Property taxes in Spain for investors: what you need to know in 2026

Taxes are one of the factors that most affect the net yield of a property investment, and also one of the least understood by first-time investors. Knowing how the taxes work before you buy (not after) can make a difference of several thousand euros to the final result.

Taxes when you buy

When you buy a resale property as a private individual, you pay the Impuesto de Transmisiones Patrimoniales (ITP, the property transfer tax), whose rate varies by region (comunidad autónoma): between 6% (Madrid) and 10% (Catalonia) of the purchase price in the regions under the common tax regime (all except the Basque Country and Navarre), 4% in the Basque Country, and on the most expensive homes some sliding scales reach 13%. On a new-build home, by contrast, you pay IVA (Spanish VAT: 10% in general, 4% for special-regime or publicly developed VPO, state-subsidised housing) plus Actos Jurídicos Documentados (the stamp duty on the deed: 0.5-1.5% depending on the region).

This tax is a direct cost that has to go into the yield calculation from day one.

Annual taxes as an owner

• IBI (Impuesto de Bienes Inmuebles, the local property tax): Paid every year to the town hall where the property is located. The amount depends on the cadastral value and the rate the municipality applies. Typical range: €300-1,500 a year, depending on the property and the municipality.
• Waste collection charge (tasa de basuras): A smaller amount, but it adds up.

Income tax (IRPF) on rental income

Rental income is taxed under the IRPF (Spanish personal income tax, paid by those who are tax-resident in Spain; non-residents pay the IRNR, non-resident income tax, instead) as income from property. The taxable base is the rent received minus deductible expenses. Deductible expenses include mortgage interest, IBI, community fees, insurance, depreciation of the property (3% a year on the value of the building), repair and maintenance costs, and the fees of a gestoría (an administrative agency) or property manager. Depreciation is especially useful because it reduces the taxable base without any real cash outlay.

Important: when the property is the tenant's main home, there is a reduction on the positive net rental income. For contracts signed before 26 May 2023 it is 60%. For later contracts it is 50% as a general rule, rising to 60% if the property was renovated in the previous two years, to 70% if it is let for the first time in a zona tensionada (an area officially declared a stressed housing market) to a young person aged 18 to 35, and to 90% if, in a zona tensionada, the new contract lowers the rent by more than 5%. That significantly reduces the landlord's tax bill.

Capital gains tax when you sell

When you sell, the capital gain is taxed under the IRPF: the difference between the sale price and the purchase price (adjusted for purchase costs and improvements). Rates range from 19% to 30% depending on the size of the gain (30%, since 2025, on the part above €300,000). If the property was your own main home, there is an exemption when you reinvest the proceeds in a new main home. The town hall also charges the plusvalía municipal (the local tax on the increase in the value of the land): since November 2021 you can choose to calculate it on the cadastral value of the land (the objective method) or on the actual gain, and if you sell without making a gain, you don't pay it.

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