Costa Blanca's Tax Benefits for Foreign Property Owners: What things to Know

Purchasing property abroad is a dream for many, and Costa Blanca, Spain's iconic white coast, continues to attract foreign buyers with its beautiful beaches, year-round sunshine, and relaxed lifestyle. But beyond the scenic views and mild climate, Costa Blanca offers real tax advantages for international property owners. Understanding these tax benefits could make a significant difference in your return on investment and overall cost of surviving in Spain.

Whether you're purchasing a holiday home, planning for retirement, or seeking to generate rental income, here's what you need to know about the tax great things about owning property in Costa Blanca.Estate Agent Los Alcazares

Why Costa Blanca Is a Foreign Investor's Favorite

Stretching along Spain's southeastern coastline in the province of Alicante, Costa Blanca offers a mixture of bustling cities, charming villages, and tranquil beach resorts. Towns like Alicante, Benidorm, Torrevieja, and Jávea are especially well-liked by British, Dutch, and Scandinavian property buyers.

Irrespective of lifestyle perks, Spain's tax regime for non-resident property owners is surprisingly favorable—particularly in the Valencia region, where Costa Blanca is located.

Key Tax Benefits for Foreign Property Owners in Costa Blanca

1. Double Taxation Agreements (DTAs):
Spain has tax treaties with over 90 countries, like the UK, Germany, and the U.S., to avoid double taxation.This means you won't pay tax twice on your own rental income or capital gains—once in Spain and once in your home country.

2. Low Property Tax (IBI):
The annual Impuesto sobre Bienes Inmuebles (IBI) is Costa Blanca's exact carbon copy of a property tax. It's relatively low in comparison to other EU countries and is on the basis of the cadastral value, not the market price, of the property.

3. No Wealth Tax for Most Owners:
Although Spain reinstated a wealth tax, many foreign buyers in Costa Blanca are exempt due to high exemption thresholds (€700,000 per person, plus €300,000 for your primary residence). For most mid-range property owners, this tax simply doesn't apply.

4. Inheritance and Gift Tax Reductions:
The Valencia regional government offers significant reductions on inheritance and gift tax for close family members. Oftentimes, spouses and children pay little to no tax when inheriting property.

5. Tax Deductions on Rental Income:
Non-resident EU/EEA citizens who rent out their Costa Blanca property can deduct allowable expenses, such as repairs, maintenance, mortgage interest, and insurance. This significantly lowers the effective tax rate on rental income.

Tax Residency vs. Non-Residency: Know the Difference

• Non-residents (spending fewer than 183 days/year in Spain) pay a flat tax rate on rental income—currently 19% for EU/EEA residents, and 24% for non-EU citizens (like U.S. and UK nationals post-Brexit).

• Residents, on one other hand, declare worldwide income but can benefit from progressive tax rates and broader deductions.

If you're planning to remain long-term, becoming a tax resident might offer additional advantages, especially when you're retired or earning locally.

Tips to Maximize Tax Efficiency

• Work with a local tax advisor who understands regional and national laws.

• Declare your property income and expenses accurately to benefit from deductions.

• Consider joint ownership with a spouse to take advantage of dual tax allowances.

• Stay updated on post-Brexit tax implications if you're a UK citizen.

Final Thoughts

Costa Blanca is more than just a beautiful place to purchase another home—it's also a smart financial move once you understand the tax advantages available to foreign property owners.With low property taxes, tax treaties, and potential deductions, owning a property here can be both a lifestyle upgrade and a tax-savvy investment.

Whether you're buying for holidays, retirement, or rental income, Costa Blanca provides a solid foundation for enjoying the Spanish lifestyle while keeping your taxes in balance.