Don’t Pay Twice! Your Guide to Avoiding Double Taxation When Buying a Home in Spain

Introduction: A Common Fear, a Legal Solution

Buying a property on the beautiful Costa Blanca is a dream, but it can raise a key tax concern: double taxation.

If you reside abroad and purchase a property in Spain, both Spanish law and the law of your country of origin may want to tax that same income, wealth or gain. Nobody wants to pay taxes twice!

The good news is that there is a legal solution: the Double Taxation Agreements (DTAs) that Spain has signed with more than 90 countries (including Norway, Germany, France, and the Netherlands, among others).

What is Double Taxation and How Does it Affect You?

Double taxation occurs when the same tax base is taxed by two different tax jurisdictions. For a non-resident taxpayer in Spain, this usually occurs in two scenarios:

1. Property Income (Rent or Imputed Rent)

If you rent out your property, you must pay Non-Resident Income Tax (IRNR, Form 210) in Spain.
Risk: Your country of origin may also wish to tax this income because you are a resident there.
The CDI Solution: The Agreement establishes that, generally, income must be taxed in the country where the property is located (Spain). Your country of origin will then apply an exemption or deduction to avoid double taxation.

2. Capital Gains (When Selling the Property)

If you sell the property and make a capital gain, you must pay tax on the profit in Spain.
Risk: Your country of habitual residence may also tax that capital gain.
The CDI Solution: The agreement usually grants tax authority for income from real estate to the country where the property is located (Spain).

The Fundamental Step: Know Your Specific Agreement

Not all Double Taxation Agreements are identical. It is essential to review the text of the specific DTA between Spain and your country of residence. A tax advisor specialising in Legal Help Services will review the Agreement to determine:

Taxing Authority: Which country has the right to tax income.
The Elimination Method: Whether your country will apply the Exemption method (no tax is levied on income already taxed in Spain) or the Deduction method (you are allowed to deduct the tax paid in Spain).

Conclusion: The Peace of Mind of Expert Advice

International taxation is complex, but it is entirely navigable with the right help. At Legal Help Services, we specialise in applying Double Taxation Agreements so that you can maximise your profitability and comply with the law, without paying a single euro more than you have to.

Do not let fiscal uncertainty take away your peace of mind when enjoying your property in Spain.