Due to its many advances, many people a lot of people are interested in buying property in Andalusia. Most home purchases by foreigners in Andalusia are concentrated in the provinces of Malaga, Almería, Cadiz and Granada, in that order. The attractiveness of Andalusia for foreign buyers lies in the climate of the region, with beach and mountain tourism, the wide variety of cultural, and culinary offerings plus good infrastructure.

For instance, the city of Malaga and its surroundings are some of the best connected in Spain. If you’re thinking of buying a home in Andalusia, either as a secondhand home or new build, with a mortgage or without it, to establish your residence in Spain or simply as an investment, we’ll try to give you the most important information you need to take into account before making a decision.

What are the costs of buying property in Andalusia?

The costs of buying a property in Andalusia are around 11% of the purchase price for secondhand homes and around 14% for new builds or off-plan homes. The main difference between the two lies in that secondhand homes are liable for a 7% ITP transfer tax, while new builds incur 10% VAT plus 1.2% for the tax on documented legal deeds. In addition to the taxes arising from the sale, one should take into account the costs of the notary and the Property Register, as well as the costs of a solicitor for the legal investigation, which are around 1% of the purchase price. Legal advice should NEVER be missing in a conveyancing process in Spain.

Can I get a mortgage for the purchase of a property?

It’s possible to obtain a mortgage with a Spanish bank for the purchase of a property in Spain even if you’re not a resident. To obtain this mortgage, it’s essential for your mortgage payments to not exceed 30% to 35% of your net income and that you can prove regular income that comes from earnings, either as an employee or as a self-employed person, or similar.

Some banks can offer up to a maximum of 70% of the purchase price, but this percentage depends on each bank. You’ll need to prove that you have funds of your own that are sufficient to pay the rest of the price and the conveyancing costs. A mortgage valuation is essential since, if it’s below the purchase price, the percentage will be applied to the value of the mortgage valuation and not to the purchase price.

What documents do I need when buying property in Andalusia?

• To buy a property in Andalusia, you’ll need a Foreigner’s Identification Number (NIE), which you can request at a National Police Station. You’ll use this number to identify yourself in Spain for tax purposes or for any other business that involves personal identification.
• The estate agency processing the sale, the developer, the bank or the law firm advising you will require you to fill out a KYC (Know Your Clients), in compliance with European money-laundering regulations. They will also ask you to prove the source of the funds you’ll use to complete the purchase through the use of your tax documents, etc. You’ll need your original passport to be identified property if you’re signing a private purchase contract or if you’re signing the public deed of sale before the notary, in addition to the NIE number.

Where in Andalusia should I buy?

This is a matter of personal preference, the climate you’re looking for and the connections you’ve got to travel from your country of origin. In other words, this is the time it’ll take you to travel from your place of residence to the city or area in Andalusia where you’d like to buy a property. Andalusia has to large airports: Malaga and Seville; as well as two secondary airports: Granada and Almería. By train, the AVE high-speed line runs through the capitals of Andalusia: Granada, Córdoba, Malaga and Seville. The road network is generally in good condition and a large portion of the Autonomous Community of Andalusia is connected through its network of public roads.

The coastal area of Andalusia are the areas with the highest population density, as there are many people who choose to live near the sea to work or retire. The weather also plays an important role in your decision. The western part of Andalusia is more humid than the East, with great contrast between Huelva and Almería, which are at either end, to give you an example.

What if I buy a property in Malaga?

Malaga and the Costa del Sol are the areas where most foreigners invest and buy properties. From Nerja to Estepona, including cities like Torrox, Rincón de la Victoria, Malaga proper, Torremolinos, Benalmádena, Mijas, Fuengirola, Marbella or Estepona is the areas with the highest population density and the largest real estate investment in Andalusia.

The interior of Malaga is also of great interest, with municipalities in the Axarquía such as Vélez Málaga, Cómpeta, Frigiliana, Viñuela, Alcaucín and Sayalonga showing strong demand for properties among foreigners, both in urban and rural areas.

The western part of Malaga, Alhaurín de la Torre or Alhaurín el Grande, along with the Guadalhorce Valley or Coín, are also very coveted areas in the non-resident property market. Natural attractions such as the Sierra de las Nieves National Park and the Caminito del Rey have also driven the presence of buyers and interest in the area.

And if I buy a property in Granada?

Coastal areas in Granada, such as La Herradura or Almuñécar, also referred to as the Costa Tropical, have been consolidated for many years in the property market for non-residents. Likewise, the city of Granada, a first-class city for tourism and monuments, along with the Lecrín Valley and la Alpujarra, are also an investment focus for property buyers.

What if I buy a property in Cadiz?

From Sotogrande to Conil de la Frontera, including the city of Cadiz and all the white villages, are also desired destinations in the property market.

We can highlight the Sotogrande area, which belongs to the municipality of San Roque, with its small marina, as an area of great interest to tourists and property buyers. Being located close to the Costa del Sol and 100 kilometres from Malaga airport, this is a very attractive area with less tourist saturation than the Costa del Sol.

What are the costs of buying property in Andalusia?

Prices in Andalusia can vary greatly depending on the area in which you’re looking to buy. In the highest price ratio, we’ve got Malaga and the Costa del Sol, followed by cities like Seville, Cadiz or Granada. In general the coast is more expensive than going further inland.

When it comes to taxes, the purchase and sale of secondhand home in Andalusia benefits from low taxation in comparison to other Autonomous Communities like Valencia, Catalonia or the Balearic Islands. These lower tax levels also translate to the Inheritance and Gift Tax.

Should I buy a secondhand home or something newly built?

Usually, if you buy a home newbly built or off-plan, you’ll need to wait 2 or 3 years for construction to finish and be able to use the home. If you have no problem waiting and your goal is to buy a new home, with more modern common facilities, this would be a good option.

But if you’re not willing to wait a long time and you’ll want to enjoy the property in the short term, you should look for a used home, taking into account the time it may take you to do the necessary renovations.

Currently, it is true that there is more demand than supply in the new-build market, for which reason there are waiting lists with potential buyers interested in acquiring a new home in many developments.

Can I live permanently in Andalusia?

If you’ve got an EU passport, you can live in Andalusia without having to apply for any type of visa. You’ll have to take into account that, if you’re living in Andalusia for over 183 days per calendar year, you’ll be liable to file for income tax in Spain, as this is set out in the tax regulations, as you’ll be considered tax resident in Spain.

If you’re from outside the EU, for instance, if you’re American, Canadian or British, you’ll be able to stay in Spain for a maximum of 90 days within the last 180 days. This means that, to live in Spain, you’ll need a visa, such as a golden visa, a non-lucrative visa or a digital-nomad visa.

Can I rent out the property?

Buying a property to rent as an investment in Andalusia is one of the main reasons behind the current interest levels in the property market. Malaga and the entire Mediterranean coast, as well as the most important tourist cities, have a high volume of purchases intended for letting, especially holiday lets.

At the tax level, an EU citizen not tax resident in Spain renting out a home will need to pay 19% of the IRNR profit tax obtained from this rental. Currently, all income obtained from rent in the calendar year can be declared between 1 and 20 January of the next year in a single tax form, for each owner of the property. If you’re not an EU citizen and non-tax resident in Spain, you’ll have to pay 24% of the profit obtained from the rent, instead of 19%.

If you’re tax resident in Spain and you let your property in the long term, i.e. if the home becomes the usual residence of the tenant, you can apply for a IRPF tax exemption on the profit obtained from the rent, ranging from 50% to 70% of the total profit obtained.

Can I have problems with holiday lettings?

As discussed in more detail in our July post, in some municipalities in Andalusia as well as in other cities in Spain, holiday lettings are being limited or restricted. From 22 February 2024, the Malaga City Council has restricted this activity drastically, as have done other places in the Costa del Sol, such as Fuengirola and others that will get added to that list. These limitations and prohibitions must be taken into account during the purchase process, as it is very important for investor buyers to have information and legal certainty about the possibility of engaging in holiday lettings in the property or properties they wish to buy.

It’s obvious that there’s a trend towards restricting these operations in the most saturated tourist areas. As it is up to each city council to decide on this matter in terms of the properties located within its municipal boundaries, it’ll be necessary to look at the municipal regulations issued by the city council in which the property where you want to invest is located. This is the only way to confirm if that property meets the requirements to engage in holiday lettings, so ask your lawyer.

It should also be noted that owners’ associations are able to ban these operations. For this reason it’s also necessary to look at their byelaws in order to guarantee that, at the moment of the sale of the property, this activity hasn’t been banned by the owners’ association.

Should I buy as a company or as a private person?

From a taxation point of view, if a single person or a married couple intends to buy a property in Spain, for renting it out or to sell it in the future, it doesn’t make sense to set up a company. This isn’t only about the tax savings compared to buying and selling the property as a privateperson but also about the fact that more taxes are paid, in addition to the annual cost of the company itself.

• If you buy a property through a non-resident company and decide to rent it out, you’ll need to pay 19% non-resident income tax (IRNR) in Spain on the rental income, just as if it were owned by a privéperson.
• If you buy a property through a Spanish company and decide to rent it out, you’ll need to pay 23% corporation tax (IS) on the profit obtained by the company in the calendar year. Once the Spanish company has settled its corresponding taxes and has a net profit, if you want to distribute this profit to the shareholders, you’ll only be able to do this through dividends. These will also be taxed at 19% to 24%, depending on the amount.

Taxes when buying property in Andalusia through a company

If you complete the purchase through a company non-resident in Spain, we also understand that taxes will be due in the country of residence over such dividends, unless these dividends are tax-exempt in the country of residence of the company. In addition to this double taxation, having a company entails annual fixed costs in terms of taxation and accounting that can be around 2,000-2,500 euros per year.

You also need to take into account that, if the shareholder uses the property privately, the company will have to declare such use as income at the market renting price. In other words, the Treasury would interpret that the shareholder will need to pay the rent and, therefore, the company will need to pay taxes on it.

It would be interesting to set up a company if the intention was to engage in different property investments, where the company will indeed engage in actual operations. Also, if there are several investment partners, a company may logically be the appropriate legal vehicle to govern the commercial relationship between them.

Is it important to hire a lawyer when buying property in Andalusia?

The purchase of a property requires specialised legal advice, enabling you to guarantee your investment and reduce the risk of problems or legal issues with such property.

At C&D Solicitors, we specialise in providing property advice to foreign clients. This whether they are individuals seeking to buy a second home or an investment property in Spain, or investment companies and investment funds seeking to grow their asset portfolio and take advantage of the capital gains they can obtain in the property market and in property operation.

Purchase guidance in your own language

We offer “full service” advice throughout the process in your native language: English, Dutch, Swedish, French and German. You can call us at +0034 952 532 582, send us a WhatsApp message at +34 639 54 16 02 or write to us at info@cdsolicitors.com. We’ll look into your case, we’ll send you information about the process and a cost estimate for this, with no commitment whatsoever.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors (Torrox & Malaga, Andalusia)

 

 

 

REFLECTION OF THE CURRENT SITUATION IN MALAGA AFTER NEW ANDALUSIAN DECREE OF 22-2-2024

Over the last few years, there has been a significant increase in the number of tourists in many Mediterranean cities as Madrid, Malaga, Seville, Valencia, Alicante or Barcelona. This increase in tourism has materialised into record figures in the purchase of houses for holiday letting. Let’s analyse the current regulations for urban holiday homes in Andalusia and the decisions some city councils are making with the goal regulating and limiting these activities for urban properties. This in end to protect both the living conditions of its habitants as well as the quality level of tourism.

Please note that rural properties or those located on non-developable land being outside its scope, including farmhouses, B&B rural hotels or country cottages are governed by different regulations.

Do you have plans to buy a property in Andalusia to rent out to tourists? Within our due diligence (legal investigation) C&D Solicitors will inform you about any possible restrictions for your specific property.  

Why is tourism investment so significant in Spain?

In Spain in 2023 tourism represented 12.8% of GDP, the highest figure ever recorded. In many cities in Spain, tourism is the main source of income and wealth at the local level, with many local shops, businesses and professionals relying on tourism as their main source of income. This growth in tourism has led to investment in the purchase of properties to be used as holiday lets increasing over the last few years, whether these are by individuals, companies or investment funds.

Foreign investment in the purchase of properties has been key to this increase in conveyancing operations, with record figures and prices being seen in cities like Malaga, Marbella, Fuengirola, Benalmadena, Torremolinos, Nerja, Granada and Cadiz. This property investment has led some regional governments and city councils to see record levels of tax income from this property conveyancing transactions.

What are the negative effects of the growth in tourism and the holiday lettings market?

The high volume of property purchases in some tourist cities in Andalusia, where buyers intend to use them as RTA holiday homes, has caused a drop in the supply and a rise in the prices of traditional lettings in these cities. Many residents and people with average salaries face great difficulties in finding affordable properties in some of these tourist towns. This is making it complicated to fill some jobs, such as doctors, teachers, hospitality workers, etc. in these cities, as the salaries paid are not enough to pay a high rent or mortgage.

Likewise, a movement has been growing in certain sections of the local resident population, critical of the situation due to tourist overcrowding, the loss of identity and the loss of comfort for those living in these areas. The quick growth of tourist-oriented businesses in these neighbourhoods has been to the detriment of local and traditional commerce, which used to focus on residents and is now disappearing. This scenario is leading the different affected administrations to take measures to control and limit holiday lettings in Spain.

Are holiday lets profitable in comparison to traditional rental housing?

In 2016, Andalusia approved Decree 28/2016, of 2 February, on holiday lettings. In 2024, Decree 31/2024 of 29 January was enacted, amending different provisions of the 2016 Decree. The statement of the new 2024 Decree, explains that it is up to municipal councils to set up different uses, including tourist use, within the different types of land, whether residential, commercial or other.

In 2016, holiday lets were defined as those located in properties on residential land and requiring a first-occupancy certificate (LPO). However, the new 2024 Decree defines holiday rentals as those fit for immediate use that comply with municipal zoning regulations. In other words, the concept of residential land and the actual to have an actual first-occupancy certificate is now eliminated within the REGIONAL law.

This Decree also makes it possible for city councils, citing reasons of general interest, to establish limits in terms of the number of holiday lets per building, area, sector or period. The few months that have elapsed since the implementation of the new Decree, along with the decisions and legislative amendments some city councils have made, have enabled us to understand the consequences of this regulatory change in Andalusia better.

What was the most important regulatory change in Andalusia for holiday lettings in 2024?

The main change in Andalusian regulations in 2024 comes from the elimination of the term “residential land” established in the 2016 decree. That is the elimination of the definition of holiday lets as those located in properties located on residential land.

The change in the law means that each municipality since 22-4-2024 now is responsible for organizing  the use of homes used for holiday lettings on different qualifications of land (such as residential, commercial or other) within the General Urban Development Plan (PGOU). Before these city councils didn´t have any influence in this.

Existing RTA Rental licenses from before 22-2-2024

It’s important to note that all properties registered in the RTA before 22 February 2024 are governed by the 2016 decree, with holiday lettings being considered residential use and with the property therefore requiring an LPO. Properties already registered in the RTA will be able to continue to operate their holiday letting activity under the old regulations.

What is the most important consequence that this 2024 change has brought to the holiday lettings market in Andalusia?

The fact that a municipality, through its local urban plan PGOU, considers holiday lettings or tourist rentals as those located in residential land or not, has very significant effects in practice.

If the local PGOU plan of the municipality defines holiday lettings as a commercial hospitality service (i.e. those in properties located on commercial land and not those located on residential land) this means that it is making holiday lettings equivalent to hotels, hostels, inns, tourist apartments, etc.

PGOUs establish more limitations and requirements to operate holiday lettings in this commercial use of land. If the PGOU establishes holiday lettings as those located on residential land, it will only require a first-occupancy licence to engage in such activities.

FOR EXAMPLE: On 9 February 2024, Seville amended its PGOU based on the new Decree from the Regional Government and changed the classification of holiday lettings to a commercial hospitality service and not a residential-use service. The PGOU in Seville introduced a series of specific requirements for properties to be used as holiday lets in that city.

What is the process to register a property in the Andalusian Tourism Register (RTA)?

As we’ve explained before, to use a home as a holiday let in Andalusia, it needs to be registered in the RTA (Registro de Turismo de Andalucia).

• RESPONSIBILITY DECLARATION: This registration is automatic and takes place through an online declaration. In other words, the applicant (like a rental agency) or owner submits the registration form online and declares, under his or her responsibility, that the home complies with the requirements established by Andalusian regulations to be used as a holiday let. At that time, a notification is received, which is equivalent to the registration document, with its corresponding holiday lettings number (VUT).
• RULES DETERMINED BY TOWN HALL (PGOU): The requirements that a property must meet to be used for holiday lettings in Andalusia are the requirements established in the local PGOU of the municipality for holiday lettings. This in addition to the structural and equipment requirements of the property, which the Decree establishes in its appendices.
• TOWN HALL CHECK: When the Regional Government receives a declaration to register a property in the RTA registry, it sends a notification to the City Council where it is located so that it can decide whether the property complies with the necessary requirements established by municipal regulations for holiday lettings.

How are the new municipal regulations applied to the registration process of a home in the Andalusian Tourism Register (RTA)?

Since the City Council receives a notification from the Regional Government of Andalusia for each registration in the RTA, we understand that the City Council will, at some point, review the registration of that property in the RTA, to check whether it complies with municipal regulations.

• RESIDENTIAL LAND: If the PGOU of the municipality or the specific ordinance governing this considers holiday lets as those on residential land, the property will require an LPO to operate as a holiday let.
• COMMERCIAL LAND: On the contrary, if the PGOU considers holiday lets as those properties located on commercial land or land with individual use, it will establish further requirements for the operation of holiday lets.

If they are considered to be on commercial land or land with individual use, they may require the properties to have access independent from the rest of the building. This also applies to independent utilities and connections, to be on the ground floor or on the first floor, etc. This will depend on the PGOU in each municipality.

What if a property doesn´t meet the Town Hall´s criteria

We understand that, in the process for the municipality to review RTA registrations, if the City Council considers that the property does not meet the requirements, the owner or the operator will be notified so that the latter may show compliance with the requirements within a certain period, if it is possible to remedy the inconsistencies. If it is not possible to comply with regulations, the City Council will request that the Regional Government of Andalusia remove cancel the RTA license.

What is the current situation of holiday lettings in Malaga?

According to data published in July by the newspaper La Opinión de Málaga, Malaga proper has over 12,000 homes used as holiday rentals. The Malaga city centre has around 4,800 holiday lets and a census of 4,260 people. This means that there are more holiday rentals than people resident in the central neighbourhood of the city.

On Saturday 29 Junne, 15,000 people took to the streets of Malaga to protest tourist overcrowding and demand a limit on holiday lets. On 7 June, the Malaga City Council enacted Instruction 1/2024 on holiday lets. In this instruction, it established that in accordance with its PGOU, since the entry into force of the Decree holiday lets are considered to be under commercial and hospitality use and not under residential use.

This means that any property owner seeking to let the property in the holiday lettings market in the city of Malaga must comply with following two extra requirements from 22 February 2024.

1. The property must have adequate means of access and evacuation independent from the rest of the building.
2. Utilities (electricity, water, phone, etc.) need be completely independent from those of the rest of the building.

What is the situation of holiday lets in the city of Malaga registered in the RTA after 22 February 2024?

The Malaga City Council has stated that properties registered from 22 February 2024 must comply with the new requirements for commercial land and accommodation.

At some point, the City Council is supposed to review these registrations and notify the owner or operator of the start of a review procedure of the registration, with the goal of checking whether the home complies with the new requirements. If it does not, the City Council should request that the Regional Government of Andalusia remove the property from the RTA automatically. To date of publishing this article, we have not heard of the City Council starting any review procedures yet.

Future ordinances in the city of Malaga to regulate holiday lets

The instruction we’ve mentioned above, enacted by the Malaga City Council on 7 June, is TRANSITIONAL, as the City Council is working on a new municipal ordinance. This new ordinance will regulate holiday lets specifically, and also probably introduce new limits or bans on new holiday lets in saturated areas, such as the historic city centre.

Reason for fear or panic when buying a property?

Some news articles in countries like the Netherlands or Britain refer to limits or bans on holiday lets in some tourist towns in Spain and, in my opinion, these claims are somewhat sensationalist. In my opinion, the fact that, in certain towns, holiday lets are limited or directly prohibited in areas very saturated by tourism, should not lead to alarm and panic among investor clients. With or without holiday lettings, property investment in Spain is and will continue to be profitable.

Holiday lettings will continue to be possible in many cities and neighbourhoods, perhaps with more requirements and limits, but holiday lettings will never be banned or limited completely. This debate should be approached with logic. For instance, if in the centre of Malaga there are more holiday lets than registered residents, it’s obvious that the area requires stricter regulations for new holiday lets.

Most of us who live in Malaga, as well as foreign clients who visit, consider that the city centre is overcrowded with tourism, with streets being full of people almost every day of the year. It’s a shame for local identity and traditional businesses to be lost and for the centre to be used solely as tourist accommodation for visitors.

On the other hand, tourism is the main source of income for many cities in Spain and, of course, for the city of Malaga, for which reason we’ve got to take care of tourists and treat them in the best way possible. Many of us live thanks to them and our company isn’t an exception.

It would be a big mistake not to try to strike a balance between tourist activities in a city and the residents who live in it. If we don’t try to get both groups to live and coexist in a balanced way, this will lead to dissatisfaction and pit different groups against each other and, in the end, will lead to extreme measures, due to not taking any intermediate steps before the problem becomes difficult to solve.

Is it profitable to buy a property without using it as a holiday let?

It’s obvious that holiday lettings are behind a significant increase in the purchase of properties in many tourist towns in Spain, as this activity has provided owners with good profits.  If limits or bans on holiday rentals start to be implemented, these will affect the number of property purchases in the areas where they are implemented, in one way or another.

Notwithstanding the above, the machine of property investment and the interest of foreign clients in buying homes in Spain, specifically in these tourist areas, will not grind to a halt due to limits placed on holiday lettings. In other words, a limit in holiday lettings by itself will not cause a slump in the property market.

Costs of exploiting holiday rentals

Holiday lettings have significant operating costs, which reduce net profits, such as the cost of the company that manages the property, which ranges from 17% to 22%. The tax cost of the rent received, for which EU residents pay 19% of profits, non-EU residents pay 24% and Spanish residents declare it as income from work, which means they pay according to the income tax bands. Likewise, for non-EU residents it is not possible to deduct certain expenses or maintenance costs for the property in the case of holiday lets.

Long-term renting

In the city of Malaga, traditional lettings also provide good profits for property owners, as long-term rental prices have doubled in the central area since 2021, for instance. Currently, average rent prices in the area are around 1,400 euros per month.

The entire city of Malaga has a low supply of traditional lettings and this has made the rent prices of such properties very high at the moment. This situation can be extrapolated to many municipalities in the Costa del Sol, such as Marbella, Benalmádena, Fuengirola, Mijas or Nerja, as the dwindling supply has led to record prices in traditional lettings.

Let’s remember that, if the owner is tax resident in Spain, traditional lettings have significant tax benefits, which range from 50% to 90% of rent being tax-free. Sometimes, emphasis is made on the gross profit obtained from holiday lettings instead of the net profit after all costs and taxes are paid.

The city of Malaga is very attractive to digital nomads, administration officials and other liberal professionals seeking to live and work in Malaga. In other words, you can look for a tenant profile that is acceptable, with proven solvency, reducing the risk of rent non-payment.

Rental per room

Another very attractive market is the letting of flats to students by the room. These prices are also very high at this time and there are companies specialising in letting homes to these students, with large profits. It should also be noted that, if the property owner is tax resident in Spain, part of the rent received from the property would be tax-free.

Conclusion about alternatives for RTA holiday rentals

With all the above, I mean to say that, in Spain, there are always options to obtain good investment returns from property purchases beyond the holiday lettings market.

Properties registered in the RTA prior to the limits being introduced may continue to operate as holiday lets and new ones will be registered in the RTA for this activity, if they meet the new requirements established by each City Council.

What is the current situation of the property market in Andalusia?

The increase in interest rates over the last two years, the low supply of homes in some tourist areas and high property prices in others has already led to a decrease in property purchases in some tourist towns in Spain in the first half of 2024, compared to the same period the year before.

Prices have not yet suffered and continue to be at an all-time high in many tourist towns. It also wouldn’t be bad for some of these areas to see a drop in prices in the property market, as this would attract future investors. For the property market to suffer an adjustment and prices to begin dropping at some point doesn’t mean we’re in a crisis or be cause for alarm.

This potential price drop shouldn’t be blamed on limits or bans introduced on holiday lettings in certain tourist towns.  Obviously, these limits or bans in specific tourist towns will affect supply and demand, but there are many other factors to be taken into account.

What should I do to buy a property with certainty and without risking my investment?

You need to hire a lawyer specialising in property and land law, who is very familiar with this area of the law and who can inform you of the legal status of your property during the process. Without a doubt, a legal report or due diligence is the appropriate document that a lawyer should offer you for your peace of mind.

Not instructing a lawyer in the process to purchase a home in Spain or not instructing the right lawyer for this process can be a big mistake. The cost of a lawyer is very small in proportion to the price you’ll pay for the property or other legal costs relating to conveyancing.

C&D Solicitors, specialist lawyers in property law in Andalusia

At C&D Solicitors, we specialise in providing property advice to foreign clients, whether individuals seeking to buy a second home or an investment property in Spain, as well as investment companies or investment funds seeking to grow their asset portfolio and take advantage of the capital gains they can obtain in the property market and in property operation.

We offer “full service” advice throughout the process in your native language: English, Dutch, Swedish, French and German. You can call us at +0034 952 532 582, send us a WhatsApp message at +34 639 54 16 02 or write to us at info@cdsolicitors.com. We’ll look into your case, we’ll send you information about the process and a cost estimate for this, with no commitment whatsoever.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors (Torrox & Malaga, Andalusia)

 

 

 

 

 

 

Are you renting out an URBAN Andalusian property to tourists? Are you planning to do so in the future? Or are you an intermediate who rents out holiday homes in the name of the property owner? Then please read this article to the end, as new regulations for holiday homes recently have been put in place by the Junta de Andalucia. You can also ask for our summary PDF for applying for the RTA-license.   

Over the last few years, tourism in some Andalusian cities and towns has grown nonstop. Property sales, attracted partially by the boom in holiday homes and the income that can be obtained from these activities have had a direct effect on the high prices of traditional rental properties.

Due to this market situation for holiday lets, the Regional Government of Andalusia published a new Decree 31/2024, of 29 January, which entered into force on 22 February 2024. This Decree repeals and amends a few articles of the Decree published in 2016, which regulated holiday lets in Andalusia for the first time.

For the first time, this new regulation makes it possible for City Councils to limit holiday lets for reasons of general interest. Likewise, from this moment, companies or individuals managing holiday lets in one or more properties become liable to the administration and users of the properties. And also for property owners, there are various changes to adapt to.

The high demand for property sales and the attractive business of holiday lets

Property purchases by individuals, companies and investment funds in strategic locations with a strong demand for tourism have had a direct effect on property prices. Malaga and other municipalities in the Costa del Sol, such as Marbella, Benalmádena, Fuengirola, Mijas or Nerja, for instance, have seen property prices reach historic highs.

We should especially mention foreign investors, who target property investments in cities like Malaga, Seville and Granada, as well as other municipalities in the Costa del Sol and Costa Tropical. The number of holiday homes offered as holiday lets, due to this property frenzy, hasn’t stopped growing in some cities. This has led to increasing costs for traditional lets for residents, with very high prices, along with certain problems of tourist overcrowding in some areas, where residents have been slowly disappearing.

To what holiday homes in Andalusia does this Decree apply?

This Decree applies to homes equipped for immediate use, intended to be let for less than two months, where accommodation services are offered in exchange for paying a price, habitually and for tourism purposes. Tourism purposes are understood to occur when the home is marketed or advertised in tourism promotion channels, such as travel agencies, tourism companies and channels that make it possible to book accommodation.

Does this Decree apply to holiday lets in non-developable or rural land?

This Decree does not apply to homes located in a rural environment, i.e. homes in non-developable or rural land. Using these homes as holiday lets is governed by different regulations.

When can a home not be used as a holiday let in Andalusia?

Homes to be let as holiday homes must comply with a series of requirements to be registered in the Andalusian Tourism Register (RTA) and carry out activities related to holiday lettings.

Ban on the use of social housing (VPO) in the regulations of holiday homes

These homes cannot be used as holiday lets. However, it should be noted that, if you’re thinking about buying a property and the Property Register report shows a VPO qualifier, this classification is often outdated and its expiry can be requested. This is something that happens often, as VPO classification only lasts a certain amount of time. However, in many cases, the VPO qualifier continues to appear in the Property Register report, even if the property lost that legal status due to the passage of time.

Inability to operate holiday lets if the Owners’ Association expressly prohibits the use of the home for holiday letting

If the property you’d like to purchase or let is part of an Owners’ Association that expressly prohibits this activity in its by-laws (founding statutes), the home cannot be used as a holiday let. It’s uncommon to find this prohibition in older buildings or developments, since holiday lets “didn’t exist” until recently and, therefore, this wasn’t regulated in the by-laws.

However, the Community of Owners can at any time modify the Statutes and introduce the prohibition of tourist vacation rentals. Nevertheless, this would not apply to those homes that were already registered in the RTA prior to the prohibition.

NOTE: However, there is a dilemma regarding the percentage necessary to modify the Statutes of a Community of Owners for this specific limitation. Some court rulings establish that a majority of 3/5 (=60%) of the total owners would be sufficient and others establish that it is necessary for unanimity (100%) of all owners. From our legal interpretation of the law, unanimity would be necessary. In the future, we understand that it will be clarified.

Maybe in the light of this contradiction, you decide to already apply for your RTA even allthough you don´t actually rent out (yet). This might be recommendable, but you need to know that in theory the authorities have the right to cancel your RTA when you’re not submitting your rental profit in your income tax declaration (either IRPF or IRNR).

The special case of a ban on holiday lets in the by-laws of new builds

It is usually in new housing developments where the by-laws (´estatutos´) can ban this activity expressly more easily. In this case, it’s important for you or your lawyer to review the by-laws thoroughly. If you’re thinking of buying a newly build home (or off-plan) and intend to use it as a holiday let, you should know that it’s possible that, once the development has been built, the by-laws may prohibit the use of the homes as holiday lets. In other words, when you sign the private sales contract, it’s very likely impossible to know whether the by-laws will prohibit holiday lets once the developer forms the Owners’ Association.

Ban on holiday letting for homes that are incompatible with the urban planning regulations of the municipality where they are located

Homes on urban residential land with a Habitability Certificate or First-Occupancy Certificate (LPO) may be used as holiday lets. The same applies to homes that, when built, were not contrary to urban planning in the municipality and hold an unregulated resolution or an equivalent LPO certificate, if these were built prior to 1986.

Regarding this matter of the requirement to have an LPO or Habitability Certificate, the new Decree has eliminated the need to have an LPO and has replaced this with the requirement for homes to comply with urban planning regulations. Perhaps this change is designed so that, in the future, other homes lacking an LPO for different reasons, can access the RTA, for instance, if the City Council implements a certain procedure to obtain a license to use a home for tourism purposes, even if such resolution is not an LPO as such. If the City Council creates such a specific procedure and a home without an LPO obtains a license for tourism purposes, it would be understood that the home complies with the urban planning regulations of the municipality. Over the next few months, we shall see whether any City Councils implement such a procedure.

Therefore, it will still be advisable to submit the LPO or Habitability certificate to register your property in the RTA, but you can also prove that you fulfill the urban planning regulations with any other document or technical certificate.

Ban on holiday letting for urban homes recognized as Equivalent to Unregulated (DAFO)

Homes built on urban land after 1986, which do not comply with the planning regulations of the municipality where these are located, may be considered homes with a status equivalent to unregulated. If recognized as such, these may only be used as holiday lets with express authorization from the City Council for such change in use.

What should I do to meet the criterion of the regulations of holiday homes in Andalusia? 

To use a home as a holiday let, it’s necessary for the person or entity intended to engage in such activity to register the property in the Andalusian Tourism Register (RTA). To complete this registration, it’s necessary to submit an affidavit (DR) electronically, certifying compliance with the requirements provided in the Decree, and the property may be used as a holiday let after the submission of the DR. The Decree establishes the minimum contents that the affidavit must include, with one of the new features being the requirement to specify whether the home is let year-round or for specific periods, which must be specified in the affidavit (declaration).

NOTE: While publishing this news article, C&D Solicitors has submitted a first RTA-application through the new web form. Although it concerns a responsibility declaration, the system still asks for the applicant to upload the concerning documents. The form states that if you don´t upload the correct documents within 10 days, the application will be cancelled.   

What happens if I don’t have a Habitability Certificate or First-Occupancy Certificate?

There are different processes to obtain the first-occupancy certificate for a home:

How to get an LPO in Andalusia for homes built prior to 1986

This is the simplest and cheapest process, as all urban homes built in Andalusia prior to 1986 with no subsequent modifications are considered homes with planning permission and a first-occupancy certificate. Based on current urban regulations in Andalusia, called LISTA, the owner can request this administrative recognition by submitting a small project signed by an architect and paying a fee. Processing times vary for every City Council, as some are faster than others.

How to get an LPO in Andalusia for homes built after 1986

In this case, the process is lengthier and more costly, due to both the type of project to be drawn up by the architect and the fee charged by the City Council. If the home is part of a building and this building has no LPO, it’s very likely for a single home to be unable to obtain an LPO and the Owners’ Association should be the one to request the LPO for the entire building. In the case of semi-detached or fully detached properties, an LPO can be obtained as long as an architect confirms, in a project, that the home complies with urban planning regulations.

As mentioned before, if the home built after 1986 does not comply with urban planning regulations, an LPO can’t be obtained. Only a certificate of equivalent to unregulated can be procured and this is neither worthwhile nor convenient for an urban home.

What changes does the Decree introduce for managers or operators of holiday lets?

One of the most important modifications of the Decree is the new position of responsibility and relevance taken on by professionals and companies that manage, on behalf owners, the operation of properties in the holiday lettings market. Operators of holiday lets, whether they are individuals or companies and even if they only operate a single holiday let, must be registered as holders in the affidavit (DR). To register the manager as holder of the DR for a property, each and every one of the legal owners of the property must provide their authorization, by signing the appropriate assignment or management contract between the operator and the owners.

Management and administration of a property by a third party are assumed to take place when a third party takes care of the delivery and collection of keys, welcoming guests, providing services during their stay, cleaning at check-in and check-out, etc. The holder of the DR will be liable towards the administration and the users of the service, with the requirement to have a contract with the owners to carry out such an activity. They will be required to notify the administration of any changes in the legal title or the conditions of the properties.

What are the obligations for homes already registered in the RTA prior to this Decree?

Homes already registered in the RTA must check whether they meet the new, additional requirements introduced by the Decree and, if not, they’ll have certain deadlines to adapt to these.

What is the deadline provided by the Decree to comply with the regulations for holiday homes in terms of furniture and quality?

The Decree provides a period of up to one year from its entry into force, i.e. until 22 February 2025, for owners already registered in the RTA to recondition the properties. These requirements mainly refer to furniture, air conditioning, minimum room sizes, minimum quality levels, etc. For example, you now need to have 2 bathrooms when having more than 5 guests and 3 bathrooms when more than 8. If you wish to receive our summary PDF with all requirements, please just ask your legal assistant at C&D or read the total decreet in Spanish. 

What is the deadline to notify of changes in the number of beds for accommodation?

The new Decree establishes a maximum occupancy per home of 15 persons (max 4 per room), if let as the entire property, and of 6 persons if let by the room (max. 4 per room). (Otherwise you need another kind of RTA license for ´establicimiento hostelero or establicimiento apartamentos´ which also requires a business opening license from the Town Hall). It also introduces minimum and maximum surface areas for the bedrooms and their maximum occupancy, a minimum number of bathrooms, etc.

If a holiday let already registered in the RTA needs to change the number of beds due to the new standards, the decree provides owners or operators six months from its entry into force to do so, i.e. until 22 August 2024.

What is the deadline to notify of the period or periods where the home is used as a holiday home?

If your home is registered in the RTA and you intend to let your home only for a certain period of the year and not for year-round, you have 6 months to do this, i.e. until 22 August 2024.

If you use your property as a holiday let year-round, you don’t need to do anything as, after this 6-month period, the administration will assume it’s used as a holiday let year-round.

How long does a manager or company working on holiday lets have to register as a holder in the affidavit?

The companies or managers who currently manage properties as holiday lets have 6 months to notify the Tourism Register of the change in holder for the RTA registration, for each of the homes they manage.

How does the new Decree affect resolutions banning holiday lets from Owners’ Associations?

The Decree clearly and unequivocally provides that a property cannot operate as a holiday let if the Owners’ Association’s by-laws expressly prohibit tourist accommodation activities. In our opinion, the only way for an Owners’ Association to prohibit holiday lets is for it to amend the by-laws and introduce this express limitation in them.

If there is just a resolution from the Owners’ Association in the minutes of an ordinary or extraordinary meeting, without amending the by-laws to prohibit this activity, even if the resolution is registered with the Property Register, we understand that this prohibition can’t be imposed on the current owners or future buyers of the property.

Can City Councils prohibit or limit holiday lets with the new Decree?

In article 2, the new Decree, allows for “… City Councils, for imperative reasons of general interest, may establish limitations, proportionate to these reasons, in terms of the maximum number of homes used for tourist accommodation per building, area, sector or period…”.

Without a doubt, this is one of the main new features in the regulations of holiday lets in Andalusia. Due to the tourist saturation in some areas or neighborhoods of large cities like Malaga or Seville, as well as other areas in the Costa del Sol, some City Councils have been calling for this measure to enable them to limit tourist activities.

If a City Council wants to limit and prohibit such tourist activities, this must be argued and justified in detail, i.e. it’ll need to show that such a limitation is necessary with clear and objective data. It must also be published prior to its adoption.

Limitations for existing licenses

It is understood that limitations from the Town Hall or the Community of Owners won´t apply to existing licenses. However, once you have a RTA license and you in reality don´t rent out and don´t declare the income tax (IRPF or IRNR), the authority can cancel your RTA license.

C&D Solicitors

At C&D Solicitors, we specialize in providing property advice to foreign clients, whether individuals seeking to buy a second home or an investment property in Spain, as well as investment companies or investment funds seeking to grow their asset portfolio and take advantage of the capital gains they can obtain in the property market and in property operation.

We offer “full service” advice throughout the process in your native language: English, Dutch, Swedish, French and German. You can call us at +0034 952 532 582, send us a WhatsApp message at +34 639 54 16 02 or write to us at info@cdsolicitors.com. We’ll look into your case, we’ll send you information about the process and a cost estimate for this, with no commitment whatsoever.

 

 

Over the last few months, we’ve come across more than one inheritance process at our law firm, for foreigners (from the EU and elsewhere) who owned assets in Spain at the time of their death. These are generally non-resident foreigners who owned a property as a second home. But some of them were also resident in Spain at the time of their death.

These inheritance processes when a person dies with assets in Spain tend to be more stressful on heirs. To the pain of the death of a loved one, we must add the heirs’ lack of knowledge of the inheritance regulations and the inheritance law in a country different from that of the person or his or her descendants, such as Spain.

For heirs in this situation, we’ll try to explain the most important points about the inheritance process for a foreigner in Spain.

PRELIMINARY POINTS ON THE REGULATIONS OF AN INHERITANCE PROCESS IN SPAIN

• What law should apply to the inheritance of an EU citizen with assets in Spain?

If a foreigner dies with assets in Spain, we must refer to the European Inheritance Regulation of 2012, applicable to people who died from 17 August 2015.

As a general rule, this regulation provides that the inheritance of an EU national will be governed by the law of the country where the person has his or her usual residence. This rule applies to the 27 member states of the European Union (EU), except for the United Kingdom, Ireland and Denmark, which are considered third countries. However, it does apply to the citizens of these countries who reside in any member state of the EU.

Therefore, if the deceased owned assets in Spain but was not resident in Spain, the law of the country of usual residence would apply.

• What law applies to the inheritance process of a non-EU national with assets in Spain?

If an American citizen, for example, has his usual residence in Spain and dies, Spanish law would apply to his inheritance. If the same person had died residing in the US but owned assets in Spain, his inheritance would be governed by the law of the American State where he last resided.

This is the case because article 20 of the European Inheritance Regulation provides for the universal application of the law designated by the regulation, even when that law is not that of an EU member state.

• Are there exceptions to the general rule of applying the law of the country of usual residence?

The law of the country of usual residence of the deceased will not apply to the inheritance if the deceased states in a last will, clearly and unequivocally, that he or she wishes to apply the law of his or her nationality to the inheritance. In this case, even if the deceased was resident in Spain at the moment of his or her death, the inheritance process for assets in Spain would be governed by the law of his or her nationality. In the case of nationals of multiple countries, they may choose the law of any of these.

This general rule is also not applicable when it is possible to prove that the deceased has a closer connection to a country different from that of usual residence. For instance, this would apply to a worker temporarily resident in a country for work reasons but who keeps his assets and family in the country of nationality.

• What happens if the deceased has not designated the application of his or her national law in a will?

If a foreigner is resident in Spain at the time of death and he or she did not opt for the application of the law of his or her nationality, Spanish law will be applicable to the entire estate. So this is regardless of the country in which the assets are located.

This is the case because the European regulation establishes that the applicable law should apply to the entire estate of the deceased, not only to the assets located in Spain. The European regulation establishes the universal application of the same law to the entire estate of the deceased.

Obviously, if the deceased was not resident in Spain at the moment of death, the applicable law for the entire estate would be that of his or her nationality, if so established in the will. Or that of the country of habitual residence at the time of death, if the deceased resided in a country other than the country of nationality.

RELEVANT DOCUMENTS AND INFORMATION FOR THE INHERITANCE PROCESS IN SPAIN

• Is it possible to find out if the deceased signed a will in Spain?

To confirm whether a person signed a will in Spain, it is necessary to apply for a certificate of wills from the Ministry of Justice. Through this application, the Registry of Wills will certify if the deceased signed a will in Spain, when it was signed and before which notary. Once this certificate has been received, if the deceased signed a will, the heir (or his lawyer) may request a copy from the notary office where it was signed.

It is important to note that, in Spain, for a will to be valid, it must be signed before a Spanish notary. This notary will notify the Registry of Wills that a person has signed a will at the notary office. In certain cases the person can´t travel to the notary, mostly in case of disease or immobility. In that case a local notary can also make a house or hospital visit.

It is possible to sign a will without a notary being present but we won’t delve further into this case, as this is very infrequent in Spain and would require a judicial procedure for legalisation to be considered valid.

• What documents do heirs need in the Spanish inheritance process?

If the deceased has assets in Spain and the inheritance is being handled according to the law of the nationality of the deceased, or that of his or her residence outside of Spain, the heirs should get one of the following documents from the country of origin:

• • European Certificate of Succession.

This is only possible in EU countries.

• • Certificate of succession or probate

Obtained in the country of nationality of the deceased. This is possible in EU countries and non-European countries.

In addition to either of the documents mentioned, it’s also necessary to obtain an original death certificate and the certificate of wills in the country of residency.

If the deceased had property in Spain, the Public Deed of Acceptance and Adjudication of Inheritance must be signed by the heirs before a Spanish notary. This document is where they receive the title of the property and the other assets that the deceased may have in Spain. This might be a house, but also a bank account or vehicle.

Once this deed has been signed, the Inheritance Tax return will be submitted and the property will then be registered with the appropriate Property Register, so that heirs become the official owner of the property or properties of the deceased.

• Is it necessary to pay Inheritance Tax in Spain?

It is always necessary to file an Inheritance Tax return in Spain for any type of inheritance. In other words, Inheritance Tax must always be paid in Spain for goods and assets located in Spain, regardless of whether Spanish law or the law of a different country applies. Liability for inheritance tax arises from the simple fact of inheriting assets located within Spanish territory.

Here, it should be noted that Inheritance Tax in Spain presents great variability, depending on the Spanish autonomous community where the deceased resided or where the deceased had assets if he or she was non-resident. Note that, in Spain, both residents and non-residents pay the same inheritance tax (including non-EU resident and there have been no tax differences in this sense for the last few years.

• What is the Inheritance Tax rate in Spain?

In Spain, each autonomous community is free to establish its own Inheritance Tax regulations and there are large differences in taxation among them. For this reason, when buying a property for either personal or investment use, it is convenient to become familiar with the Inheritance Tax rate in the region where property is to be purchased.

If you’re thinking about buying a home in Spain, our advice is to get an estimate of the Inheritance Tax for your intended heir that may be due on that property in case of death.

For more information on this subject, I recommend you read our post from April 2021 on Spanish inheritance tax. However, the autonomous community of Andalusia has one of the lowest rates of Inheritance Tax in Spain. Heirs such as a widowed spouse, children and grandchildren of the deceased, pay no Inheritance Tax in Andalusia, although it is always necessary to file a tax return.

• What documents does a British citizen need to inherit in Spain?

Since Brexit, British citizens with assets in Spain have become more worried about the impact that their assets in Spain may have on their heirs.

It is widely known among notaries in Spain that British citizens are free to leave a will. If British law applies to the inheritance and the deceased had a will in Spain, it will not be necessary for heirs to provide an English probate document. In this case, the Spanish will is enough to process the inheritance in Spain, along with the rest of the necessary documentation.

If the deceased had no will in Spain, it would be necessary to make the UK probate and legalize it with The Hague Apostille.

• What documents does a USA citizen need to inherit in Spain?

We are currently dealing with different inheritance processes for US citizens, which is why we would like to shed some light on this situation.

Inheritance processes for US citizens where the law of the State of nationality is applied, the main document necessary for heirs to provide is the Grant of Probate. If the deceased died without a will, they must provide a Letter of Administration.

• Is it a good idea to sign a will in Spain?

If you have assets in Spain, even if you have a will in your country of origin, it is always advisable for a will to be signed in Spain covering only the assets located in Spanish territory.

It will always be possible to choose to apply the law of your nationality in this will. If you are not resident when you sign the will but then decide to move to Spain, through this will signed in Spain, the law of your nationality will apply to your inheritance instead of Spanish law. The financial cost of this last will signed in Spain isn’t high and will always help to make the process in Spain easier and cheaper for your heirs.

A will does not reduce taxes, i.e. it has no tax advantages, but it does help heirs deal with the bureaucracy of the inheritance process that will take place in Spain after your death.

Likewise, consider that Spanish law provides for forced heirs and it is not possible to leave your assets to whomever you choose. Therefore, if Spanish law were to apply to your inheritance, these minimum shares for forced heirs must be respected.

• Is it possible to sell a property in Spain without having completed the inheritance process?

Many heirs receive a property in inheritance and consider putting it up for sale as, in many cases, they have no interest in holding on to that property.

Sometimes these heirs don’t have sufficient financial resources to carry out the inheritance process in Spain and pay the potential inheritance tax and Plusvalue tax. However, if they sold the property, they would indeed have the financial resources to cover the inheritance expenses and also obtain capital gains from the sale of the property.

If the heirs of the property have not completed the inheritance process in Spain, the property will be registered in the land registry and in the cadastre registry in the name of the deceased. For which reason they will be unable to sell this property, without first completing the Spanish inheritance process.

However, in Spain, it is possible to put a property on the market through any agency, even if the inheritance process has not been completed yet. In this case, any potential buyers should be informed that the inheritance process is underway and that the selling heirs will complete it, before the deed of sale is signed at the notary office, with the payment by the buyer of the total price.

It’s also possible to sign a private sales contract, through which the buyer will pay a certain amount (usually 10%) of the selling price and, using this money, the sellers/heirs will be able to complete the inheritance process and cover their expenses in Spain. The seller will have enough time after the private agreement is signed to finish the inheritance process and register the property in the Property Register, prior to signing the purchase title deed, at which time the remainder of the selling price will be paid.

IMPORTANT: Since a private contract requires the seller to complete the process within the agreed timeframe, it is very important to hire a lawyer/solicitor specialising in (international) inheritance processes. Before the private contract is signed, the lawyer will be able to confirm that the heirs’ documentation is correct, which would reduce the risk of any problems arising during the inheritance process in Spain.

• Is it necessary to hire a lawyer to complete the inheritance process in Spain?

In Spain, there is no legal obligation to hire a lawyer for procedures of this type, but not only would I find it difficult for someone to complete this process without the advice of a specializing lawyer on these matters, but it also does not seem very advisable to forego.

It’s necessary to obtain a lot of documentation and information, and an expert lawyer will save time, headaches for heirs and surely money as well, since, from the beginning, the lawyer will only ask you for what is necessary for you in Spain as an heir to become the owner of the assets of the deceased.

For instance, obtaining a correct tax valuation of the property to be inherited may be key if heirs intend to sell the property later on, so that they can pay less capital gains tax in Spain. A lawyer would be able to give you an estimate of Inheritance Tax and Municipal Capital Gains tax (Plusvalue, the latter only being applicable to urban properties) before you accept the inheritance in Spain.

If you are going to inherit a property in Spain, it will be necessary to sign an inheritance deed before a notary. The lawyer advising you can also choose the appropriate notary to sign the deed of inheritance, as there are notaries who are very experienced in inheritance and testamentary matters for foreign citizens, whilst other notaries may be less experienced and may require more documentation than necessary.

A law firm specializing in inheritance?

C&D Solicitors is a law firm specialized in Inheritance processes and wills in Spain, with extensive experience in inheritance and testamentary matters. We have been advising both EU and non-EU citizens since 2006. Many Dutch, Belgian, Swedish, German, British and American citizens are regular clients of ours, just to give an example.

We offer “full service” advice throughout the process in your native language: English, Dutch, Swedish, French and German. You can call us at +0034 952 532 582, send us a WhatsApp message at +34 639 54 16 02 or write to us at info@cdsolicitors.com. We’ll look into your case, we’ll send you information about the process and a cost estimate for this, with no commitment whatsoever.

Do you own an expensive property in Andalusia and want to know if you need to pay Wealth Tax? Malaga is leading in Spain in the number of purchase of luxury properties and Marbella is the municipality with the largest number of transactions. Over the last two years, there has been a greater number of foreign buyers of luxury homes in Andalusia, specifically around the Costa del Sol.

Thinking about these foreign buyers interested in purchasing luxury properties or properties with much higher than average prices, we’ll attempt to clarify the current situation in Andalusia in terms of Wealth Tax.

What is the current status of the market for luxury homes in Spain?

A luxury home is considered a home purchased for over 2 million euros. We’ll start with the following data about the property market in terms of the purchase and sale of luxury homes: in 2022, these sales grew 55% in Spain compared to 2021 and, in the first half of 2023, they have grown 30% compared to the same period in 2022. Over the last year, the value of these properties has grown by 13%.

Purchase of expensive properties by foreign buyers

Without a doubt, these sales have a high international profile and we are referring to investment clients with a foreign nationality. Likewise, non-EU buyers with American, British, Chinese or Russian nationality, for instance, have displayed an interest in this market.  This is due to the possibility of applying for a Golden Visa once they have completed their property investments. 

Who is liable to pay Wealth Tax in Andalusia?

Resident or non-resident individuals, who own assets and rights with a net value exceeding 2 million euros in Andalusia, are required to file a return. From 1 January 2022, the tax value of property is calculated based on the cadastral reference value (so not the cadastral value), published by the Ministry of Finance through the Cadastre.

How much is paid in Wealth Tax in Andalusia?

In Andalusia, since 2022, the rate for this type of tax is subsidised at 100%. This means that no one pays Wealth Tax in Andalusia. It’s important to note that, even though nothing is currently payable for this tax, the requirement to file an annual Wealth Tax return still applies.

Taxpayers must comply with this annual tax obligation. Once the annual return for this tax is submitted, the resulting tax would be reduced in its entirety and, in every case, taxpayers will pay zero euros. 

Where is Wealth Tax lowest in Spain?

Currently, Andalusia and Madrid are the autonomous communities with the lowest tax burden for large buyers or property investors in Spain. Both communities have introduced a Wealth Tax reduction of 100%.

In Spain, some Autonomous Communities have entered a tax “battle” to attract large purchases and foreign investment, especially in the real estate market and the purchase of properties. Andalusia and Madrid are at the lead of tax reductions, compared to other communities.

What is the new national tax on large fortunes?

In July, Spain introduced a special tax on large fortunes. This tax has been created so that taxpayers who do not pay Wealth Tax in their Autonomous Communities pay this new tax.

New national tax next to Wealth Tax

A return for this tax must be filed in Andalusia and Madrid by:

• residents with assets valued at over 3,7 million euros (because of a 700.000 euro exemption)
• non-residents with assets valued at over 3 million euros

This always refers to the net value of the assets and applies per person. However, this tax has a lower tax impact compared to Wealth Tax in other Autonomous Communities in Spain, as the minimum amount exempt from taxation is higher than that of Wealth Tax.

Legal and tax advice from C&D Solicitors

Advice on the purchase and sale of properties, from an independent lawyer specialising on this matter, is very important to guarantee your investment and avoid surprises during the conveyancing process or later on.

If you are thinking about buying a home in Andalusia, don’t hesitate to contact our firm, C&D Solicitors in Malaga, and we’ll be glad to help you and guide you on this matter, always safeguarding your interests and position as buyer. We can assist you in English, Dutch, Swedish, German and French.

Author: Gustavo Calero Monereo, lawyer/CEO at C&D Solicitors, Torrox, Malaga (Andalusia)