Thinking about buying your dream home on the Costa del Sol? You’re not alone! With over 30% of property buyers in southern Spain being foreign nationals, this sun-drenched region remains one of Europe’s most desirable destinations for investment and relocation. Whether you are seeking a second home, a rental opportunity, or a long-term move, understanding Spain’s property tax system is essential to protecting your investment.
In this comprehensive 2025 guide, we explain the key property taxes foreign buyers face when purchasing, owning, and selling real estate on the Costa del Sol. From transfer tax and VAT to wealth and capital gains obligations, this article will help you make informed financial decisions before buying your ideal home in Marbella, Estepona, or Benahavís.
Understanding Property Taxes in Spain for Foreign Buyers
Spain’s property tax system applies to both residents and non-residents, with some important distinctions. As a non-resident foreign buyer, you are required to pay taxes not only when acquiring a property but also annually during ownership and upon selling it.
Property taxation in Spain operates at both national and regional levels. Andalusia, where the Costa del Sol is located, sets its own rates for key taxes like the Property Transfer Tax (ITP) and Wealth Tax. Fortunately, Andalusia has recently introduced tax reductions to attract more foreign investment, making it one of Spain’s most favourable regions for property buyers.
Additionally, Spain has double taxation treaties with many countries, including the UK, Sweden, and Germany. These agreements help ensure you do not pay tax twice on the same income or gain, offering peace of mind for international investors.
Taxes When Purchasing Property on the Costa del Sol
When buying a resale property in Andalusia, you’ll need to pay the Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales or ITP). As of 2025, rates typically range between 8% and 10%, depending on the property price.
For new-build homes, instead of ITP, buyers must pay Value Added Tax (IVA) at 10% of the purchase price, plus Stamp Duty (Actos Jurídicos Documentados or AJD) at 1.2%.
You should also budget for notary fees, land registry fees, and legal costs, which generally add another 1% to 2% of the total price. For example, purchasing a €500,000 home could incur total additional costs of around €50,000 to €60,000 once taxes and fees are included.
Annual Taxes on Property Ownership in Spain
Once you own a property, there are several recurring taxes to consider. The IBI (Impuesto sobre Bienes Inmuebles) is a local property tax based on the cadastral value of your home. It is paid annually to your local town hall and typically ranges from 0.4% to 1.1% of the property’s assessed value.
Owners of high-value properties may also be subject to Wealth Tax (Impuesto sobre el Patrimonio). In Andalusia, this tax has been significantly reduced in recent years, which has helped attract wealthy buyers to the region.
Non-resident owners must also pay Non-Resident Income Tax (Impuesto sobre la Renta de No Residentes or IRNR), even if the property is not rented out. This is calculated as a small percentage of the property’s theoretical rental value.
Other costs include rubbish collection fees and community charges, particularly if you own an apartment within a managed complex. All foreign owners should also file an annual tax return to ensure full compliance with Spanish tax law.
Taxes When Selling a Property on the Costa del Sol
When selling your Spanish property, the key tax to consider is the Capital Gains Tax (CGT). For non-residents, the standard rate is 19% on the profit made between the purchase and sale prices. Residents are taxed progressively between 19% and 28%.
You can reduce your taxable gain by deducting legitimate expenses such as renovation costs, agent fees, and legal charges. Sellers must also pay Plusvalía Municipal, a local tax based on the increase in land value since purchase.
Additionally, non-resident sellers are subject to a 3% withholding tax, retained by the buyer at the time of sale and paid to the Spanish Tax Authority. If your actual tax liability is lower, you can later claim a refund for the difference.
How to Reduce Your Tax Burden Legally
Foreign buyers can legally minimise their Spanish tax obligations in several ways. Spain’s Double Taxation Agreements prevent paying tax twice on the same income, while owning property through a company or trust can sometimes improve tax efficiency.
Timing the sale of your property can also make a difference, as capital gains may vary based on residency status or market conditions. Always keep records of improvements, as these can be deducted from your taxable gain. Working with a qualified tax lawyer or gestor familiar with Costa del Sol property taxation ensures you remain compliant while benefiting from available allowances.
Common Mistakes Foreign Buyers Make with Property Taxes
One of the most common errors is underestimating the total purchase cost, which can reach up to 15% above the property’s sale price once taxes and fees are added. Some owners neglect to file annual non-resident income tax returns, which can lead to penalties.
Others fail to declare rental income correctly or miscalculate their capital gains tax upon selling. Currency fluctuations also affect declared values, especially for UK-based buyers transferring large sums in pounds sterling.
Understanding these details from the outset prevents unnecessary stress and costly errors.
Tax Differences Between Regions: Why Andalusia Is Attracting Foreign Investors
In recent years, Andalusia has introduced several tax incentives to encourage property investment. Reduced transfer tax and wealth tax rates have made the Costa del Sol more competitive than regions such as Catalonia or Valencia.
These reforms, combined with consistent buyer demand in Marbella, Estepona, and Benahavís, have strengthened Andalusia’s position as Spain’s most attractive region for foreign investors in 2025. The outlook remains positive, with continued policy support aimed at stimulating property purchases and international relocation.
Professional Advice for Foreign Buyers
Navigating Spain’s tax system can be complex, especially for non-residents. Engaging a qualified Spanish tax advisor is strongly recommended to ensure compliance and optimise your financial position.
Before completing a purchase, gather all necessary documentation, including your NIE (Número de Identificación de Extranjero), proof of funds, and property registration papers. Estate agents and lawyers play an essential role in ensuring your transaction follows Spanish regulations from start to finish.
For long-term success, maintain accurate financial records and stay updated on any legislative changes affecting expat property ownership in Spain.
Why Choose Eliasson Estates?
Eliasson Estates is more than just a real estate agency, it’s a trusted partner for international buyers seeking a seamless property experience in Spain.
Local Expertise and Market Knowledge:
With years of experience on the Costa del Sol, Eliasson Estates offers deep insight into local property laws, taxes, and investment opportunities. Their team understands the unique needs of international clients, ensuring your buying process is smooth from start to finish.
Personalised Service:
Whether you’re looking for a modern apartment in Estepona or a luxury villa in Marbella, Eliasson Estates provides tailored guidance. Every client receives one-on-one support to help them find the right home or investment property.
Transparency and Trust:
Eliasson Estates prides itself on honesty and professionalism. From initial consultation to final contract signing, you’ll receive clear advice on taxes, fees, and legal procedures, so there are no hidden surprises.
Strong Network of Experts:
The agency collaborates with leading lawyers, tax advisors, and notaries across the Costa del Sol to ensure full legal and financial compliance for every transaction.
Proven Results:
Their strong track record and reputation for excellence make Eliasson Estates a preferred choice for buyers from the UK, Scandinavia, and across Europe.
FAQs
Do I need to pay taxes in Spain if I am not a resident?
Yes. Non-residents who own property in Spain must pay Non-Resident Income Tax (IRNR) and local property taxes such as IBI, even if the property is not rented out.
How can I avoid paying tax twice on my Spanish property income?
If your country has a Double Taxation Agreement with Spain (like the UK or Sweden), you can offset taxes paid in Spain against your home country’s liability.
What documents do I need to buy a property in Spain?
You’ll need an NIE (Foreigner Identification Number), proof of funds, and valid identification. Your lawyer or estate agent can assist with documentation for registration and tax payment.
Are property taxes in Andalusia lower than in other regions?
Yes. Andalusia’s recent reforms make it one of the most tax-efficient regions in Spain, especially for transfer and wealth taxes.
How much should I budget for taxes when buying a property?
It’s wise to budget around 10–15% of the purchase price for taxes and additional costs, including notary and legal fees.
Conclusion
Owning a home on the Costa del Sol is an exciting opportunity, offering lifestyle benefits and strong investment potential. However, understanding Spain’s tax obligations is vital to protecting your financial interests. By learning how purchase, ownership, and sale taxes work, you can make informed decisions and avoid unexpected costs.
If you are planning to buy property in Marbella, Estepona, or anywhere along the Costa del Sol, seek professional advice and take advantage of Andalusia’s investor-friendly tax environment.
Contact Eliasson Estates today to begin your property journey in Spain with trusted local experts who will guide you every step of the way.