The Costa Blanca is one of the landmarks of the Mediterranean coastline and, by extension, of the whole of Spain. Many people dream of buying a property in Javea, but it is important to know the tax aspects of buying property in this area.
This article details five key points in terms of the tax implications of buying a property on the Costa Blanca. In this way, you will be able to calculate more accurately the total amount of the transaction based on the price of the property and the applicable taxes.
1. Taxes when buying a property
When buying a property on the Costa Blanca, you will have to pay an additional cost in the form of taxes. If the property is new, you will have to pay Value Added Tax (VAT), which is 10%, with the exception of the Canary Islands, where it is 6.5%.
On the other hand, if it is a used property, you will pay Transfer Tax (Impuesto sobre Transmisiones Patrimoniales, ITP), which varies depending on the autonomous community between 4% and 10%. Likewise, there may be reductions in the case of large families, people with disabilities or if the property is an Official Protection Housing (VPO).
These taxes will be paid when the sale and purchase process is carried out, so they should be included in the budget and added to the sale price, in order to avoid unpleasant surprises later on.
2. Real Estate Tax (IBI)
Once you become the owner of the property, you will have to pay the Property Tax (IBI) every year. The value of this will depend on two factors: the town in which the property is located and the cadastral value of the property. It is an unavoidable municipal tax that also affects commercial premises, garages or plots of land.
This tax may be reduced for large families or those with limited income. The same applies to properties that have solar panels installed to help reduce the environmental impact of homes. In any case, each municipality has its own conditions, so we recommend that you ask for information in your destination town or city to correctly calculate the cost of this tax.
Generally, it is possible to request payment in several instalments throughout the year. Otherwise, it will be paid in a single annual payment.
3. Taxes for non-residents
Non-residents who buy a property on the Costa Blanca must pay Non-Resident Income Tax (IRNR), amounting to 3% of the price of the property. This withholding must be paid to the Tax Office within 30 days. Both the payment and the completion of the AEAT form 211 can be made online or on paper.
In the event that the purchase is made between several people and one of them is a resident, this person will be exempt and the tax will only be applied to the part corresponding to non-residents. Once the payment has been formalised, the buyer will give the receipt to the seller, so that he can include it in the self-assessment of the Non-Resident Income Tax through form 210 of the AEAT (Spanish Tax Agency).
As with this and other taxes, it is essential to know the jurisdiction or consult with specialised professionals.
4. Gift and inheritance tax
In the event that it is not a purchase per se but the property is received by donation or inheritance, the beneficiary will have to pay Inheritance and Gift Tax (ISD). The amount will depend on the value of the net base, which ranges from 7.65% to 34%. In any case, you should check with the institutions of the Autonomous Community in question, the Valencian Community in the case of the Costa Blanca, because there are deductions that may benefit you.
As we have already seen in the IRNR, the beneficiary of the property has 30 days to declare that he/she has received the donation. In addition, when calculating the total amount to be paid, a multiplier coefficient is introduced based on the previous wealth of the person receiving the property, which ranges from 1 to 2.4.
5. Municipal Capital Gains Tax
The Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana, also known as plusvalía municipal, is paid to the town council of the town in question when the ownership of a plot of land is transferred from one person to another. Although in theory it is payable by the seller, there may be an agreement between the parties as to who pays. However, if the seller is not resident in Spain or if it is an inheritance or donation, the buyer will be responsible for the cost.
Of course, if there is no profit or the seller has a loss, the tax should not be paid, as there would be no capital gain. This will have to be demonstrated with documentation proving the current and original value.
All these issues can be complex if you do not have the relevant knowledge and for this reason we recommend that you consult our agents who specialise in the Costa Blanca property market.