Property and State Level Income Tax Deductions in

Spain

Income Tax Deductions in Spain

There are 17 autonomous communities or regions in Spain

and each has competency to regulate tax exemptions and

deductions within it’s territory.

Income Tax Deductions in Spain

However, the central state government also regulates income

taxes.

Income Tax Deductions in Spain

Both systems work together in a complex arrangement that

means that taxpayers pay a proportion of their taxes to the

central government and the remainder to their local

government.

Income Tax Deductions in Spain

So when we refer to a tax deduction available for a particular

type of income, that this may not be the whole story.

Additional deductions, with different qualifying criteria , may

also exist, at a local level. A list of the regional deductions

currently available can be found on the main ‘Buying Property

in Spain page.

Income Tax Deductions in Spain

A number of important deductions are available to those who

pay income tax and have dealings with property in Spain.

It must be said however, that perhaps the most important one

– deductions for investment in a family home – has recently

had its ambit reduced substantially.

Investment in the Principal Private Residence

This tax deduction is still available but only for those on

incomes if less than €24,107. For those acquiring homes from

January 1st 2011, the deduction is as follows:

Principal Private Residence Mortgage Relief

For those with a net income below €17,707 the deduction is

equal to 7.5% (plus any additional deduction approved at a

regional level, if any) of any mortgage used to purchase a

principal private residence up to a maximum taxable base of

€9,040 (i.e. 7.5% of 9,040)

Principal Private Residence Mortgage Relief

The deduction is also available when opening a special bank

account (cuenta vivienda) for the purpose of saving to buy a

home, at the same rate.

Principal Private Residence Mortgage Relief

Where the net income is between €17,707 and €24,107 then

the deduction is 7.5% (plus any regional deduction, if any) of

the following amount: 9.040 – 1,4125 x (net income –

17.707,20).

Homes bought before January 1st 2011

Where the home was acquired before this date, the old

deduction of 15% up to a maximum of €9,040 applies.

Exceptions to the Maximum Income Limit

Some regional governments permit those on higher incomes to

benefit from a tax deduction (available at the regional level in

addition to the state deduction)

Deductions in the Canary Islands

The government of the Canary Islands permits the following

deductions for the purchase of homes in the region:

1.15% on tax base up to €9,015 if net income €30k - €60k

1.55% on tax base up to €9,015 if net income €12k - €30k

1.75% on tax base up to €9,015 if net income < €12k

Deductions in Valencia

The regional government in Valencia, which has responsibility

for the Alicante area, permits the following deductions on

homes purchased after January 20th 2006:

3.3% to a maximum of €4,507 for the 2 years after purchase

1.65% to a maximum of €4,507 thereafter

Deductions in Madrid

The regional government in Madrid has opted to continue the

deductions as previously was the case before the change to

the law.

Accordingly there is currently a 15% deduction up to a

maximum of €9,040 for the purchase of a home.

Deductions in Madrid

If the home is of new construction an additional 1% may be

deducted with the same limits as for the purchase of a second-

hand property.

Deductions in Castilla La Mancha

An additional 1% above the state deduction for the purchase of

a principal private residence is available in Castilla la Mancha

where the net income of the individual is below €50,000

Deductions for Modifications made to the Home

Modifications and installations made to a principal private

residence so that it is made accessible to a disabled owner of

the property, or spouse or relative living there are tax

deductible.

Deductions for Modifications made to the Home

The maximum taxable base is €12,020 per annum and the

deductible rate is 10%.

The need to make improvements for the purpose of

accessibility must be certified by the competent authority.

Income Tax Deductions for Renting a Home

If a person is renting their principal private residence, they may

make deductions in the income tax as follows:

The rate is 10.05% and applies to a maximum base of €9,015

where the income is less than €12,000 per annum

Income Tax Deductions for Renting a Home

The maximum income to qualify for the deduction is €24,020

and a sliding scale applies until €12,000.

To calculate the deduction if net income is over €12,000 and

below €24,020 the following formula is used:

9,015 – [0.75 x (Net Income - €12,000)]

Income Tax Deductions for Home Refurbishment

Taxpayers may deduct 20% of investments in property

refurbishment made up until the end of 2012.

The maximum base is €6,750 which is applicable to those on

incomes up to €33k. A sliding scale reduces this amount to

zero as the income approaches a limit of €53k.

Income Tax Deductions for Home Refurbishment

This deduction has been extended to include refurbishments

carried out on properties other than the principal private

residence, including property rented out by the taxpayer (as

long as such refurbishment does not form part of the

taxpayer’s economic activity).

Income Tax Deductions for Home Refurbishment

The maximum deduction is limited to €20k over several years

and to those refurbishments that improve accessibility,

installations such as internet or digital television or those that

improve energy efficiency and reduced water usage

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Source AEAT25