New amendments to the «tax on large fortunes» have presented an unpleasant surprise for non-resident foreigners in Spain who own real estate in the amount of 3 million euros. In view of this small correction, the entire Spanish luxury housing market may be shaken. However, so far, the changes in the legislation have yet to pass final approval. However, at the end of November, it was already being finalized in the Senate. The target for foreigners is due to the fact that they are the key buyers of luxury housing in the country.
Initially, it was assumed that the new tax would be a temporary solution, but later it became clear that the changes could become durable and would support the already existing wealth tax. The amendments were approved on Thursday, November 24, in the Congress of Deputies (the lower house of Parliament) and is now in the Senate (upper house). Its further path lies through the highest instances of the Cortes Generales. As mentioned above, the tax affects real estate at a price of 3 million euros. Today there are about 23,000 such facilities in Spain.
The tax is charged in three values, depending on the net value:
- 1.7% will be charged on luxury real estate at a price of 3 to 5.34 million euros;
- 2.1% will be charged on luxury real estate at a price of 5.34 to 10.69 million euros;
- 3.5% will be charged on luxury real estate at a price of 10.69 million euros and above.
What taxes do non-resident foreigners already pay for Spanish luxury real estate?
When a non-resident foreigner buys a house, he must pay the cost of the house and a number of other mandatory expenses and duties, including property valuation and taxes on the ownership transaction itself. Among the payments that each foreigner needs to make are the following points:
- IRNR. This is an income tax from non-residents, levied when a person who does not have documents of a resident of the country owns, at the same time, real estate on its territory. It is not necessary to draw up and provide the necessary documents, as well as to pay the tax personally, but it is possible through intermediaries.
- VAT on new housing. Is 10% of the estimated value of the purchased object. Thus, the tax on real estate worth 5 million euros will amount to 500,000 euros. This tax is paid if the purchased property is a new building.
- ITP. The full name of the tax is «Impuesto sobre Transmisiones Patrimoniales» (ITP). It is charged from housing purchased on the secondary market. The amount of tax varies depending on the autonomous community. The approximate interval is from 5% to 10% of the real estate price. According to the example above, from 250,000 to 500,000 euros from an object for 5 million euros. This tax is paid if the property is secondary.
- AJD (stamp duty). It is paid for both in the case of new buildings and secondary market housing, if the property was purchased through a mortgage. It is 1% of the collateral purchase price.
- IBI. The tax that must be paid by both individuals and legal entities who own real estate from January 1, 2022. This tax is levied on the estimated value of the property.