Mortgage in Spain for Swiss buyers

The Spain-Switzerland Double Tax Convention (1966, amended by protocols of 2006 and 2011, the latter in force since 24 August 2013) prevents double taxation between both countries. For income from a Spanish property, Switzerland applies exemption with progression: it does not tax that income again but may count it to set the rate on the rest of your income (Article 23.2.a).

If you remain Swiss tax resident (183 days a year or less in Spain and your main economic interests not here):

• IRNR (Spanish non-resident tax): 24% on an imputed income of 1.1% of the cadastral value (if it was revised in the previous 10 years) or 2% otherwise — the rate for residents outside the EU/EEA
• If rented: 24% on gross rental income — expenses, including mortgage interest, are only deductible for EU/EEA residents (art. 24.6 of the Non-Residents Income Tax Act)
• Swiss salary, AHV/AVS, BVG, 3a: generally taxed in Switzerland while you live there, as the treaty provides
• Capital gains on sale: 19% in Spain, and the buyer withholds 3% of the price on account
• Swiss taxes: Switzerland has no federal wealth tax; ask your cantonal tax office how it treats a property abroad in your Steuererklärung

If you become Spanish tax resident (more than 183 days a year in Spain, or your main economic interests are here — art. 9 of the Personal Income Tax Act):

• Worldwide income subject to Spanish IRPF, at progressive rates set jointly by the State and each region
• Swiss BVG/3a benefits taxed as the treaty provides, with relief for double taxation
• Modelo 720 required if your assets abroad exceed €50,000 in any of its categories
• If you move to Spain for work, the special regime of art. 93 of the Personal Income Tax Act ("Beckham Law") may apply: 24% on up to €600,000 of income (47% above) in the year you move and the following five, if you meet its conditions

Action point: residents outside the EU/EEA pay 24% IRNR (19% for EU/EEA residents) and cannot deduct mortgage interest from rental income. If you plan to rent out the Spanish property, this materially affects your effective return — consult a Spanish tax advisor.

Your Spanish mortgage is in EUR. Your income is (probably) in CHF. Banks cover the exchange-rate risk by lending a lower percentage (Banca March publishes 60% instead of 70% with income in another currency) or discounting the income they count; ask each bank how it treats CHF income and get it in writing.

How the franc affects you: if the franc strengthens after you sign, your monthly payment costs fewer francs; if it weakens, more. Past movements don't tell you which will happen over a mortgage of 20 years or more, so check that you could still pay if the franc weakened.

Practical strategies:

• Open a EUR account in Spain and build up a cushion of several monthly payments before signing
• Compare the total cost of each CHF→EUR transfer (exchange-rate margin plus fees) between your bank and a currency-transfer specialist
• Consider a foreign-currency mortgage if a bank offers one (Bankinter lists foreign-currency mortgages for non-residents), and compare its conditions with a EUR loan
• Show pension income (AHV, BVG, 3a) already being paid, and ask the bank how it weighs it