moreover, you may not even be aware that you are considered a fiscal resident of Spain, which can have significant implications for your tax obligations.
First, let's cover the taxes that non-fiscal residents with property in Marbella are still obligated to pay each year:
1. Spanish Tax for Non-Residents: This tax is required regardless of whether you rent out your property. Even if you don't generate rental income, you must pay an imputed income tax. If you do rent your property, the income tax rate is 24%, except for residents of the EU, Iceland, and Norway, who pay 19%.
2. Spanish Wealth Tax (Solidarity Tax in Andalucia): This tax is based on the net value of your property, with taxes due if your net worth exceeds €3 million. Originally intended for the years 2022 and 2023, there's a high likelihood it may be extended if the government is reelected.
3. Municipal Spanish Property Tax (IBI): This tax varies based on the cadastral valuation of the property and the location.

But what if you become a fiscal resident of Spain? How can it happen?

You may be considered a Spanish resident for tax purposes if you have resided in Spain for at least 183 days during the calendar year (not necessarily consecutively), if your primary source of income and business is in Spain, or if your family resides permanently in Spain. Meeting just one of these requirements can classify you as a fiscal resident.
It's worth noting that even if you have lived in Spain for more than 183 days, you can demonstrate non-residency if your principal income, your spouse's home, and your minor children's residence and schooling are outside of Spain.
Becoming a fiscal resident of Spain has tax implications:
- The Spanish tax for non-residents is no longer applicable.
- You must report all foreign assets exceeding €50,000 and pay Spanish income tax on your worldwide income (minus any taxes paid in other countries).
- Spanish income tax rates start at 19% and can go up to 47% for annual incomes over €300,000.
Given these complexities, it's essential to exercise caution, especially if you plan to buy property in Marbella and make frequent visits. It's advisable to consult a qualified financial advisor for personalized guidance and clarification.
For inquiries about buying property in Marbella, you can easily reach out through our website or by email.

FAQs:

1. How much is the non-resident property tax in Marbella? The tax amount depends on the property's cadastral value, and it's calculated as 24.75% of 2% of the entire cadastral value.
2. How much time do I have to pay property taxes in Marbella? Non-resident tax and wealth tax declarations must be filed between January 1 and December 31 of the current year and paid in January of the following year. Municipal property tax is typically due in August or September for the current year.
3. How much tax do you pay in Marbella? How much is the income tax in Marbella? Income tax rates differ based on whether you are a fiscal resident or non-resident. For non-residents, it's 24% (or 19% for EU, Icelandic, and Norwegian citizens). Residents start at 19% and can go up to 47% for annual incomes exceeding €300,000.

05: VENDOR TAXES AND EXPENSES TO SELL A PROPERTY IN MARBELLA

What are the taxes and vendor costs when selling a property in Marbella, Spain? What tax and cost do you pay when you sell a property?
Are you interested in selling your Marbella property but are unclear of the costs involved? In order to have all the cards in place before listing your property for sale—or sometimes even before purchasing a property, particularly if it's an investment—it is strongly advised that you look into this.
This is a comprehensive list of all the taxes and fees you will need to pay when selling a home in Marbella.

PLUSVALÍA (CAPITAL GAIN)

All vendors are required to pay it (though you can attempt to dodge it if there is a loss on a sale). It is computed by multiplying the cadastral value of the land by the number of years or months that you possessed the property. (Even if you own an apartment, the percentage of land that is used for urbanisation will be taken into account). Though usually not a major expense, it is something to think about.

INCOME TAX

Only paid if you have earned revenue from the sale of your property; various taxes apply if you are a resident (19%) if you are a citizen of the EU or EEA, a nonresident (24%), or a company selling. All of your expenses—notaries, register fees, attorneys, purchase taxes, agent commissions, and a host of other expenses—are taken into account, whether they were incurred during the buy or the sale. The only amount classified as income is the remaining balance. Reforms may also be taken into consideration, depending on which ones. Naturally, you must possess all authentic bills for each and every thought.

REAL ESTATE FEES

You may always get in touch with us if you choose to sell your Marbella property through a professional real estate firm. Although not required, working with the proper agent can improve the likelihood and timeliness of a sale. In a selling procedure in Marbella, the vendor is always responsible for paying the agent's fees—which are usually predetermined when the property is listed. The buyer never pays these fees. It's crucial to keep in mind that the agent, like any other professional, including lawyers, must add 21% VAT to the quantity when sending out invoices.

LAWYER FEES

Again, it is not obligatory to use a lawyer in the sale process, but highly recommended.

MORTGAGE CANCELLATION FEES

In the event that the property is mortgaged, the vendor will cover all closing charges and fees. This can include notary and register expenses, as well as bank commission for early loan cancellation.

RETENTION OF 3% FROM THE SALES PRICE

This is something we feel is necessary to clarify in order to provide a clearer picture; it is neither a tax nor a cost. It only comes into play when the seller doesn't live in Spain. It is legally required of the buyer to deduct 3% of the purchase price in the notary. Once the vendor signs the title deed, this money is placed in the tax office. The vendor may request the return of this money to their bank account by filing an application with the tax office following the sale. The refund procedure may take up to six months, after which the money—less any outstanding taxes, if any—will be put into the vendor's account. Generally, the income tax will be taken straight out of the retention if you received any money from the sale. This is usually handled by the lawyers. You must wait for at least one month following the signing of the title deed before submitting an application for the reimbursement. The vendor will have three months from the end of the month to turn in the form to the tax office in order to get their money back.

QUESTIONS AND ANSWERS

Who holds the 3% when you sell a property in Spain?

Usually, the buyer's attorney deposits the funds in the vendor's name at the tax office and retains the 3% on his client's account. After the purchase is made, he has up to thirty days to complete the task. The assurance that everything will be completed correctly is the property that now belongs to the buyer.

Who pays Plusvalia tax in Spain?

Plusvalia is always paid by the seller. Usually, the buyer deducts this fee from the purchase price if you are a nonresident. After the sale is concluded, it will be paid on your behalf.

How to sell a property in Spain?

The first step in the process is listing your property for sale. If you choose to proceed, you can then select qualified and suitable real estate agents. It's also a good idea to estimate your income tax and begin looking into all of your selling-related expenses and taxes concurrently. You must now retain legal counsel to represent you during the transaction process. The ultimate asking price at which the property will be marketed may be determined in part by using this information. It is advised that you maintain correct control over the property's online listing, asking every vendor you work with to sell it at the same price.
If you receive an offer for your property after that, the bargaining process is over. With the initial deposit you will receive, a reservation or private purchase contract must be prepared (we advise consulting a lawyer already at this point). Usually, this cannot be refunded unless a later inspection reveals certain anomalies with the property.
The remaining amount is paid at the notary concurrently with the title deeds being signed. Typically, the notary signing occurs about two months following the signing of the reservation or private purchase agreement. On the same day as the notary, your mortgage will also be terminated if you have one on the property. It will be cancelled when the buyer's funds are subtracted from the purchase price. Unless you would rather cancel it ahead of time and there's no specific reason for that. During the transaction, you have to keep track of all the taxes and expenses. These are described in this blog and regulate, among other things, modifications to the property's supply contracts, such as those pertaining to water and energy bills and the new domiciliation of property taxes to the buyer. All of this can be assisted by a lawyer.
Wishing you luck. Contact us right now if you're prepared to sell your Marbella property and require a excellent real estate agent.

06: TAXES AND COSTS FOR OWNERS WHEN RENTING A PROPERTY

Do you own a property that you don't frequently use? Have you thought about the possibility of renting it out? If you own real estate in Marbella and are contemplating renting it out, you can find comprehensive information about the costs and taxes associated with renting out your property in Spain right here.

In general, there are two types of property rentals: long-term and short-term. The costs and taxes for short-term rentals can vary significantly.

TAXES AND EXPENSES FOR PROPERTY OWNERS CONSIDERING RENTING OUT THEIR MARBELLA PROPERTY, SPAIN

Income Tax: The income tax rates vary depending on whether you are a resident or a non-resident. For residents, the tax is calculated on a progressive scale, ranging from 19% to 46%. Non-residents are subject to a flat rate, with EU/EEA citizens paying 19% and non-EU/EEA citizens paying 24%. In simple terms, the tax amount increases with your rental income.
Asset Transfer Tax (TPO): Although this tax is intended for long-term rentals, it is rarely paid, and the amount is typically negligible.
Agency Fees: Whether you opt for a long-term or short-term tenant through a real estate agent, you will be responsible for covering their fees, which are often calculated using a "no win, no fee" model.

QUESTIONS AND ANSWERS

How can you reduce your income tax liability?

If you own a rental property and generate income from it, you can reduce your taxable income by deducting various expenses. These deductible expenses include:
1. Interest on mortgages
2. Property maintenance and repair costs
3. Fees, additional taxes, and IBI (local property tax)
4. Outstanding rent owed to you
5. Community fees and other regular expenses
6. Depreciation of the property
7. Home insurance costs
8. Utility bills like electricity and water (if paid by the owner)
9. Formalization costs related to rental contracts
Additionally, if your tenant uses the property as their primary residence, you may benefit from a 60% reduction in taxes, known as the "reduction of 60% for habitual residence."

What is the tax rate on rental income?

If you are a non-resident property owner, you must pay 19% on your net rental income if you are an EU/EEA citizen and 24% if you are a non-EU/EEA citizen. If you are a resident in Spain, your net rental income is taxed at rates ranging from 19% to 45%.

How can I avoid paying tax on rental income?

You are legally obligated to pay taxes on your net rental income. However, you can reduce your taxable income by including all eligible rental-related expenses that can be deducted, as explained above.
At Amea, we take pride in being Real Estate Experts, and we are here to provide you with information and answers to any questions you may have.
If you wish to contact us, you can reach us right here or visit our Instagram page for more information.

07: TAXES AND COSTS FOR TENANTS WHEN RENTING A PROPERTY IN MARBELLA

Not everything necessitates constant tax payment. In this instance, we have good news if you're a tenant trying to find something to rent in Marbella.
There are no fees or taxes involved. Subject to negotiation, the price you see on the internet is the price you will actually pay. Although in certain situations, when the property you are looking for is hard to find on the market and multiple agents are engaged, you may be required to pay a fee to the real estate agent, real estate agent costs are typically covered by the owner. Before approving the watching, you should be informed that you have the right to decline. Additionally, even if you are not required to, it is a good idea to use legal counsel.
Curiously, there is a fee that the tenant is required to pay on the rent – a transfer tax – at a rate of about 24 euros per 6.000 euros, but no one does. You could perhaps get sanctioned, but since the money is so little, it doesn't really matter.
When making an offer on a property, you may generally be asked for references (bank statements, tax returns, letters of recommendation, internet links, etc.), especially if you are renting for an extended period of time. Offering the best references you can will help sway the owner's decision to accept your proposal over one that may be better from a client with no references.
With any questions you may have, Amea will be happy to help make your experience and goals fulfilled. It's never been easier to contact us, so don't hesitate to do so.