PROPERTY SALE

When buying a newly built home, you pay 10% VAT (Value Added Tax). But if the house is second hand, the ITP (Patrimonial Transfer Tax) must be paid instead. Although there is also the possibility of paying VAT for a second handed home, instead of the ITP, if certain conditions are met.

At the sale of a property, you must pay income tax (IRPF, if you are a resident; IRNR, if you are not) for the profit obtained on the sale, and for the capital gain, if there has been an increase of value during ownership.

PROPERTY RENTAL

If the house is put up for rent and you are not professionally engaged in this activity, the profit obtained is declared in personal income tax or IRNR (depending on whether you are a Spanish resident or not). This profit is calculated by subtracting from the income obtained all the expenses, paid by the owner, that have been made during that period (insurance, repairs, community, IBI, etc.), as well as the amortization of the value of the construction, of the furniture and facilities.

The rent for habitual residence carries an additional discount of 60% on the net income. Although, unfairly, this reduction only applies if you are a Spanish resident and you pay personal income tax.

If you rent a property that is not going to be used as a first home (to develop a business, or for vacation rentals, for example) you must also add 21% VAT to the rental price, which will not be included in the calculation of the IRPF/IRNR.

OWN USE PROPERTY

In the case of having a property that is not a habitual residence or is not rented, it will be necessary to declare a “fictitious yield”, which is calculated by applying a percentage to the cadastral value (which appears in the IBI) and is paid in personal income tax . There are some exceptions to this payment, but all vacation homes must declare it.

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