1. Back to EU Member states Spain Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs on property acquisitions 5.Issues during Ownership 6.Disposal of property 7.Non resident owners of property 8.Sundry issues

2. Back to EU Member states Spain Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs on property acquisitions 5.Issues during Ownership 6.Disposal of property 7.Non resident owners of property 8.Sundry issues

3. Back to EU Member states 1. Introduction - Spain Real estate in Spain might be acquired for residential reasons, as a holiday property, or due to business needs or convenience (owner occupier or investor).

4. Back to EU Member states 2. Contact Details Xavier Echeverria Laudis Consultor 00 34 932 387 387 xe@laudis.es Maite Fandos Laudis Consultor 00 34 932 387 387 mf2@laudis.es

5. Back to EU Member states 3. Form of property ownership Real estate property in Spain is mostly held through outright freehold. Sometimes, splitting the property within bare ownership and usufruct between two people might be convenient, but this is casuistic. Multi-property systems have been implemented some years ago in some holiday property cases and zones.

6. Back to EU Member states 4. Taxes and other costs on property acquisition Transfer Tax (2 to 7%, depending on the property location) if bought to an individual or secondhand to a Company or an entrepreneur. VAT (house: 7%; business premises: 16%) if bought new to a Company or an entrepreneur. Public Notary and Mercantile Register expenses.

7. Back to EU Member states 5. Issues during ownership Holding: Local Tax on Real Estate Holding (“Impuesto sobre Bienes Inmuebles”): municipal annual tax that depends on the property cadastral value. Occuping: 2% of the property cadastral value is imputed as income to individuals when second house (not when habitual home). Renting: Profit is included among income subject to tax (scaled rate for individuals – maximum rate 43%-; 25 to 30% rate for Companies).

8. Back to EU Member states 6. Disposal of property Depends on the seller condition (individual, entrepreneur, Company) and the way of disposal (sale, inheritance). Local Tax on the Land Increase Value (“Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana”) is levied in any case: municipal tax depending on the land holding period and its cadastral value. Individuals: capital gain is taxed at a 18% rate (profit included in the Personal Income Tax return). Corrections for inflation are applicable. Other reductions are applicable if the property sold was acquired before 01.01.94. Profit on habitual home disposal is exempt if the proceeds are reinvested in a new habitual home within 2 years (a property is considered the individual’s habitual home when living there for a minimum of 3 consecutive years -few exceptions). Companies: capital gain is taxed at the normal rate (25 to 30% -included in the accounting result). Corrections for inflation are applicable. Exemptions are applicable in some cases if reinvestment under certain conditions is made. Inheritance: heirs are subject to the Inheritance Tax. The rate depends on several conditions (property value, prior assets, relationship, residence, etc.)

9. Back to EU Member states 7. Non resident owners of property Holding: apart from the Local Tax on Real Estate Holding, also Special Real Estate Tax is levied for non-residents (annual 3% on the cadastral value -some exemptions). Rental Income: Non-residents are subject in Spain on the gross income amount at a 4% flat rate, unless a Permanent Establishment through which the rental activity is arried out exists in Spain (they are then taxed as a Spanish Company -25 to 30%- on the profit). Disposals: Local Tax on the Land Increase Value (“Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana”) is levied in any case (see 6 before). Non-residents are taxed on the capital gain obtained (profit) at a 18% rate (unless Permanent Establishment: 25 to 30%). Corrections for inflation are applicable. Individuals will be withheld a 3% of the selling price by the purchaser, as a payment on account of the tax due.

10. Back to EU Member states 8. Sundry issues Building in Spain is subject to other several municipal minor taxes and licenses. Carrying out any economic activity in Spain is subject to a special municipal tax (“Impuesto sobre Actividades Económicas”) that depends on the kind of activity, though some exemptions might be applicable (for instance, for the 2 first years of activity, or for Companies with a turnover lower than €1.000.000).

11. Back to EU Member states