Everything you need to know to invest in the Costa Blanca as a foreigner and make the most of the opportunities in the property market in the area.

The Costa Blanca North is one of the most sought-after destinations for property investment, especially for foreign buyers looking for luxury properties in privileged surroundings such as Moraira, Jávea or Teulada. Its pleasant climate, incomparable natural environment and modern infrastructure invite you to live in the region all year round.

Investing in the Costa Blanca as a foreigner is a unique opportunity to access a growing property market with high demand and excellent prospects for profitability. However, buying a property in another country implies knowing certain legal and fiscal requirements and financing options in order to make a successful investment and avoid future problems.

In this article, we offer you a complete guide with everything you need to know: from the legal requirements for buying as a foreigner, the taxes you will have to face, the financing options available and the tax benefits you can take advantage of.

Requirements to be met when investing in the Costa Blanca as a foreigner

Buying a property in Spain as a foreigner is a simple process that does not differ too much from the buying process that a local buyer would carry out. However, there are a number of requirements to keep in mind in order to be able to carry out the operation:

• Foreigner Identification Number (NIE): This is compulsory for any legal procedures related to property, including buying, selling, opening bank accounts or paying taxes. You can apply for it at the foreigners’ offices or through a representative.

• Legal capacity: You must be of legal age and have the legal capacity to make the purchase.

• It is not necessary to reside in Spain: You can buy a property without residing in the country. Tax residency will only be relevant if you decide to live in Spain or for certain taxes.

• Opening a bank account in Spain: To manage tax payments, community fees, utilities and receive rental income, it is recommended to open a local bank account.

• Real estate advice: Having a local and specialised real estate agency is essential to help you find the ideal property, negotiate the best conditions and accompany you throughout the process. Knowledge of the local market, experience in luxury properties and personalised attention ensure that your investment is safe and efficient.

Taxes a foreigner must pay when buying and selling on the Costa Blanca

When investing on the Costa Blanca, it is important to know in advance what taxes you will have to pay, both at the time of purchase and on the sale of the property in the future. These taxes vary depending on whether the property you are buying is new or second hand and depending on the capital gain obtained. Having this information clear will allow you to calculate the real cost of the investment and better plan your profitability.

Taxes when buying on the Costa Blanca

The taxes that a foreign buyer will have to pay when purchasing a property on the Costa Blanca are as follows:

• Transfer Tax (Impuesto de Transmisiones Patrimoniales (ITP): For second hand properties, in the Valencian Community the general rate is 10% on the purchase price (11% for properties over one million euros).

• VAT and AJD (Actos Jurídicos Documentados): For new homes, you pay 10% VAT plus around 1.5% AJD.

• Notary and registry fees: Approximately an additional 1% for the public deed and registration in the Land Registry.

Once you have taken ownership of your property, you will also have to pay a number of taxes on an annual basis as a result of owning a property in Spain. We explain it all in more detail in our article What taxes a non-resident pays with a house in Moraira.

Taxes when selling on the Costa Blanca

The taxes that a foreign buyer will have to pay when purchasing a property on the Costa Blanca are as follows:

• Capital Gains Tax: 19% for residents of the EU, Iceland and Norway and 24% for sellers from outside the above countries.

• Municipal Capital Gains Tax: This is a local tax on the increase in the value of land. It varies depending on the municipality and the length of time you have owned the property.

• 3% withholding on sale: If the buyer is a tax resident in Spain and the seller is a non-resident, the buyer must withhold 3% of the sale price for the tax authorities as a payment on account.

To find out more about sales tax, you can take a look at our article Taxes for non-residents when selling a property on the Costa Blanca.

Financing options for foreigners in Spain

Although many investors buy properties for cash, Spain also offers affordable financing options for foreigners, even if they do not reside in Spain. Spanish banks are generally open to granting mortgages to non-resident buyers, albeit with certain specific conditions. Generally, financial institutions offer financing of between 50% and 70% of the appraised value of the property.

If you decide to live in Spain, the conditions improve, with access to financing of up to 80% of the appraised value and more competitive interest rates. There are also alternatives of private loans or financing from abroad. At Hispania Homes we help you find the best solution to make your investment comfortable and secure.

• You may be interested in: Here are the mortgages for second homes on the Costa Blanca.

Tax benefits for foreigners when investing on the Costa Blanca

In addition to tax obligations, investing in the Costa Blanca as a foreigner also offers important advantages and benefits that can help you optimise the profitability of your investment. Knowing these benefits will help you to plan better and take advantage of the opportunities that the Spanish system makes available to international buyers.

• Double taxation agreements: Spain has agreements with many countries to avoid double taxation, which means that taxes paid in Spain can be discounted in the investor’s country of residence, improving returns.

• Flat rate for non-residents: Non-residents are taxed at 19% on capital gains derived from the sale of a property (24% if they are from outside the EU), unlike residents who pay progressive rates of up to 28%.

• Deductible expenses: from rental income, it is possible to deduct the expenses associated with the residents’ association, maintenance, repairs, insurance and local taxes and municipal charges.

Do you want to invest on the Costa Blanca?

At Hispania Homes we help foreign investors to take advantage of all the potential that the Costa Blanca property market has to offer, either by buying properties for sale or to obtain profitability through rentals. From our real estate agency in Moraira we take care of the whole process: from locating the best buying opportunities, to the sale of the property, taking care of all the legal and fiscal aspects required by the operation.

Thanks to our knowledge of the local market and our specialisation in luxury properties, we make investing on the Costa Blanca a simple, safe and profitable process, regardless of our clients’ place of origin.

Want to know what returns you can expect? Get in touch with us.