Land Taxes in Spain: What Property Owners Need to Know

When buying land in Spain, it is important to understand the taxes associated with property ownership and transactions. Spain has several types of taxes that may affect both the buyer and the seller during the transaction process.

1. Tax on the increase in land value (Plusvalía)

When selling a plot of land, the seller is required to pay the tax on the increase in land value (Plusvalía) if the land is classified as suelo urbano (urban land) or has special characteristics. This tax applies to land whose value has significantly increased since its acquisition.

If the land is classified as suelo rústico (rural land), no tax on the increase in value is levied.

2. Taxes and expenses for the buyer

The buyer of a plot of land in Spain faces other taxes and expenses. Depending on the seller’s status, the buyer may need to make the following payments:

• VAT (IVA) or property transfer tax (ITP):
• If the seller is a legal entity, the buyer will need to pay VAT (IVA) at a rate of 21%.
• If the seller is an individual, the buyer will need to pay the property transfer tax (ITP) at a rate determined by the specific autonomous community.
• Tax on documented legal actions (IAJD): If the transaction is subject to VAT, the buyer will have to pay the tax on documented legal actions, which in Catalonia is currently 1.5%.
• Notary fees: Notary fees depend on the value of the property. For example, with a transaction value of €100,000, notary fees would be around €350.
• Registration fee for property ownership: This fee depends on the value of the property and typically costs around €170.

3. Possible problems when buying land in Spain

When preparing for the transaction, it is essential to carefully check the land in Spain for encumbrances and other issues that could affect future plans.

Check for encumbrances

One of the simplest ways to check is to request an extract from the Property Registry, known as a Nota Simple Informativa. This document contains information on any encumbrances, such as mortgages, liens, or tax debts, and lists all property owners and their shares. To obtain such a document, you can contact specialists in Nota Simple (notarial certificate).

Check for easements

It is also important to check whether there are any easements on the land, which are usage rights that restrict the use of the land. For example, municipal pipes may run under the land, and these cannot be altered or moved.

Check for a building permit

Purchasing land for construction requires checking whether a building permit is in place or can be obtained. Some plots may not be included in the approved urban planning schemes, which limits the possibility of construction. For this, you may need a reform permit to ensure the legal status of the property.

4. Property tax (IBI)

All landowners in Spain are required to pay an annual property tax — Impuesto sobre Bienes Inmuebles (IBI). This tax is calculated based on the cadastral value of the property and depends on local rates:

• From 0.30% to 0.90% for rural land.
• From 0.40% to 1.10% for urban land.

The taxpayer is the person registered as the owner on January 1 of the current year.

5. Problems with cadastral classification

There are often issues with the correct application of the tax, especially if the land is misclassified in the cadastre. Land that is actually agricultural may be classified as urban, leading to an inflated tax. Resolving these issues may require intervention from administrative or judicial bodies. For this, you may need legal services or assistance from lawyers.

6. Tax on the increase in value of urban land (IIIVTNU)

When transferring rights to land, a tax is levied on the increase in value of urban land — Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana (IIIVTNU). This is a municipal tax calculated based on the increase in land value since its acquisition. The tax base is determined by the rate set by local authorities and can vary depending on the region and other factors.

Conclusion

When buying land in Spain, it is important to carefully choose the property, check its legal status, and understand the tax obligations that will arise during and after the transaction. Consulting with specialists can help avoid potential legal and financial risks. For example, seeking advice from experts in transaction accompaniment or property insurance can significantly reduce risks.