Mortgage in Spain for German buyers

The Doppelbesteuerungsabkommen Spanien-Deutschland (Double Tax Convention signed on 3 February 2011, in force since 18 October 2012 and applied from 2013) governs how income, capital gains and wealth are taxed when you have ties to both countries.

If you remain German tax resident (you spend less than 183 days/year in Spain):

• IRNR (Spanish non-resident tax): 19% on imputed income (1.1% of the cadastral value if it was revised in the previous 10 years, 2% otherwise) for every year the home is not rented (Non-Residents’ Income Tax Law arts. 24.5 and 25.1; IRPF Law art. 85)
• If rented: 19% on net rental income; as an EU resident you can deduct expenses such as mortgage interest, IBI, community fees and repairs (art. 24.6)
• Salary for work done in Germany: taxed in Germany under the treaty
• AfA depreciation: if you rent the property, Germany taxes the Spanish rental income and credits the Spanish tax (Article 22 of the treaty); in that calculation the building is depreciated at 2% a year (3% if completed after 2022, 2.5% if completed before 1925, §7(4) EStG)
• Capital gains on sale: Spain taxes 19% and the buyer withholds 3% of the price on account (art. 25.2); Germany credits the Spanish tax paid (Anrechnungsmethode, Article 22)

If you become Spanish tax resident (>183 days/year):

• Worldwide income subject to Spanish IRPF, on the State scale plus your region’s scale
• German pensions reportable in Spain with treaty relief
• German Riester/Rürup pensions: complex treatment, consult tax advisor
• Important: file Modelo 720 if your assets abroad exceed €50,000 in any of its categories (accounts, securities, real estate)

Spekulationsfrist: Spain taxes the gain on a Spanish property whatever the holding period. Germany’s 10-year rule for private sales (§23 EStG) only decides whether Germany also taxes it; if it does, it credits the Spanish tax.