Spain is by far the largest foreign property market for Swedish buyers. Costa del Sol, Alicante and Mallorca dominate, and for many the purchase is the first step towards a longer stay or an eventual relocation. For tax purposes, keep two things apart: what Spain charges, and what Sweden continues to charge.
What you pay when you buy
You need a Spanish tax number, an NIE, before the purchase can be completed. The acquisition itself is taxed differently depending on whether the property is resale or new build:
- Resale property: transfer tax (ITP). The rate is set by the autonomous region, so it differs between, for example, Andalusia, Valencia and the Balearics.
- New build from a developer: Spanish VAT (IVA) instead of ITP, plus stamp duty (AJD), which is also set regionally.
- Other costs: notary, land registry and, in practice, often a gestoría handling the registration.
Expect transaction costs to add a material amount on top of the purchase price – they are what determines how long you need to hold the property for the investment to work.
Ongoing taxes while you own
The municipal property tax IBI is payable annually, based on the cadastral value.
If you are not tax resident in Spain, you must also file Modelo 210. Two things regularly surprise Swedish owners here:
- If the property is kept empty for your own use, a deemed income calculated on the cadastral value is still taxed. No letting is required – ownership alone is enough.
- If the property is let, the rental income is taxed. Residents of the EU/EEA may deduct costs attributable to the letting; residents outside the EU/EEA generally may not.
Spain also levies a wealth tax that can apply to Spanish assets even for non-residents, with significant regional differences and a state-level surcharge on larger fortunes.
When you sell
The capital gain is taxed in Spain because the property is located there. If you sell as a non-resident, the buyer is obliged to withhold part of the purchase price and pay it to the Spanish tax authorities as provisional tax. If the final tax turns out to be lower, you have to actively claim the refund – it does not happen automatically. In addition, many municipalities levy a local land value tax (plusvalía municipal) on the transfer.
How this affects your Swedish tax
This is the part most often missed. If you are unlimitedly liable to tax in Sweden, you are taxed here on your worldwide income. Both rental income and capital gains from the Spanish property must therefore be reported in your Swedish tax return.
- Double taxation is relieved under the tax treaty between Sweden and Spain. As a main rule, immovable property is taxed in the country where it is located, while the state of residence relieves double taxation – in practice normally by crediting the Spanish tax.
- A credit requires documentation. You must be able to show which Spanish tax was actually paid, on the right income and for the right year. Sloppy records in Spain become a Swedish tax cost.
- Deferral of capital gains when replacing a permanent home may, under certain conditions, apply to homes within the EEA – Spain is within the EEA.
- Buying a Spanish house does not sever your ties to Sweden. It is the Swedish connections – above all a retained home in Sweden, family and business involvement – that decide the substantial connection question.
The mistakes we see most often
- Assuming Spanish tax is the only tax. If you remain in the Swedish system, it is merely a creditable amount.
- Not filing Modelo 210 for a property left empty – the obligation exists even without rental income.
- Buying through a company without modelling the consequences in both Spain and Sweden.
- Planning the relocation only after the purchase. The order of decisions – the Swedish home, the date of departure, disposals – affects the outcome more than the purchase itself.
About the author and NORTH INVESTMENTS
Felix Schöttle is a lawyer specialising in Swedish and international tax law, assisting individuals and companies with cross-border tax matters through NORTH INVESTMENTS.
This article describes the main features of the rules and is intended as general information only. Rates, fees and exemptions change and often differ between regions and municipalities – always confirm what applies to your transaction. It does not constitute tax or legal advice; professional advice should always be obtained based on your individual circumstances.
