1. Is stamp duty, transfer tax or a similar tax payable on the direct sale, purchase or leasing of real estate? If so, what are the rates and who is required to pay the duty or tax?

Acquisition/purchase

The acquisition of real estate is either subject to transfer tax (TT) or value-added tax (VAT). In general, VAT applies if the transfer of the asset constitutes a ‘first transfer’ for VAT purposes and is purchased from a VATable entity/person, but VAT exemptions could lead to the application of TT. VAT is generally recoverable (with some relevant exceptions), while TT represents a real cost for the purchaser.

Stamp duty is triggered when a real estate acquisition is subject to VAT.

Leasing

This would mainly depend on the type of asset, the type of lease and if the lessor is a VATable entity or not. Generally, if the lessor is a VATable entity, the leasing will be subject to VAT. There are also relevant exceptions. For example, the leasing of commercial space would be subject to and not exempt for VAT purposes. However, the leasing of a principal residence would be subject to but exempt for VAT purposes and subject to but exempt from TT.

Depending on the type of asset, VAT would be either a super-reduced rate of 4%, a reduce rate of 10% or the standard rate of 21%. VAT is normally paid by the purchaser/tenant but the application of a “reverse charge mechanism” generally reduces the VAT leakage on the acquisition of real estate.

TT rates range from 6% to 13%, depending on the region where the asset is located. Reduced rates, bonifications or exemptions could apply under certain circumstances. This tax is paid by the purchaser.

Stamp duty rates range from 0.4% to 3%, depending on the region where the real estate asset is located. This tax is paid by the purchaser. Please find below details of the tax rates established for each region (at the time of publication of this guide).

1. Note that these are the standard applicable tax rates. However, there are certain cases in which reduced or increased tax rates apply, depending on the type of transaction and the parties involved. Additionally, please note that the regulations provide for certain discounts that will be applicable when the requirements for their application are met.

2 The increased tax rate applies in cases of the first copies of notarial deeds in which an express waiver of the VAT exemption in real estate transactions is explicitly stated.

2. Is stamp duty, transfer tax or a similar tax payable on the indirect sale or purchase of real estate, e.g., by means of the sale of an SPV which holds real estate in the jurisdiction? If so, what are the rates and who is required to pay the duty or tax?

Transfer of securities -non-listed or listed in an official stock market- are generally exempt from VAT and TT. Nevertheless, such exemption would not apply, if the transfer of shares is carried out with the purpose of avoiding the payment of the VAT or TT that would have been paid on the direct transfer of the real estate held by the entities.

Unless evidence is provided to the contrary, the law deems that these share deal scenarios are designed for the purpose of avoiding the payment of taxes corresponding to a real estate transfer if:

• the acquisition of the control of an entity whose assets are mainly made up of Spanish real estate not linked to a business activity (this also applies to increases of control).
• the acquisition of the control of an entity holding a controlling stake in another entity whose assets are mainly made up of Spanish real estate not tied to a business activity. This also applies to increases of control; and/or
• the transfer of shares acquired because of a contribution of real estate assets upon the incorporation or the increase of capital in a company, provided that such assets are not treated as related to a business activity and the transfer happens within the three-year period following the contribution.

Therefore, VAT or TT depending on the type of real estate properties held by the Company and the parties involved- would be applicable if any of the mentioned scenarios arise. For VAT purposes, the tax calculation will be obtained by considering the market value of the properties and, for TT purposes, it will be obtained by considering the value that should be determined according to the TT legislation.

Please note that control is achieved when the participation in the share capital is, at least, 50%. The shares held in other companies of the same group of companies would be considered to determine if there is control.

For rates, please refer question 1 above.

3. Is value added tax, goods and services tax or a similar tax payable on the sale or purchase of real estate, and the letting of real estate? If so, what are the rates and who is required to pay the tax?

Please refer to question 1 above.

4. Are there any annual taxes that may be payable on the ownership of real estate, e.g., annual land tax, municipal taxes, surtaxes, etc.?

Yes. Property tax is a local tax that is levied annually for the ownership of real estate assets. The tax due ranges from 0.3% to 1.1% (although under certain circumstances, it can be increased), depending on the municipality, over the cadastral value of the asset (an administrative value of the property).

Depending on the municipality where the asset is located, minor taxes such as the garbage tax or the parking rate could apply.

5. What is the tax rate imposed on rental income?

Taxable income obtained by a Spanish entity from net rental income is subject to corporate income tax (CIT) at a 25% rate. Subject to the fulfilment of certain requirements, the following reduced rates may apply:

• 23% applies to entities whose turnover – calculated on a group basis if the entity belongs to a group as per article 42 of the Spanish Commercial Code – in the previous tax year was less than €1 million; or
• 15% applies to newly created companies for two fiscal years, as from the first fiscal year in which the taxable base is positive – under certain requirements, start-up entities can benefit from this reduced rate for an extra two fiscal years; or
• 0% as per the SOCIMI regime – as explained in question 14

Non-resident entities could benefit from a reduced 19% rate on lease income, under certain circumstances and provided that they will not be acting in Spain through a permanent establishment (PE).

6. Is interest on borrowings used to acquire real estate deductible for tax purposes against rental income? If so, (i) are there any restrictions, such as thin capitalization, transfer pricing or interest limitation rules; and (ii) Is there any withholding tax on the interest?

Broadly, the deductibility of interest is limited to up to 30% of the operating profit (as defined in the CIT Act) of the Spanish entity. Nevertheless, if the interest does not exceed €1 million per year it is deductible in any case (known as the minimum allowance).

For a non-resident taxpayer (subject to Spanish Non-Resident Tax) that is considered EU tax resident and not acting in Spain through a PE, it may be argued that interest accrued on mortgage-secured debt obtained for the financing/refinancing of real estate property may also be tax deductible if a direct link between the debt and the Spanish activity can be evidenced.

The interest paid (and, depending on the case, the principal amount) must also comply with transfer pricing rules if the loan is made by a related party. Generally, non-resident entities outside the EU and acting without a PE in Spain cannot deduct the interest expense.

Generally, if the lender is an EU resident (other than a blacklisted territory), it should benefit from a withholding tax exemption on interest payments, subject to anti-abuse provisions.

7. Are deductions for capital expenditure available against rental income for tax purposes, for example capital allowances or deductions for depreciation? If so, are deductions available for expenditure on both land and buildings, or on buildings only?

Provided the real estate asset is recorded as a fixed asset on the balance sheet of the Spanish entity, the accounting depreciation would be deductible for tax purposes.

Plots of land cannot be depreciated.

8. Are there any other material restrictions on the costs and expenses which may be deducted in calculating a person's taxable rental income, e.g. transfer pricing or anti-hybrid rules?

In general terms, EU residents should be able to deduct the expenses related to the amounts received for the rental income. However, in principle, non-EU-residents would not be able to deduct these amounts.

On March 9, 2021, Spain adapted the measures under EU Anti-Tax Avoidance Directive (ATAD 2) in order to address hybrid mismatches, in line with action 2 of BEPS. Therefore, the Spanish measures (that have transposed ATAD 2) apply to hybrid mismatches that occur between Spain and third countries, including EU member states.

9. Are there any restrictions on the use, and/or the carry forward, of losses?

Carried forward tax losses can be used to offset the CIT taxable income, but only up to 70% of the taxable income. In any case, up to €1 million of carry-forward losses may be offset against CIT taxable income without limitation.

The Spanish Congress has recently approved additional measures to limit the offsetting of taxable bases applicable to companies classified as large companies (i.e., those with a net turnover of at least €20 million during the 12 months prior to the start of the tax period).

10. Are capital gains arising on the direct sale of real estate taxable? If so, what are the rates and are there any exemptions?

Capital gains arising from the sale of real estate assets by a Spanish entity are taxed at a 25% rate for CIT purposes. For reduced rates, please refer to question 5 above.

Certain exemptions/non-taxation rules could apply if the Spanish entity is under a special tax regime. For instance, capital gains on the sale of real estate properties created by Spanish real estate investment entities (REITs, or Spanish SOCIMIs) would be exempt, provided certain conditions are met.

Non-residents are generally taxed for the capital gains obtained on the transfer of the property at a 19% rate.

The transfer of real estate could also be subject to a municipal tax on the increase in value of the urban land (in Spanish, plusvalía municipal). This tax would be payable by the transferor upon the transfer of the assets, based on either (i) the deemed increase in the value of the land which forms part of the property – based on the cadastral value; or (ii) the difference between the effective cost of purchase and that of sale, considering the percentage of the cadastral value corresponding to the land. The applicable tax rate may vary depending on the municipality where the real estate assets are located, with a 30% limit. Please note that, the municipal tax on the increase in value of the urban land would only be payable if there is a real increase of the land value.

11. Are capital gains arising on the indirect sale of real estate taxable, e.g., by means of the sale of an SPV which holds real estate in the jurisdiction? If so, what are the rates and are there any exemptions?

In principle, capital gains derived from the transfer of shares of a company would be exempt from Spanish Non-Resident Income Tax. However, the exemption will not apply when the assets of the entity consist mainly, directly or indirectly, of real estate located in Spanish territory. In this case, the capital gain would be taxed at a 19% tax rate.

Nevertheless, when there is a double taxation treaty in place, the taxation of capital gains in Spain will be subject to the rules of allocation of such double taxation treaty. According to the vast majority of the double taxation treaties signed by Spain in case of transfer of Spanish real estate companies, capital gains would be subject to 19% taxation.

Where the transferor entity is tax resident in Spain, the capital gain obtained on the transfer of the SPV shares would be 95% exempt for CIT purposes if the following requirements are met:

• the percentage of direct or indirect participation in the capital or equity of the entity is at least 5% and
• the participation should be maintained for a period of one year before the transfer.

12. Is there a withholding tax on rental income?

If the lease agreement is between Spanish entities, the rental income would be subject to a 19% withholding tax. This withholding tax would be deductible from the CIT amount due. Nevertheless, provided certain conditions are met (e.g., the cadastral value of the lessor’s properties is higher than €600,000), withholding tax may not apply.

Conversely, if the lessor is a non-resident entity, the lease income (gross amount) would most likely be subject to 19% withholding tax.

13. Is there a withholding tax on capital gains derived from real estate? If so, does the withholding tax apply to both direct and indirect sales, or to direct sales only?

Capital gains generated by a Spanish entity are not subject to withholding tax. However, transfer of a real estate property by a non-Spanish resident taxpayer (without a PE) is subject to a 3% withholding rate that applies in respect of the purchase price (i.e., total consideration).

14. Does the jurisdiction have a REIT regime? If so, please outline the tax treatment of the REIT and the main conditions that must be satisfied to enter and remain within the regime.

The Spanish legislation includes a SOCIMI (the Spanish equivalent of a REIT) regime.

Requirements to apply for the SOCIMI tax regime are as follows:

• the company would need to be a public limited company (in Spanish, sociedad anónima) and have a minimum amount of share capital of €5 million. Note that this requirement is not applicable to Spanish Sub-SOCIMIs – as defined below.
• the shares of the SOCIMI must be nominative and of the same class, meaning they all have the same nominal value and grant the same voting and economic rights to their shareholders.
• the shares should be admitted to trading on a regulated market or in a Spanish multilateral trading system or in that of any other Member State of the European Union or the European Economic Area, or in a regulated market of any country or territory with which there is an effective exchange of uninterrupted tax information throughout the tax period. Note that this requirement is not applicable for sub-SOCIMIs.
• the main corporate purpose has to be:The acquisition and development of real estate properties for rental purposes.
• The holding of shares in the capital of other SOCIMIs or non-resident entities in Spain that have the same corporate purpose as the ones which apply to the Spanish SOCIMI tax regime and which are subject to a similar regime concerning the mandatory, legal or statutory profit distribution policy (such as Real Investment Trusts or REITs).
• The holding of shares in the capital of other entities (known as “sub-SOCIMI”) whether resident or not in Spain, whose main corporate purpose is the acquisition of urban real estate properties for rental purposes and that are subject to a similar regime established for SOCIMIs regarding the mandatory, legal, or statutory profit distribution policy, and that meet the investment requirements established in point (e) below.
• Please note that the companies referred to in this point cannot have subsidiaries and their share capital shall belong to other SOCIMIs or non-resident entities with a similar tax regime to the Spanish SOCIMI tax regime.
• he ownership of shares in Real Estate Collective Investment Institutions.
• *Note a SOCIMI can carry out economic activities different from the ones listed above as long as the income obtained from these other activities is less than the 20% of the total income.

• Investment and income requirements.

  • 80% investment requirement: 80% of the SOCIMI asset must be invested in leasable urban real estate assets, lands for the development of leasable urban real estate properties (development shall begin in a three-year period as from the acquisition of the land) and shares in the capital of other SOCIMIs, REITs, or resident or non-resident Sub-SOCIMIs, as well as shares in the capital of Real Estate Collective Investment Institutions.

    Please note that, if the SOCIMI is the parent company of a group (as per the Commercial Spanish Code), compliance with this requirement shall be calculated based on the consolidated balance sheet with certain particularities.

  The investments made should be maintained for a minimum three-year period.

  • 80% income requirement: At least 80% of the income -excluding those derived from qualifying assets - must come from the lease of urban real estate properties (to individuals or entities that are not part of the same group, regardless of their residence) and from dividends distributed by any subsidiary SOCIMI (including REITs or sub-SOCIMIs).

    Please note that, if the SOCIMI is the parent company of a group, compliance with this requirement shall be calculated based on the consolidated balance sheet with certain particularities.

• Distribution of results. A SOCIMI is required to distribute its accounting profit as follows:
• At least 80% of the overall benefits, including those obtained from the lease real estate properties.
• At least 50% of the benefits obtained from the transfer of real estate properties and shares eligible for the application of the SOCIMI regime. The remainder of these profits should be reinvested in other, qualifying, assets during the following three years as from the date of the transfer. If the reinvestment is not made, these profits must be distributed in their entirety together with the rest of the benefits.
• 100% of the profits obtained from dividends in its subsidiaries.

How are SOCIMI taxed:

1. CIT tax regime: These entities are subject to the reduce tax rate of 0% for all their income, except for those taxed under the general regime – at a 25% rate – (for instance, benefits derived from non-compliance with the investment maintenance requirement set forth in sub-paragraph (e) of paragraph (i).
2. Special levy: The SOCIMI is subject to the special tax rate of 19% on the gross amount of distributed dividends when the following conditions are met:
   • the shareholder holds a participation in the share capital of the SOCIMI equal or greater than 5% and
   • the dividends received by the shareholders are exempt or subject to a tax rate lower than 10%.
3. Since 2021, the SOCIMI would be subject to the tax rate of 15% for the profits obtained and not distributed, for the part that comes from income that has not been taxed at the general CIT tax rate or, are incomes covered by the reinvestment period.
4. A SOCIMI is entitled to a 95% reduction on the Transfer Tax triggered on the acquisition of residential assets to be leased or land for the promotion of this type of properties to be leased, provided that the holding period of three years is met.
5. However, please note that not all the requirements mentioned above need to be fulfilled at the time of option for the special regime. Thus, some requirements may be met within the two-year period from opting for the SOCIMI regime without this being an impediment to applying the special tax regime.

15. Apart from REITs, are there any other tax-efficient real estate investment vehicles or structures which are commonly used to acquire, hold and exploit real estate in the jurisdiction?

There is another tax regime for entities dedicated to housing rental whose main corporate purpose is the leasing of residential properties located in Spain.

The properties may have been acquired, constructed, or developed by the entity. This main activity must be compatible with the undertaking of other complementary activities.

The following requirements should be met to apply the special tax regime:

• The Company should have, at least, eight residential properties leased or offered to be leased.
• The properties should remain leased or offered for lease for at least three years. This period will be calculated according to the following points: If the above requirements are not met, each property would lose the tax reduction and the company would be liable to pay the full amount of reductions previously applied for under this regime.
  • For properties that are part of the entity’s assets before opting for the special tax regime: from the start date of the tax period in which the option for the regime is communicated as long as, at that date the property was leased.
  • For properties acquired or developed subsequently by the company: from the date they were first leased by the company.
• The real estate development and leasing activities should have an independent accounting register for each property acquired or developed, in order to know the income obtained per unit.
  • The income eligible for the tax reduction should be at least 55% of the whole income for the fiscal year, without considering those that derive from the transfer of properties. The tax reduction may apply to the income derived from the leasing of residential properties.
  • If the incomes eligible for the tax reduction are less than 55%, the tax reduction cannot be applied to any of the company’s income.
  • Alternatively, at least 55% of the entity’s asset value must potentially generate income derived from the leasing of residential units.

The option for this regime should be communicated to the Spanish Tax Authorities.

For CIT purposes, the company would be able to apply a tax reduction amounting to 40% of the tax quota.

16. Are there any structures commonly used to mitigate real estate tax liabilities on acquiring and/or disposing of real estate?

Not really. This will generally depend on the type of asset and the particular circumstances of the seller, such as whether it has tax debts pending or to be paid, the nature of such tax debts, the nature of its activities and other factors.

Provided that the underlying real estate assets are devoted to business activities, no VAT or TT is triggered on the transfer of shares.

17. Are there any material differences in the way individuals and companies are taxed on acquiring, letting and/or disposing of real estate?

Yes. Individual taxation is slightly different from corporate taxation. For individuals, it is important to consider whether or not the individual is tax resident in Spain, and whether or not the individual will be exploiting the real estate asset within a business activity. 

This guide does not constitute tax advice and readers should note that the laws of each jurisdiction are regularly refined and/or revised, so the statements made in this report are not definitive. However, this guide does provide a summary overview of the state of the law as at 31 January 2025 and will hopefully serve as a useful tool for investors to ensure they understand the unique provisions and distinctions in the various jurisdictions.