Tax strategies when investing in properties in Spain

Spain is less tax friendly than other countries when it comes to property investments. Taxes can heavily reduce your earnings and because of that, you need to have a tax strategy in place before you start investing.

Utilize the Spanish Compliant Investment Bond (SCIB)

A SCIB is exempt from investment growth being taxed on an arising basis, allowing you to discard investment income when calculating liability for Spain's wealth tax. This can significantly reduce your wealth tax liability.

Apply the 60% Rule

The 60% rule states that wealth tax cannot exceed 60% of your gross income. By structuring your investments properly using a SCIB, you can reduce your taxable income base and take advantage of this rule to cap your wealth tax liability at 60% of your gross income.

Take Advantage of the Special Expat Tax Regime

If you qualify as a new tax resident in Spain and haven't lived there for the past 10 years, you can opt for the "Beckham Law" regime. Under this, you are taxed as a non-resident, only paying tax on Spanish-sourced income like rental income. Foreign income and capital gains are exempt from Spanish tax for the first 6 years.

Utilize Tax-Efficient Investment Vehicles

Investing through tax-efficient vehicles like Collective Investment Institutions (CIIs) can provide tax benefits. CIIs are subject to a reduced 1% corporate tax rate in Spain.

Consider Spanish Holding Company (ETVE) Structure

If you hold foreign real estate through a Spanish holding company (ETVE), dividends and capital gains from the foreign subsidiaries can be exempt from Spanish tax under certain conditions. By carefully structuring your investments and taking advantage of available tax incentives and regimes, you can significantly reduce your tax burden when investing in Spanish properties as a foreign investor or new resident.