Real Estate Investing in Spain: An Overview for Expats

January 12, 2024 4:00 PM

Sponsored by EuroAmerican Financial Advisors.

Spain has long been an attractive destination for real estate investors, offering varied opportunities, a rich cultural heritage and a diverse property market. Whether you’re seeking a Mediterranean coastal retreat, a base in a vibrant metropolis, an opportunity for residency through the golden visa program, or simply rental income, the Spanish real estate market offers many options. A recent survey ranked Spain the fourth best country in Europe to invest in, with Madrid and Barcelona the fifth and sixth highest ranked cities.

In this article, we break down what you need to know when investing in Spanish real estate.

The Process of Buying Real Estate in Spain

When you buy real estate in Spain the buying process differs slightly from the US, where a real estate agent typically facilitates the transaction, and title insurance is commonly used. In Spain, the process is normally handled by a notary public who ensures the legality of the transaction. Additionally, what’s referred to as a “gestor” may assist with administrative tasks. Hiring a lawyer who understands the complexities of buying real estate in the Spanish market is however always advisable.

Acquiring property in Spain as a foreign investor is a relatively straightforward process. The initial step involves obtaining an NIE (número de identificación de extranjero, or foreigner's identification number). This is a vital Spanish financial identifier necessary for expats to engage in fiscal activities within the country. You can secure an NIE number yourself or you can hire someone with a Spanish power of attorney to take care of the process for you.

Investing in Real Estate for a Golden Visa

Spain’s golden visa program offers residency in exchange for investment in Spain. There are different investment options in the program, investing in real estate is the most accessible with just a €500,000 investment required. The golden vIsa program also potentially offers a route to Spanish citizenship after ten years. This program is especially appealing for investors seeking a foothold in the European Union and the associated lifestyle benefits.

Spanish Tax Implications

Both Spanish residents and non-residents must pay Spanish income tax on their income accrued in Spain, including on real estate rental income. US and Canadian citizens can claim tax credits to offset their Spanish tax liability and avoid double taxation. Two other Spanish taxes investors should be aware of are capital gains and wealth taxes.

Capital Gains

When selling a property in Spain, sellers are subject to capital gains tax on their profits. The applicable rate varies based on residency and nationality. For non-residents from EU/EEA countries, the capital gains tax stands at 19%, whereas for non-residents from other countries, it is set at 24%.

Capital gains tax is charged on a scale for residents, ranging between 19% and 23%. Additionally, residents may qualify for tax relief if they have resided in the property for a minimum of three years before the sale.

Wealth Tax

Wealth tax in Spain applies to both residents and non-residents and is applied to just Spanish assets for non-residents, and global assets for Spanish residents. Spain stands out as one of the few countries with this additional tax. While the rules provide allowances, exempting many individuals, it can substantially impact wealthier individuals—and catch non-resident investors by surprise. Different regions in Spain apply the tax at different rates.

Non-residents without a permanent home in Spain may need to appoint a representative (i.e. attorney) to represent them before the Spanish tax authorities, and seeking guidance is recommended for all investors with assets in Spain to successfully navigate this part of the Spanish financial landscape.

Where to Invest in Spain

Spain's diverse regions offer distinct opportunities for real estate investment. Coastal gems like Costa del Sol and Costa Brava are magnets for tourists, making them ideal for rental and holiday properties. Meanwhile, cities such as Barcelona and Madrid offer not only thriving rental markets but also the potential for property appreciation, as well as the opportunity to enjoy Spanish culture and lifestyle. Emerging areas, like Valencia and Malaga, offer a strategic blend of affordability and growth potential, and these regions may be favorable for investors looking for untapped potential.

Making the right choice hinges on understanding local market trends. Doing your own research and working with a knowledgeable Spanish advisor familiar with the real estate market is a savvy move. Their insights can be instrumental in aligning your investment goals with the most promising opportunities.

Final Thoughts

The Spanish real estate market has shown resilience and stability over the last few years, and factors such as a thriving tourism sector, improving economic conditions and foreign investment contribute to a positive outlook for the years ahead. The government's efforts to streamline bureaucracy and enhance legal security for investors in recent years further support confidence in the market. However, external factors, such as geopolitical events or unforeseen economic events, always have the potential to influence the market. This underscores the importance of due diligence, and conducting thorough research and seeking the specialist professional advice for expats investors will allow you to take full advantage of the opportunities Spain offers.

This article is for informational purposes only; it is not intended to offer advice or guidance on legal, tax or investment matters. Such advice can be given only with full understanding of a person’s specific situation.

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