15 of March 2023
RESIDENCE BY PROPERTY INVESTMENT IN SPAIN.
Golden Visa (GV) for Spain allows non-EU investors who intend to purchase an unencumbered real estate for a minimum of 500,000 euros to obtain a visa or residence permit that allows them and their family to live and work in Spain and a visa-free access to the Schengen Zone. The GV does not require the holder to stay for a minimum of time in the country.
Investments made by legal persons will be accepted, provided that the legal person is not based in a tax haven, and that the investor holds, directly or indirectly, majority voting rights and the power to appoint or dismiss the majority of the members of the board of directors.
The GV can be obtained in the form of a visa or a residence permit.
- Who: applications must be submitted in person by the applicant, or by one of their parents if they are a minor. They may also be submitted through a duly accredited representative. For residence permit, the investor must be in Spain at the time of application of it.
- Place: Applications must be submitted at the Consular Office of Spain in country of origin or residence.
- Decision period: 10 days (20 days in the event of Residence Permit) as of the day after the submission date of the application.
- Validity period: Once the Golden Visa has been granted, the applicant can activate the one-year temporary residence permit. Alternatively, the applicant can apply for a two-year residence permit. After the first two-year permit expires, a second two-year permit is granted. After five consecutive years of living in Spain, the applicant (and any dependents) can apply for a permanent residence visa. Visa allows freely traveling within the Schengen Area and staying and working in Spain during its validity period, making it unnecessary to obtain a Foreigner Identity Card or other work permit.
- The residence permit allows the holder to live and work in Spain for an initial period of time of 2 years that can be extended for periods of 5 years as long as the holder maintains the minimum investment.
- The residence permit holder can apply for a permanent residency permit after 5 years by meeting the requirements of minimum presence in Spain as long as the conditions are maintained.
- The following family members of the investor may also obtain the visa: (a.)The spouse or unmarried partner; (b.) children and adult children who are financially dependent on the investor and who have not created a family unit of their own; and (c.) relatives in the ascending line in the investor’s care.
- Taxes: GV in Spain does not oblige the investor to pay any taxes, it depends on the total time of residence in the country. If this is more than 183 days per year, then you are obliged to declare your total income. However, what you will have to account for to the Spanish authorities will be the profits from the investment made.
TAXES of the intended transaction at the moment of the purchase.
New-build property. In this event you are liable for two taxes:
VAT (called in Spanish “Impuesto sobre el Valor Añadido”) levied at 10% of the purchase price. Sale and Purchase price: €950,000. VAT: €95,000.
Stamp duty (called in Spanish “Actos Jurídicos Documentados”) The tax rate is different in each Region. In Catalonia and Valencia the tax rate is 1.5%. In Madrid amounts to 0.75%. In Andalusia Region is 1.2%. Price €950k. AJD: €14,250 (Catalonia).
Second-hand property. In this event you are liable for the following tax:
Transfer tax (called “Impuesto de Transmisiones Patrimoniales”) Tax rate in Catalonia (as well as in Valencia Region) is 10% of the purchase value. In Madrid and Andalusia Regions it amounts to 6%. Price: €950k. ITP: €95k (Catalonia) and €57k In Madrid and Andalusia.
TAXES to be paid annually when you own a property in Spain:
Property Tax (called “IBI- Impuesto sobre Bienes Inmuebles”) is a tax that is payable by the owners of all Spanish properties – regardless of their residential status. The tax base is calculated by applying a percentage on the property cadastral value (valor cadastral), which is the official assessed value of the properties for tax purposes only (it is normally lower than the property real market price). The percentage applicable depends on each municipality.
Non Residents Income Tax (called “IRNR- Impuesto sobre la Renta de no residentes”). The taxation will depend on whether or not the property is leased. The tax rate applicable is 19% except for taxpayers are not residents in European Union State Member, Iceland or Norway. In this event, the tax rate applicable is 24%.
- If the property is rented, the tax base will be composed of the incomes obtained.
- If the property is not rented (is used by you the owner or is empty), the income will be estimated as the amount resulting from applying some percentages to the cadastral value. The total is calculated by multiplying the tax base which is 2% of the cadastral value by the tax rate which is 24% for this year.
Example: Cadastral value 50,261€
Tax base 2%: 1005.22€
Income Tax: 241.25€ (24%)
Wealth Tax (Called “IP- Impuesto de Patrimonio”): It is an annual tax, payable on the total value of the taxable assets at the 31st December (properties, savings, vehicles, etc). Non-residents are only liable on their Spanish assets. Since the Solidarity Tax on Large Fortunes Law that entered into force in 29 December 2022, Wealth Tax is applied to those structures where non-resident individuals hold shares in foreign entities with underlying real estate assets in Spain.
Tax free allowance of €700,000. In Catalonia it is 500,000€.
The tax is calculated by applying a progressive tax rate from 0.210% to 2.75% to the total value of the assets.
Example: One owner non- resident in Spain who owns a property located in Catalonia whose value is 1,000,000€.
Value of the property: 1,000,000€
Free allowance: (500.000€)
Tax base: 500,000€
Tax Rate (0.210% of 167,129.45€+0.315 of the rest of the value): 1,572.10€
TAXES to be paid when you sell your property in Spain:
Non-resident vendor:
The tax is calculated by imposing the tax rate of 19% on the net gain.
Resident owner:
The tax is calculated by imposing a progressive tax rate on the net gain:
Since 2023: from 19% to 28%
2021-2022: from 19% to 26%
2016-2020: from 19% to 23%
Example:
Sale 2023/01/02
Sale price €1.25M
Allowances €85,625.00
Net sale price €1,164,375
Acquisition 2015/06/30
Purchase price €150k
Allowances €14,375.00
Net purchase price €164,375
Difference €1M
Tax to be paid by Non-resident vendor. €190K
Tax to be paid by Resident vendor. €267,880
Solidarity Tax on Large Fortunes (“Solidarity Tax”): The solidarity tax is of a direct and personal nature and is meant to apply throughout the national territory. The fundamental difference between Wealth Tax and Solidarity Tax is that the solidarity tax is only levied on taxpayers with a net wealth above €3 million, which is why it is set as complementary.
The new tax is supposed to be a temporary measure implemented for the first two tax years after its accrual (December 31) since the Law came into force in 29 of December of 2022.
The solidarity tax is levied on taxpayers who are also liable for wealth tax, including non-resident individuals, who are taxed on their net wealth in Spain.
Having calculated a taxable base of more than €3 million, a progressive tax rate applies as follows:
- 0% up to €3 million of net wealth
- 1.7% between €3 million and €5 million of net wealth
- 2.1% between €5 million and € million of net wealth
- 3.5% for a net wealth of over €10 million
The amount an individual pays in wealth tax may be deducted from Solidarity Tax.
As a very general rule, taxpayers will be required to check whether the corresponding double taxation treaty also applies to wealth taxes. In certain cases, wealth taxes or any tax of an identical or similar nature (such as the solidarity tax), are not covered by the corresponding treaty.
In other cases, the treaty does apply to wealth tax (and to identical or similar taxes) and will establish which State is entitled to tax the wealth of a particular individual.
The Solidarity Tax is established without prejudice to the provisions of international tax treaties and conventions. Can non-residents taxpayers be treaty-protected?
As a very general rule, taxpayers will be required to check whether the corresponding double taxation treaty also applies to wealth taxes. In certain cases, wealth taxes or any tax of an identical or similar nature (such as the solidarity tax), are not covered by the corresponding treaty. In other cases, the treaty does apply to wealth tax (and to identical or similar taxes) and will establish which State is entitled to tax the wealth of a particular individual.
