Spanish Investment Opportunities

Making an investment in Spain is a very appealing option for many investors looking for investment opportunities in Europe. However, before investing in Spain, it is very important to know the ins and outs regarding these opportunities.

Golf property almost matches beachfront apartments as the top seller in Spain’s property boom. There are nearly 60 golf courses in Andalucía, of which 30 are on the Costa del Sol. The fine weather allows golf to be popular all year round. Those who purchase golf property as an investment usually rent their property for most of the year. Returns can be around 8% to 10%. Real estate agents or the golf complex developer will arrange to manage the rentals for a fee of around 15%. Property on new golf courses is usually purchased off-plan before construction begins. Off-plan purchasers get a good initial price, because you’re effectively financing the developer by putting money down before the property is finished. Depending on the project, you can usually expect returns of 20% to 30% on your money if you resell within a year.

Investing on Andalucia’s Alternative Coast–the Costa de la Luz

Andalucia is actually more sizeable than some countries. Most people usually think the province and the Costa del Sol are the same thing, but there’s a lot more to Andalucia than endless resorts. It’s divided into eight provinces: Malaga, Seville, Cordoba, Granada, Jaen, Almeria, Huelva, and Cádiz. Care is being taken to protect this undiscovered region, nicknamed “the Spanish Algarve” because of its proximity to the Portuguese border. A property here could be a very worthwhile investment–homes are substantially cheaper than equivalent properties on both the Costa del Sol and the Portuguese Algarve. Plus, strict planning laws mean that it will never become overbuilt. A good town for a property search in Costa de la Luz is Chiclana de la Frontera. Splendid beaches are just seven miles away, and settlements near Playa La Barrosa are some of Spain’s most architecturally charming. Small, lowrise apartments and intensely white, attached houses with neat, flowery gardens front the beach. In the pine woods beyond are low-density developments–apartments and individual bungalows, usually set around a communal swimming pool. La Barrosa’s golden sands run for five miles down to Novo Sancti Petri where there’s a golf course. Even in winter, these little resorts aren’t dead–most beachfront cafés remain open and there are plenty of people about.

Paying Your Taxes

Under Spanish law, all non-residents with assets in Spain are required to appoint a fiscal representative to carry out their tax duties. Foreign residents in Spain must file an income tax return for personal obligations and worldwide income. Income tax rates go from 15% to 45% on earnings above 45,000 euro ($54,000). If you stay more than six months per year in Spain, you are considered a tax resident even if you have not obtained a residence permit. Certain types of income (like public pensions for complete and permanent invalidity) are exempt from income tax. There are also double taxation agreements between Spain and a number of countries including the U.S. If you have already paid income tax abroad, you can deduct this from your Spanish tax bill. Spain has an annual wealth tax–the patrimonio. It’s levied on assets in Spain: property, bank accounts, cars, bonds, stocks, and shares. Non-residents are subject to wealth tax only on assets in Spain, whereas residents also pay taxes on offshore assets. For residents, the wealth tax only applies to property worth over $204,000. For non-residents, the tax is levied on all property, no matter what the value. It can be based on either cadastral value, purchase value, or the value estimated by the tax authorities–whatever is greater. The wealth tax starts at 0.2%, and goes up to a maximum of 2.5% for estates with a value above $12,840,000.

Capital Gains

Non-residents are taxed at 18%. To ensure the tax is paid, Spanish law requires that you pay 5% of the total purchase price directly to the tax agency if you’re a non-resident. So only 95% of the selling price goes into the vendor’s bank account. If the tax turns out to be less than this deposit, the balance can be reclaimed.

Learn more about investing in Spain in IL Postcards.

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