When a client asks us about the costs involved when buying property in Spain, they normally mean the short-term ones: conveyance tax, Notary and Land Registry fees, etc. However, being a property-owner involves other annual costs which should be borne in mind:
Local Tax
This basically refers to the Impuesto de Bienes Inmuebles (IBI), or Council Rates, and waste disposal tax (refuse collection and incineration fees). These are levied annually and, although they cover the calendar year, each town council has their own individual set of deadlines. For example: property owners in Calvià pay these taxes between the months of July and August; in Palma, waste tax is paid in the Spring and the Rates during the Autumn. Local councils also levy fees for no parking areas in front of garages and gates, and road tax. We recommend that these items are all paid by direct debit.
Community Fees
If the property is within a condominium or gates community, owners must also pay Community Fees. These can be either monthly, quarterly, half-yearly or yearly. Some communities have early payment agreements in place, and the majority penalize for late payments. We recommend that this item be paid by direct debit.
Income Tax – IRPF or IRNR
Property-owners in Spain must declare this asset when filing income tax, regardless of whether they are tax residents in Spain or not.
For Spanish tax residents, if the property is the owner’s permanent address, it is exempt from tax; however, should it be a second home an imputation of income must be made, which is a taxation regime whereby the empty property is assigned a value. Should the property be rented, the owner must declare profits accordingly.
Non-resident property owners must apply imputed income on all real estate they own in Spain and which is not rented out (otherwise they must declare profits from rental income). This tax is not filed automatically, as it is the taxpayer who voluntarily declares it to the Agencia Tributaria (aka Hacienda). At Agote Diez & Abogados we can help you with this annual tax.
Utilities and Insurance
Property must be equipped with utilities: electricity, water, gas, telephone, internet, etc. These items can be billed monthly or every two months. On Mallorca, many communities have a communal water supply which is paid for on a pro rata basis, or whose cost is divided proportionally if there are internal water meters in place.
Additionally, it is also important to take out home insurance, regardless of whether the property is a detached home or within a community. Insurance premiums can also be paid in different ways, such as monthly, bi-monthly, half-yearly or annually.
At Agote Diez & Abogados we can help you with handling the above costs. Please do not hesitate to contact us.