EU Citizen’s Guide to Buying a Holiday Home in Spain (Taxes Included!)

The allure of Spain – sunshine-drenched beaches, vibrant culture, and delicious food – is undeniable. And what better way to experience it all than with your own holiday home in Spain? As an EU citizen, buying a property in Spain is a relatively straightforward process, but there are some tax implications and key considerations to keep in mind before diving into the market.

Tax Considerations for EU Holiday Homes 💸

👉 Property Acquisition Tax (Impuesto sobre Transmisiones Patrimoniales – ITP)

This tax applies to all property purchases in Spain, including those by EU citizens. The rate varies depending on the region, typically ranging from 4% to 10%. Be sure to factor this into your budget when considering different properties.

👉 Value Added Tax (VAT) 

If you’re buying a new-build property directly from a developer, you’ll pay VAT on top of the purchase price. This rate is currently 10%. New-build properties can be attractive due to their modern amenities and potentially lower maintenance costs, but be aware of the additional VAT expense.

👉 Non-Resident Income Tax (Impuesto sobre la Renta de No Residentes – IRNR)

If you plan to rent out your holiday home, you’ll be subject to income tax on the rental income. The current rate for EU citizens is 19%. Understanding these tax implications is crucial, especially if you plan to generate income from your property.

Formalities for Buying a Holiday Home in Spain ✍️

🪪 NIE (Número de Identificación de Extranjeros) 

• The NIE number is essential for opening a bank account, buying property, and paying taxes in Spain. NIE is the foreign identity number assigned to any person who is going to carry out an economic activity in Spain. Obtaining an NIE is a straightforward process, but plan for some lead time before your property search. The current appointment booking system is overloaded. Therefore, we advise you to plan your investment in advance and as far as possible to start the process before you arrive in Spain.

🏦 Bank account

• Having a local bank account is not necessary to buy a holiday home in Spain. However, having one will make it much easier for you to pay for taxes such as community fees, utilities, etc as some companies do not allow payment from bank international accounts.

📑 Tourist License 

In most Spanish regions, renting your property short-term (for platforms such as Aibnb , for example) requires a tourist license. This ensures your property meets safety and quality standards. Research specific requirements for your desired region – they can vary!

Finding Your Perfect Spot ☀️

📍 Location, Location, Location 

• Spain boasts diverse regions. The bustling Costa del Sol might be ideal for some, while the tranquility of the Canary Islands might suit others. Consider proximity to amenities, tourist demand (if renting), and personal preferences. 

Running costs

• Budget for ongoing expenses like property taxes (IBI), community fees (if applicable), and utilities.

Now is the perfect time to turn your dream of owning a holiday home into reality. By understanding the tax considerations, legal requirements, and key factors involved in purchasing property in Spain, EU citizens can confidently navigate the process and embark on their Spanish adventure.

At Luxton Legal, we specialize in providing tailored legal assistance to clients seeking to invest in Spain’s real estate market. Our team of experts is here to guide you through every step of the journey, ensuring a seamless and legally sound experience.