I moved with my family from Finland in April of this year for work reasons. This year I shall be considered as Spanish tax resident. I am thinking about staying in Spain indefinitely.

At present, I live in a rented property, but I am thinking about investing in a house on the Costa.

I have heard about tax reductions in personal income tax and I would like to know the tax advantages of investing in a Spanish house.

Thank you.


First of all, you are considered to be resident in Spain by virtue of having spent more than 183 days Spain this year. In addition Spanish tax law deems you to be resident because your spouse and underage children also have their usual place of residence in Spain.

With regard to investing in a property as your habitual dwelling, there is a deduction for annual payments made in respect of the acquisition of property used for usual residence. Usual residence is defined in Spanish law as a house in which you live for a period of at least three years.

The deduction base comprises the amounts paid in relation to the acquisitions of the house up to a maximum amount of 9.015,18 euros per year, including the payments made in relation to mortgage loans, insurance on the loan, VAT or Transfer Tax, urban land value increment tax (plusvalía), notary and land registry expenses. These amounts will be calculated using a different percentage depending on whether you have obtained bank financing or not.

If you have obtained self-financing, this percentage is 15 per cent of payments made. Conversely, if you are using bank financing the percentage ranges from between 25 per cent for the first 4,507.59 euros and 15 per cent for the rest (up to 9,015.18 euros), for two years after the purchase. After the first two years, these percentages oscillate between 20 per cent and 15 per cent based on the same amounts.

If you are using bank financing, 50 per cent of the house value must be paid with this financing, and the mortgage repayments during the first three years should not exceed four per cent of the amount financed.

Alternatively, while you are deciding about which property to invest in, you may deposit sums of money in a special account for home buyers, to take advantage of the above-mentioned tax benefits. The terms of such an account are that the deposits made must be destined exclusively to the purchase of your (future) first habitual residence, no withdrawals are made other than for the purpose of buying a house and that the house is purchased within four years after having opened the account and you observe the above-mentioned requirements concerning the percentage reduction of the amounts invested, length of ownership of the house and retain your status as tax resident in Spain.