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.
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.
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:
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.
Please refer to question 1 above.
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.
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:
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).
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.
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.
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.
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).
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.
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:
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.
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).
The Spanish legislation includes a SOCIMI (the Spanish equivalent of a REIT) regime.
Requirements to apply for the SOCIMI tax regime are as follows:
Investment and income requirements.
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.
How are SOCIMI taxed:
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 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.
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.
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.