Taxes on a holiday home abroad

Once you’ve found your dream home abroad, the numbers matter too: what taxes do you need to pay for a second home abroad? Below, you’ll find key information that can help you make your decision.

What are the taxes for a holiday home abroad?

Owning a property abroad can be very appealing, but it also comes with various tax obligations. The taxes you pay for a holiday home abroad vary greatly by country and can be complex. Here are some key aspects to consider:

Property Tax

In many countries, you are required to pay property tax, also known as real estate tax. This is an annual tax calculated based on the property’s value. Rates and valuation methods vary depending on the country and even the municipality.

Income Tax

If you rent out the property, you may need to pay income tax on the rental income. Tax rates and the way rental income is taxed differ by country. It’s important to review local regulations and consult a tax advisor if necessary.

Wealth Tax

Some countries levy a wealth tax on the value of the real estate you own. This tax is often a fixed percentage of the total value of your assets in that country.

Inheritance and Gift Tax

When inheriting or gifting a property abroad, taxes may also apply. Rules for inheritance and gift taxes vary by country, so it’s wise to discuss these matters with a professional.

Tax Treaties

Tax treaties between countries can influence how you’re taxed. Some taxes may be deductible in your home country (e.g., the Netherlands), depending on the regulations in both the country where your property is located and your country of residence.

Capital Gains Tax

If you sell the property in the future, capital gains tax may apply to the profit you make. This is usually levied in the country where the property is located.

Local Taxes and Fees

In addition to the taxes mentioned, there may be local taxes and fees, such as municipal taxes or extra charges for tourist accommodations if you rent the property to holidaymakers.

Conclusion

It is crucial to be well-informed about the tax obligations in the country where you plan to buy a property. Seeking legal and financial advice can help ensure you meet all requirements and avoid unpleasant surprises. Each country has its own tax regulations, and understanding them can save you a lot of money and hassle in the long run.

Specifically: Taxes for a second home in Spain

If you own a second home in Spain, there are several tax obligations to consider. Below are the main taxes that may apply:

Property Tax (IBI – Impuesto sobre Bienes Inmuebles)

This is an annual tax collected by the local government on real estate. The amount of IBI depends on the cadastral value of the property and can vary by municipality. It is similar to the Dutch property tax (OZB).

Non-Resident Income Tax (IRNR – Impuesto sobre la Renta de No Residentes)

If you don’t live in Spain but own a second home, you’re required to pay income tax. If the property is not rented out, the taxable base is usually 1.1% of the cadastral value of the property. If it is rented, you pay tax on the rental income.

Wealth Tax (Impuesto sobre el Patrimonio)

In some autonomous communities in Spain, a wealth tax applies to your worldwide assets, including real estate. This tax only applies if your total assets exceed a specific threshold (usually around €700,000, although the exact figure can vary by region). Some regions, like Andalusia, do not levy a wealth tax.

VAT or Transfer Tax when buying

When purchasing a second home in Spain, you pay VAT (IVA – Impuesto sobre el Valor Añadido) for new properties, typically 10%. For resale properties, a transfer tax (ITP – Impuesto de Transmisiones Patrimoniales) is usually applied, ranging from 6% to 10% depending on the region.

Municipal Capital Gains Tax (Plusvalía Municipal)

When selling your second home, you may need to pay the Plusvalía Municipal tax, which is levied on the increase in the value of the land during the period of ownership. This tax is calculated based on the land value in the respective municipality.

Conclusion

It’s essential to be aware of the specific tax rules that apply to your situation, including regional variations and possible exemptions. Consulting a local tax advisor can help ensure you meet all your obligations and make the most of available tax benefits. We work with various specialists who can assist you in managing your tax matters. Click below to learn more about our office or to get in touch with us directly.