Property
Understanding Property Taxes in Andalusia
Buying a property in Andalusia is an exciting investment, whether it’s for a holiday home, rental income, or permanent relocation. However, understanding the tax implications is essential to avoid unexpected costs and ensure compliance with Spanish law. Property taxes in Andalusia differ slightly from other regions in Spain due to specific regional tax policies and incentives. Here’s everything you need to know.
When purchasing a property in Andalusia, buyers must account for several upfront taxes. If buying a new-build property, you’ll need to pay VAT (IVA) at 10% of the purchase price, plus an additional Stamp Duty (AJD) at 1.2%. For resale properties, there’s no VAT, but buyers must pay a Property Transfer Tax (ITP) instead. Andalusia has one of the lowest ITP rates in Spain, set at a flat 7%, making it more attractive than other regions where the rate can be higher. Additionally, notary fees, land registry fees, and legal fees should be factored in, usually adding around 1% to 2% to the total cost.
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Owning property in Andalusia comes with recurring tax obligations. The IBI (Impuesto sobre Bienes Inmuebles) is the equivalent of council tax and is paid annually. The amount varies depending on the municipality and the property’s cadastral value, typically ranging between 0.4% and 1.3% of the assessed value. Non-resident property owners must also pay an imputed income tax on their Spanish property if it’s not rented out, calculated as 1.1% or 2% of the cadastral value. For those renting out their property, rental income tax applies, with non-residents paying 19% (EU citizens) or 24% (non-EU citizens) on rental income.
If you decide to sell your Andalusian property, you may be liable for Capital Gains Tax (CGT). The tax rate is 19% for EU/EEA residents and 24% for non-EU residents, applied to the profit from the sale. However, there are deductions available, such as expenses related to the sale, and in some cases, exemptions apply if reinvesting in a primary residence. Sellers who are non-residents are also subject to a 3% retention tax, which is deducted from the sale price and later adjusted based on the final tax liability.
A significant advantage of buying property in Andalusia is the recent reduction in Wealth Tax (Impuesto sobre el Patrimonio). While this tax applies to individuals whose assets in Spain exceed €700,000, Andalusia has introduced a 100% Wealth Tax relief, effectively eliminating the tax for residents.
Andalusia has also reformed its Inheritance and Gift Tax (Impuesto de Sucesiones y Donaciones). There are generous allowances, particularly for close family members, meaning that many inheritances are now tax-free or significantly reduced compared to other regions in Spain.
Understanding the tax obligations associated with property ownership in Andalusia is crucial for effective financial planning. The region offers some of the most attractive tax incentives in Spain, making it a prime location for property investment. Working with a local tax advisor can help ensure compliance and optimise tax efficiency, whether you’re buying, renting, or selling a property. If you’re considering investing in property in Andalusia, make sure to budget for all taxes and fees to avoid surprises along the way. With the right knowledge and preparation, property ownership in Andalusia can be a rewarding and profitable experience.
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