Marbella – a hotspot for foreign real estate investment
Inmaculada Pineda
by Inmaculada Pineda
1) Main tax considerations for real estate investment in Marbella
Choosing the right ownership structure
One of the first and most strategic decisions for any investor is how to structure the ownership of the property. Many investors opt for direct ownership in their personal name; this simplifies the acquisition process but may limit tax planning opportunities, particularly in areas such as inheritance or asset protection.
Alternatively, purchasing through a corporate structure – either a Spanish company or a foreign entity – can offer more flexibility, especially for investors managing multiple properties or planning long-term investment strategies.
Taxes on acquisition: VAT and transfer tax
Whether value-added tax (VAT) or transfer tax applies on the purchase of a property depends on the nature of the property and the seller. The acquisition of a newly-built property directly from a developer is subject to VAT at 10%, plus stamp duty at a rate of 1.2%. On the other hand, the purchase of a resale property is subject to transfer tax (the rate is 7% in Andalucía).
It is noteworthy that a new state complementary tax on property transfers (currently under parliamentary review) aims to impose a 100% tax on real estate acquisitions by non-EU residents, unless the transaction is subject to and not exempt from VAT. The goal is to discourage such purchases, particularly in the housing sector.
Ongoing tax obligations: income, wealth, and local taxes
If the property is rented, rental income is subject to non-resident income tax. For residents of the European Union (EU) or European Economic Area (EEA), this is taxed at 19% on net income after allowable deductions. For non-EU residents, the rate rises to 24%, and deductions are not permitted.
Even if the property is not rented, non-resident owners are taxed on a deemed rental income, calculated as a percentage of the property’s cadastral value. In addition, Spain levies a wealth tax on net assets held in the country, but for non-residents with assets in Andalucia the exempted threshold amounts to EUR 3.7 million.
Local property tax (IBI) is another recurring cost, determined by the municipal authorities and based on the cadastral value. This tax, while often modest, should not be overlooked.
Capital gains and exit strategy
The capital gain of a non-resident seller is taxed in Spain at a maximum rate of 19%. The effective tax rate may be lower depending on the provisions of the applicable double tax treaty. In addition, non-resident sellers are subject to a 3% withholding tax on the sale price at the time of transaction, which is credited against the final tax liability.
Inheritance and gift tax planning
Perhaps one of the most overlooked but critical aspects for foreign investors is inheritance tax. Spain taxes beneficiaries on inheritances, and historically non-residents have been at a disadvantage. Recent reforms and regional incentives in Andalucía have alleviated some of this disparity, offering generous reductions for close family members. Nonetheless, estate planning remains essential, especially for investors from outside the EU.
2) Main legal considerations for real estate investment in Marbella
Property acquisition process
Foreigners can freely purchase property in Spain, but they must first obtain a NIE (Número de Identificación de Extranjero), a tax identification number required for any financial transaction. The buying process typically involves signing a reservation contract, conducting a due diligence of the property, signing a private purchase contract, and completing the transaction before a notary with the granting of the deed of purchase and the payment of the remaining price. The public deed should be filed for registration at the relevant land register.
Investment by companies: real estate investment trusts (SOCIMIs)
Foreign investors may choose to channel their investment through a Spanish company or an existing foreign entity. This approach is particularly common for large portfolios or rental income-focused strategies.
There are three possible legal structures:
Sociedad Limitada (SL): This is the most common structure for small and medium real estate investments.
Sociedad Anónima (SA): Suitable for larger operations and capital raising.
Sociedades Anónimas Cotizadas de Inversión Inmobiliaria (SOCIMI): SOCIMIs are the Spanish equivalent of real estate investment trusts (REITs). A SOCIMI is a special type of public company with tax benefits – they are taxed at a 0% corporate income tax (CIT) rate, provided they meet certain requirements. SOCIMIs are structured as public limited companies – sociedad anónima (SAs) – and are subject to strict governance and reporting regulations, offering a high degree of transparency and accountability to investors.
Conclusion
Marbella offers strong potential for real estate investment, but success depends on more than just choosing the right property. Tax and legal complexities require careful planning. With the right legal and tax advice from the outset, investors can navigate the regulatory landscape, optimise returns, and ensure their investment is both secure and compliant.
XLNC member firm B Law & TaxMadrid, SpainT: +34 917 817 194
B Law & Tax is a highly specialised legal boutique providing legal and tax advisory services, both nationally and internationally. Besides others, they provide international tax advisory for companies, guidance for high-net-worth individuals, legal and tax advice for family businesses, and assistance in the field of expatriation.
Inmaculada Pineda is a Managing Partner at B Law & Tax and joined the firm in 2007, becoming partner in 2017. She advises high-net-worth individuals on tax and estate planning and has broad experience in tax structuring for real estate and cross-border investments. Contact Inmaculada.
