Step-by-Step Guide to Spanish Property Taxes for German Nationals

For German nationals who own real estate in Spain, understanding and complying with Spanish tax laws is essential. The Spanish tax system differs significantly from the German system, and non-compliance can result in financial penalties or legal issues. This guide offers an overview of the taxes that affect German nationals owning property in Spain, ensuring they meet their tax obligations and avoid potential complications.

1. Spanish Property Taxes

IBI (Impuesto sobre Bienes Inmuebles)

• What is IBI?

The Impuesto sobre Bienes Inmuebles (IBI) is an annual tax levied by local municipalities in Spain. Similar to property tax in Germany, the IBI is calculated based on the cadastral value of the property, which is an official valuation determined by the government and is typically lower than the market value.

• Calculation and Payment:

The IBI is calculated by applying a percentage to the cadastral value, with the rate varying by municipality. Property owners must pay this tax annually within a specific period set by local authorities. German nationals can pay the IBI directly at the municipal office, via bank transfer or direct debit, or using online payment methods provided by the municipality. 

The tax varies by municipality, typically ranging from 0.4% to 1.1% of the cadastral value. For example, if your property’s cadastral value is 200,000€ and the local rate is 0.5%, your IBI would be 200,000€ x 0.5% = 1,000€.

Non-Resident Income Tax 

• Rental and Imputed Income:

German nationals who own property in Spain are subject to the Non-Resident Income Tax. This tax applies to both income earned from renting out the property and to imputed income for properties that remain unoccupied or for personal use. 

To calculate the non-resident tax on rental income in Spain, allowable expenses such as maintenance, insurance, and management fees are deducted from the total rental income. A tax rate of 19% applies to residents of the EU, Iceland, and Norway, while non-residents from outside these regions are taxed at 24%.

Example: If you are an EU resident earning 12,000€ in rental income with 2,000€ in allowable expenses, your taxable income is 10,000€. Your Non-Resident Income Tax would be calculated as: 10,000€ x 19% = €1,900.

For properties that are not rented out, an imputed income is calculated, representing a theoretical income from the property for tax purposes. This imputed income is calculated as either 1.1% or 2% of the cadastral value of the property, depending on the date of the last cadastral review took place in the municipality where the property belongs. If the cadastral review was conducted within the last ten years, the rate of 1.1% is applied; otherwise, the rate is 2%. This imputed income is also taxed at the applicable rate of 19% for EU, Icelandic, and Norwegian residents, and 24% for residents from other countries.

Example: If the cadastral value of your property is 200,000€ and the last review was less than 10 years ago, the imputed income would be: 200,000€ x 1.1% x 19% (UE) = 418.

Capital Gains Tax (CGT)

This tax applies when a German national sells property in Spain. This tax is calculated on the difference between the sale price and the original purchase price, adjusted for inflation and certain allowable costs. The rate is always 19% regardless of whether the taxpayer is an EU resident or not. 

At the time of sale, a 3% withholding tax is applied to the sale price, which the buyer must withhold and pay to the Spanish Tax Agency. This amount is credited against the final CGT liability. If the 3% withholding exceeds the actual tax due, the seller can request a refund through the Modelo 210.

For example, if you sell your property for 300,000€ that you purchased for 200,000€, with 10,000€ in allowable costs, your capital gain is (300,000€ - 200,000€ - 10,000€) = 90,000€. As an EU resident, your CGT would be 90,000€ x 19% = 17,100€

Wealth Tax (Impuesto sobre el Patrimonio)

The Wealth Tax applies to individuals whose total assets, including real estate in Spain, exceed a certain threshold. For non-residents, the general threshold is 700,000€, although regional variations may exist. For example, in the Balearic Islands, tax rates range from 0.2% to 3.5%, depending on the total value of the assets.

To calculate Wealth Tax, all assets owned in Spain are summed, and applicable debts are deducted. The relevant tax rates are then applied to the net value. Wealth Tax is declared annually, usually along with income tax returns, using Modelo 714.

For example, if your total assets in Spain amount to 1,000,000€, the tax on the amount exceeding 700,000€ would be calculated. Assuming a progressive rate of 0.5% for the amount between 700,000€ and 1,000,000€, your Wealth Tax would be (1,000,000€ - 700,000€) x 0.5% = 1,500€.

2. Step-by-Step Guide to Compliance

Step 1: Determine Your Tax Obligations

German nationals must pay always IBI, Non-Resident Income Tax (whether for rental or imputed income for the not rented properties), Capital Gains Tax if selling a property, and in certain occasions Wealth Tax if their assets in Spain exceed 700,000€.

Step 2: Calculate Your Tax Liabilities

Collect the necessary information, including the cadastral value of your property, rental income received, and property sale details. This information is often found in property deeds, rental contracts, and notifications from the tax office, such as IBI receipts. Us the figures to calculate the corresponding tax.

Step 3: File Your Taxes

Each type of tax—IBI, Non-Resident Income Tax (NRIT), Capital Gains Tax (CGT), and Wealth Tax—has specific deadlines that must be met. Adhering to these deadlines not only helps you avoid late fees and interest but also ensures smooth management of your tax obligations. Meeting these deadlines is essential for avoiding unnecessary financial burdens and legal complications.

Filing period:

• The IBI (Property Tax) is an annual tax with payment deadlines that vary by municipality, typically falling between April and November. Payments are usually made directly to the municipality where the property is located. No form submission is required as the tax is assessed by the local taxing authority. Many municipalities offer online payment options through their official websites.
• Non-Resident Income Tax: for imputed income, the annual declaration must be filed between January 1st and December 31st of the year following the income year. For rental income, starting from the 2024 tax year onwards, the filing period will run from January 1st to January 20th of the following year.
• Capital Gains Tax must be reported and paid within four months of the property sale. For instance, if the property is sold in June, the tax should be paid by October.
• Wealth Tax: The filing period for the Wealth Tax runs from April to June of the year following the tax year.

The Non-Resident Income Tax, as well as the Capital gains tax, are filed through the Modelo 210. The Wealth Tax is filed using Modelo 714. These forms are available on the Spanish Tax Agency's website. 

When submitting Non-Resident Income Tax, Capital Gains Tax, and Wealth Tax, the filing procedure can be completed online. However, you will need a valid digital certificate or be registered in the Cl@ve system to authenticate your identity. If you do not have these, you will need to use a collaborating entity such as IberianTax to file the tax on your behalf.

Conclusion

Understanding and complying with property taxes in Spain is essential for German nationals to avoid fines and legal issues. We advise you to regularly review your tax obligations and stay informed about changes in tax laws. 

If you have questions or need personalized advice, do not hesitate to contact IberianTax for expert guidance on Spanish property taxes.