Beyond the cost of the plot, the project and the construction, there is a chapter that tends to come up later in conversations and has a significant impact on total investment: the taxes and fiscal costs associated with buying and building in Spain as a non-resident.
In this article I explain the main fiscal items you will encounter, from the moment you acquire a plot until your villa is built and in use. The aim is not to replace the advice of your lawyer or tax advisor, but to give you a general map so you arrive at that conversation with the right questions.
NIE: the starting point
No fiscal process in Spain begins without the Foreigner Identification Number (NIE). It is mandatory for any significant economic transaction: buying a plot, signing deeds, opening a bank account, filing taxes or contracting utilities. You can request it at the Spanish consulate in your country of residence or in person in Spain. Official information and forms are available at the Spanish Ministry of the Interior.
A practical recommendation: start this procedure well in advance, as timelines vary between two weeks and two months depending on country and timing.
Buying the plot: ITP, VAT and AJD
The first major fiscal item appears when acquiring the property. Which tax applies depends on whether the purchase is second-hand (from an individual or non-promoter company) or new-build (from a promoter).
• Second-hand: Transfer Tax (ITP) applies. In Andalusia, the general rate is 7% on the higher of the deed price and the cadastral reference value.
• New-build or plot from a promoter: VAT at 10% (housing) or 21% (rural/urban undeveloped land) applies, plus Stamp Duty (AJD) at 1.2% in Andalusia.
Official information on ITP-AJD in Andalusia is available at the Andalusian Ministry of Economy, Finance and European Funds.
Notary and registry costs
The public deed before notary and registration in the Land Registry are two mandatory procedures to formalise the purchase. Fees are regulated at national level and usually range between 0.1% and 0.5% of the deed price each, with minimums. Official information is available at the Spanish College of Property Registrars.
Since 2022, the reference value published by the Cadastre is the minimum tax base for ITP, Inheritance Tax and part of Stamp Duty. You can check the reference value of any property at the Spanish Cadastre Electronic Office.
Construction: ICIO, permits and construction VAT
During construction, municipal fiscal items and VAT on professional and construction services become active.
• ICIO (Construction Tax): between 3% and 4% of the material execution budget, settled with the town hall.
• Urban planning permit fee: between 1% and 2% of the material execution budget, also municipal.
• VAT on architecture, supervision and construction services: 10% for residential construction, 21% for professional services.
Combined, the total fiscal load during construction usually represents between 15% and 20% of net build cost, once VAT, ICIO and fees are added. A figure worth including in the budget from the start.
Property in use: IBI and imputed income
Once the villa is built and in your name, two recurring taxes apply even if you do not rent the property:
• IBI (Property Tax): annual municipal tax on the cadastral value of the property. In Marbella, the applicable rate usually ranges between 0.4% and 0.8% of the cadastral value.
• IRNR on imputed income: for having a dwelling available to you in Spain, even if empty, the Tax Agency considers that you obtain “imputed income” of 2% of the cadastral value (1.1% if the cadastral value has been reviewed within the last ten years). This income is taxed at the corresponding IRNR rate.
Declaration is made through Form 210 of the Tax Agency. Details and filing options are available at the Spanish Tax Agency Electronic Office.
If you decide to rent: tax rate by residence
If your villa is rented at some point, taxation depends on your fiscal residence:
• Residents in the EU, Iceland and Norway: rate of 19% on net income, with the right to deduct expenses related to the property (IBI, community fees, insurance, repairs, amortisation, financing interest).
• Residents outside the EU and EEA (including UK residents post-Brexit): rate of 24% on gross income, with no right to deduct expenses.
The difference is significant and worth considering in any profitability analysis. The updated official manual is available at the AEAT Non-Resident Taxation Manual.
When you sell: 3% retention and capital gains
The sale of a property by a non-resident has two important fiscal particularities:
• 3% retention: the buyer must retain 3% of the sale price and deliver it to the Tax Agency via Form 211, as a payment on account of the seller’s IRNR.
• Capital gain: the difference between sale value and acquisition value (adjusted for associated costs and taxes) is taxed at the general IRNR rate.
This 3% retention is subsequently offset in the IRNR declaration, but it is important to know about because it affects the seller’s cash flow at the time of the transaction.
EU vs non-EU: what changes post-Brexit
For British buyers this is particularly relevant. Since January 2021, UK residents are taxed in Spain as non-residents outside the EU. The change has two main implications:
• The IRNR rate on rental income rises from 19% to 24%, with no possibility to deduct expenses.
• Certain advantages that apply only to EU/EEA residents in inheritance and gift tax are lost.
A double taxation treaty between Spain and the UK still applies, allowing offset of taxes paid in each country. But the direct fiscal framework has tightened, and it is a conversation any British buyer should have with a specialised tax advisor before signing.
Why professional fiscal advice is decisive
Real estate taxation for non-residents has many variables: country of residence, type of operation, ownership structure (personal, Spanish company, foreign company), property use, inheritance planning. Each combination has different implications.
In my experience, clients who arrive with their own, independent and specialised non-resident fiscal advice make better decisions and avoid later surprises. It is not a significant cost compared to the investment, and usually pays off many times over in fiscal optimisation across the years.
An initial conversation
If you are considering building a villa on the Costa del Sol and want to understand the total fiscal impact of your operation, you can write to me. I help organise the general map and, where appropriate, connect you with tax firms specialised in international clients.
P.S. A significant part of real estate taxation in Spain is referenced to the cadastral value of the property, which in many cases is below market value. This tends to work in the owner’s favour when calculating recurring taxes. That said, since 2022 the reference value published by the Cadastre is the minimum tax base for ITP, which has balanced the situation somewhat at the moment of purchase.
