A recent report by global property specialists has shown that investors are increasingly interested in property in Spain. We look into these figures and provide useful information on taxes to be aware of if you plan to rent out a Spanish property.
Madrid is the 5th most attractive city to purchase property in Europe in.
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The ‘European Investor Intentions’ report
CBRE, global real estate specialists, have released a report on ‘European Investor Intentions 2023’. The report shows that Spain is the fourth most attractive country in Europe to invest in property in 2023. The number one to invest in property is the UK, overtaking Germany for the first time since 2021. Being positioned at number four is a significant jump for Spain, as it was seventh only last year.
The report highlights that prospects are looking up for southern Europe, as Portugal (and specifically Lisbon), Italy, and of course Spain, all improved on last year.
Top ten most attractive cities to invest in real estate
Barcelona is the 6th most attractive city to investors.
Furthermore, the report details the top ten most attractive cities in Europe to invest in real estate. Other than Germany, Spain is the only country to have not one – but two – cities on this list, Madrid (no.5) and Barcelona (sharing sixth with Lisbon). Like Spain as a whole, Madrid and Barcelona have improved from last year. Madrid has gone from sixth to fifth; Barcelona from ninth to sixth. According to numbeo, the average rent for a one-bedroom apartment in the city centre of Madrid is €1,028.07, and €793.75 for outside the centre. In Barcelona, city centre rent stands at €1,039.34, while outside is €820.46. Rent in both locations is more than 50% cheaper than London, which is the no.1 attractive city (in Europe) for investing in real estate.
The report highlights that prospects are looking up for southern Europe, as Portugal (and specifically Lisbon), Italy, and of course Spain, all improved on last year.
Additionally, the report shows that half of buyers expect buying to remain the same or increase in 2023.
Your need-to-knows before investing in Spanish property
Are you thinking of renting out a Spanish property?
With a property in Spain, even if you do not intend to live there, you will be liable to pay taxes in Spain. The first thing to be aware of is that the Spanish tax year runs from 1st January to December 31st. Spanish tax residents are required to complete a Spanish tax declaration between 6th April and 30th June the following year. Additionally, it is worth knowing that Spain and the UK have a Double Taxation Treaty, which means that you do not have to pay tax twice on the same income.
All property owners in Spain – regardless of what they do with their property – must pay IBI (el impuesto sobre inmuebles urbanos), which is similar to Council Tax in the UK. The tax is determined by the rateable value of a property (the valor castastrol). You will also need to pay a second tax, basura y alcantarillado, that goes towards waste and drainage.
Aside from property tax, you will be taxed on any rental income you earn from your Spanish property, this process is different for residents and non-residents in Spain.
Spanish tax residents:
In Spain, you are considered a tax resident there if one of the following fits:
- You have spent 183 days or Spain within a single calendar year
- Your primary professional activities are in Spain
- Your main interests (your spouse, your children live in Spain)
If you are a Spanish tax resident, you will pay personal income tax (IRPF) on your salary, pensions, and any rental income. Personal income tax in Spain is based on a progressive scale. Your precise personal income tax will be dependent on the rules set by the autonomous region in Spain that you live in.
Non-residents in Spain
What taxes will I need to pay for renting out my Spanish property?
It may be that you are not intending to spend much time in Spain at all. Perhaps, you are thinking of purchasing a holiday home that you will rent out for the majority of the year and spend a handful of weeks (or even no time at all) there yourself. If this is your arrangement, you will be liable to taxes for rental income.
Spanish and EU citizens pay 19% on their net income from renting property. They can apply for tax deductions on expenses such as notary fees and the cost of repair and maintenance. Meanwhile, non-EU citizens (which post-Brexit, means us) pay 24% on their gross rental income. Non-EU citizens are not able to apply for any deductions.
Don’t forget: these rental incomes must be declared and paid on a quarterly basis, by the 20th day of the month following the end of the quarter.
If you do not choose to rent out your Spanish property, you will have to pay an imputed income tax of between 1.1% and 2%.
For more information on taxes in Spain, click here.
Should I invest in Spanish real estate?
It may seem like a drawback that non-EU citizens have to pay 24% on their gross rental income. However, Spain has always been a popular location, for holidaymakers and those looking to stay long-term too. Additionally, the new digital nomad visa scheme that is set to launch this year will likely result in a greater influx of people moving to Spain. This scheme gives people the ability to stay in Spain for up to two years, so it is likely that these people will be looking to rent rather than buy. This new data from ICRE just demonstrates that Spain is growing in prosperity and worldwide attraction. So, you are sure to have lots of interest in your property, and to make a sizeable income.
