100% Tax for Non-EU Citizens in Spain: What Does It Mean for You?

If you are a non-EU citizen considering buying property in Spain, you may have come across discussions about the so-called "100% tax." But what does it actually mean, and how does it affect your investment? In this post, we’ll break down the tax implications, explore potential future changes, and provide an example of how purchasing a €150,000 property could impact your finances.

Understanding the "100% Tax" Concept

The idea of a "100% tax" often refers to Spain’s Non-Resident Income Tax (Impuesto sobre la Renta de No Residentes or IRNR) and other property-related taxes that apply to non-EU investors. While the name sounds alarming, it doesn’t mean you pay double your purchase price in taxes—it refers to a high tax burden compared to EU residents.

This stems from Spain’s tax policies that impose a 24% tax rate on rental income for non-EU owners (as opposed to 19% for EU citizens) and the lack of deductible expenses for non-EU investors. Additionally, the capital gains tax and wealth tax can also be higher for non-EU property owners.

What Could the "100% Tax" Rule Mean?

There have been concerns that Spain might introduce stricter tax measures on non-EU property owners in the future, particularly in response to housing shortages and affordability issues for locals. Some discussions have revolved around the possibility of further increasing the tax burden on non-residents to discourage speculative investments and short-term rentals.

Possible future scenarios include:

  • Higher Non-Resident Income Tax: The 24% tax rate on rental income could increase further, potentially making rental investments less attractive.
  • Additional Wealth Tax Reforms: Spain’s wealth tax could be adjusted to lower the threshold for non-EU citizens, forcing more investors to pay.
  • Stricter Capital Gains Tax Rules: Non-EU property owners may face new conditions when selling, such as higher withholding tax or reduced exemptions.
  • New Tax Categories for Non-Residents: There has been speculation that Spain may introduce a specific “foreign investor property tax” to curb excessive speculation in high-demand areas.

While no official legislation has been introduced, investors should stay informed about potential policy changes that could impact their long-term financial strategy.

Example: Buying a €150,000 Property in Spain as a Non-EU Citizen

To better understand the financial impact, let’s look at an example. Suppose you are a non-EU citizen purchasing a €150,000 property in Spain. Here’s what you might expect in taxes and fees:

1. Property Purchase Costs

  • Transfer Tax (ITP) or VAT: Depending on whether the property is a resale or a new build, this could range between 8% to 10% (€12,000 - €15,000).
  • Notary & Land Registry Fees: Approximately €1,000 - €1,500.
  • Legal Fees: Around €1,500 - €3,000 if using a lawyer.
  • Stamp Duty (for new builds only): Typically 1.5% (€2,250).

2. Annual Non-Resident Taxes

  • Non-Resident Income Tax (IRNR): If the property is not rented out, Spain assumes an imputed rental income of 2% of the cadastral value and taxes it at 24%.
  • Real Estate Tax (IBI): Ranges from €300 - €800 per year, depending on the location.
  • Wealth Tax: If total Spanish assets exceed €700,000, additional tax applies.

3. Selling the Property Later

  • Capital Gains Tax:
    • Non-EU citizens: 24% tax on profits.
    • EU citizens: 19% tax.
  • Withholding Tax: Spain withholds 3% of the sale price at the time of selling as an advance payment toward capital gains tax.

How Much Does This Add Up To?

After factoring in taxes, legal fees, and other costs, a €150,000 property purchase could require an additional €20,000 - €25,000 upfront. Then, ongoing costs and higher tax rates on rental or resale profits further impact your investment.

Ways to Reduce the Tax Burden as a Non-EU Citizen

Although the tax implications can be high, there are ways to minimize the financial impact:

  • Golden Visa Program: Investing at least €500,000 in Spanish property can grant you residency, which may offer tax advantages.
  • Setting Up a Spanish Company: Some investors choose to purchase property through a Spanish company, which can provide tax benefits.
  • Using a Tax Advisor: A local tax consultant can help identify legal deductions, exemptions, and structures that reduce your tax liability.
  • Renting Smartly: While rental income is taxed at 24%, ensuring compliance with local rental laws and choosing long-term over short-term rentals can improve profitability.
  • Choosing Locations with Lower IBI: Some municipalities have lower property taxes, which can reduce annual costs.
  • Double Taxation Agreements: Some countries have agreements with Spain to avoid double taxation. Check if your home country has one to reduce additional taxes.

Future Outlook: Is It Still Worth Buying?

Despite the tax burden, Spanish property remains attractive due to lower property prices compared to other European destinations, high rental demand, and strong capital appreciation potential. Many investors choose to structure their purchase strategically, such as through Spanish companies or Golden Visa schemes, to mitigate some tax liabilities.

However, it’s important to stay informed about possible tax reforms that could impact non-EU property owners in the future. If Spain introduces new measures that significantly increase the tax burden, investors may need to rethink their strategies or focus on locations with lower tax implications.

Final Thoughts

The "100% tax" terminology can be misleading, but non-EU investors should be aware of Spain’s stricter tax policies. Consulting with a tax advisor before purchasing is essential to understand all costs and ensure a profitable investment.

Would you like assistance finding the best properties with the lowest tax impact? Contact Keystyle Properties today!

Navigating Finances with Revolut: A Guide for Foreigners and Residents in Spain

In today's digital age, managing your finances seamlessly across borders is more crucial than ever. For those living in or visiting Spain, Revolut emerges as a powerful tool to simplify financial transactions, whether you're a foreigner exploring the vibrant streets of Madrid or a resident managing your daily expenses. Here's a comprehensive guide on what Revolut entails and how it can benefit you in Spain.

What is Revolut?

Revolut is a financial technology company that offers a range of services designed to make managing money simpler and more cost-effective. Founded in 2015, Revolut began as a digital alternative to traditional banking, providing users with a prepaid card and a mobile app to manage their finances. Since then, it has evolved into a full-featured financial platform, offering everything from currency exchange and international transfers to crypto trading and budgeting tools.

Key Features of Revolut

  1. Multi-Currency Accounts: One of Revolut’s standout features is its ability to hold and manage multiple currencies. With a Revolut account, you can hold and exchange over 30 currencies at interbank rates, which is especially advantageous for frequent travelers or expats in Spain.
  2. Fee-Free Spending Abroad: Revolut’s global card can be used for purchases anywhere in the world without incurring foreign transaction fees. This is particularly beneficial if you’re a foreigner visiting Spain or a local resident who travels frequently.
  3. ATM Withdrawals: With Revolut, you can withdraw cash from ATMs globally, though there are limits on free withdrawals based on your plan. For those living in Spain, this means convenient access to cash without excessive fees.
  4. Instant Transfers and Payments: Transferring money to friends or paying for services is straightforward with Revolut. Instant transfers within the Revolut network are free, and international payments are typically completed within one business day.
  5. Budgeting and Analytics: The app offers tools to track your spending and set budgets. This can be invaluable for managing your finances, whether you’re budgeting for a trip or keeping an eye on your monthly expenses.
  6. Crypto and Stock Trading: For those interested in investment opportunities, Revolut provides the ability to buy, hold, and trade cryptocurrencies and stocks directly from the app.
  7. Insurance and Other Benefits: Depending on your plan, Revolut also offers travel insurance, purchase protection, and even access to airport lounges.

Using Revolut in Spain: A Foreigner's Perspective

If you're a foreigner visiting Spain, Revolut can make your financial life significantly easier. Here’s how:

  • Seamless Transactions: Avoid the hassle of exchanging cash at poor rates or dealing with transaction fees from your home bank. Use your Revolut card to pay directly in euros with no additional charges.
  • Currency Exchange: You can exchange your home currency for euros within the app at competitive rates. This can save you money compared to traditional exchange services.
  • Emergency Withdrawals: If you need cash while exploring Spain, use your Revolut card to withdraw from ATMs with minimal fees. Just be mindful of your plan’s withdrawal limits.
  • Tracking Spending: Keep track of your spending in real-time with the app’s analytics. This helps you stay within your budget and manage your travel expenses more effectively.

Using Revolut as a Resident in Spain

For those who call Spain home, Revolut offers several benefits to enhance your daily financial activities:

  • Local and International Transfers: Easily send money to other Revolut users or make international transfers without high fees. This is especially useful if you frequently need to move money across borders.
  • Expense Management: Utilize the app’s budgeting features to manage your monthly expenses, set savings goals, and track where your money goes.
  • Cost-Effective Travel: For residents who travel frequently within Europe or globally, Revolut’s fee-free spending and competitive exchange rates can make a significant difference.
  • Investment Opportunities: If you're interested in diversifying your investments, Revolut’s platform allows you to trade cryptocurrencies and stocks with ease.

Conclusion

Revolut has revolutionized how we handle finances, making it easier and more affordable to manage money across borders. Whether you’re a foreigner visiting Spain or a local resident, Revolut offers a suite of features to streamline your financial activities, from fee-free spending and currency exchange to budgeting tools and investment options.

By leveraging Revolut’s capabilities, you can focus more on enjoying your time in Spain or managing your daily life without the typical financial hassles. Embrace the future of banking with Revolut and experience a new level of financial freedom.

Why You Should Use a Currency Exchange Company

In today's global economy, international transactions have become commonplace for individuals and businesses alike. Whether you're traveling abroad, conducting international business, or investing in foreign markets, currency exchange is a crucial aspect of these activities. While banks offer currency exchange services, specialized currency exchange companies often provide significant advantages. Here’s why you should consider using a currency exchange company for your currency conversion needs.

Better Exchange Rates and Lower Fees

Competitive Rates vs. Bank Rates

One of the primary reasons to use a currency exchange company is the competitive exchange rates they offer. Banks often add a significant markup to the exchange rates, making your transactions more expensive. Currency exchange companies, on the other hand, tend to offer more favorable rates, enabling you to get more value for your money. Over time, especially for large transactions, the savings from better exchange rates can be substantial.

Transparent Fee Structures

Currency exchange companies typically charge lower fees compared to banks. Banks may include hidden charges and higher service fees, which can add up quickly. Exchange companies are more transparent with their fee structures, making it easier for you to understand the costs involved. Many currency exchange companies operate with lower overhead costs than banks, allowing them to pass these savings onto their customers through lower fees.

Speed, Convenience, and Expertise

Efficient Processing

Using a currency exchange company can be more convenient and faster than going through a bank. These companies are designed to handle currency transactions efficiently, often providing quicker turnaround times.

Online Platforms

Many currency exchange companies offer online platforms where you can manage your transactions from the comfort of your home, adding to the convenience.

Market Knowledge

Currency exchange companies specialize in foreign exchange and have a deep understanding of the market. This expertise allows them to provide better services and advice compared to general banking institutions. Whether you need to understand market trends, get insights on the best times to exchange currency, or manage large transactions, these companies can offer valuable guidance.

Wide Range of Services and Enhanced Security

Diverse Offerings

Beyond basic currency exchange, these companies often provide a range of services tailored to meet various needs. This includes international money transfers, travel money, business foreign exchange solutions, and hedging options to protect against currency fluctuations. This breadth of services makes currency exchange companies a one-stop-shop for all your currency-related needs.

Regulation and Compliance

Currency exchange companies often invest heavily in security measures to protect your transactions. They are regulated by financial authorities and must comply with stringent standards to ensure the safety and security of your funds. This focus on security can give you peace of mind, knowing that your transactions are handled safely.

Common Concerns About Currency Exchange Companies

Trust and Reliability

Worry About Legitimacy

Some people worry about the legitimacy and reliability of currency exchange companies. They fear being scammed or receiving poor service. However, many currency exchange companies are fully regulated and licensed by financial authorities, ensuring they operate under strict guidelines and standards.

Security Concerns

Fear of Fraud

Security is another common concern. People worry about the safety of their funds and personal information. Reputable currency exchange companies invest heavily in security technologies and practices, such as encryption and fraud detection systems, to protect their customers.

Lack of Familiarity

Preference for Banks

Many individuals are simply more familiar with banks and therefore prefer to use them for currency exchange. However, currency exchange companies specialize in foreign exchange, offering expertise and services that banks may not provide. Their focus on this niche market allows them to deliver superior value and service.

Personalized Customer Service

Tailored Experience

Unlike large banks, currency exchange companies often provide more personalized customer service. They are typically smaller, more agile, and customer-focused, allowing them to offer a more tailored experience. This personalized approach can be particularly beneficial if you have specific needs or require assistance with complex transactions.

Our Recommendation: Lumon

About Lumon

Lumon is a trusted currency exchange partner, established in 2000 with a core value of being a center of excellence by delivering exceptional service and competitive exchange rates for their customers. This ethos continues to guide Lumon’s operations to this day. The company takes great pride in offering a service that is “people-led and tech-enabled.”

Customer-Centric Approach

Lumon understands that their customers are motivated by their goals—whether it's buying property, getting married, retiring, growing their business, or expanding to new territories—not just the rates, products, and processes involved. Lumon's experts have a deep understanding of currency markets, and their cutting-edge technology platforms are vitally important in providing excellent service.

Turning Ambitions into Achievements

Lumon combines their technological advancements with a deep understanding of their customers’ ambitions to turn overseas payments into achievements and dreams into realities. Lumon stands out for its commitment to customer satisfaction and excellence in currency exchange services.

 

Conclusion

Using a currency exchange company can offer numerous benefits over traditional banks, including better exchange rates, lower fees, faster and more convenient transactions, specialized expertise, a wide range of services, enhanced security, and personalized customer service. While some concerns about using currency exchange companies exist, understanding their regulatory environment and security measures can alleviate these worries. Whether for personal travel, business, or investment purposes, a currency exchange company like Lumon can provide a more efficient and cost-effective solution for your currency conversion needs.

By choosing the right currency exchange company, you can ensure that you get the best value and service for your money, making your international financial transactions smoother and more profitable.

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Luxury, Bespoke and Resort Property Sales throughout the Costa Calida and Costa Blanca, Spain
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