Spanish taxation is still reasonably low, and may be less than you pay in other parts of EU community, but for peace of mind it still needs to be taken seriously before you sign on the dotted line for your new property. Costs involved need to be understood
Taxes are levied by three tiers of government: the central government, autonomous regional governments and local municipalities. Government taxes are administered by the Ministry of Economy and Taxation which is based in Madrid: Assessment and tax collection centres in the capital towns of the provinces operate a five year assessment and tax collection service.

Personal taxation: non-residents:

Non-residents are taxed at a flat rate of 24 per cent on their source of income made in Spain, for example rental income from property, income from a business and interest on funds deposited with a Spanish bank.

However, those who own a Spanish property exclusively for their own personal use and have no other source of taxable income in Spain pay a version of income tax called imputed income tax, which is calculated on the property’s cadastral values (valor catastral), or rateable value. Although they do not earn an income from the property, the Spanish authorities take the view that they nevertheless derive a benefit from owning it, and should be taxed accordingly.

In addition, non-residents are liable for wealth tax (patrimonio) on their Spanish assets, including property, and for capital gains tax should they dispose of an asset at a profit.

Personal taxation: Residents:

For residents, the Spanish tax system is quite complicated, even experts have difficulty agreeing with the tax authorities. We would, therefore, recommend obtaining the advice of a tax adviser, especially if you are self employed or having more than one source of income.

In summery, we have been advised that there are around 15 different taxes for which individuals are liable. The important ones are:

Income Tax: Payable on worldwide income if resident in Spain, or if non resident in Spain, on income arising in Spain
Business Tax: Paid by the self-employed once a year.
Capital Gains Tax: Payable on the profits made on the sale of property and other assets located in Spain.
Company Tax: Paid at a percentage of profits by partnerships and registered companies.
Wealth Tax: payable on the value of worldwide assets if resident in Spain, or if not resident in Spain, payable on the value of Spanish assets alone.
Inheritance and Gift Tax: Payable on assets situated in Spain or assets passing to a beneficiary who is Spanish resident.
Motor Vehicle Tax: Paid annually by all vehicle owners.
Offshore Company Tax: Annual tax on offshore companies that don't declare the individual owner of property in Spain or the source of investment.
Property Tax: Paid by all property owners.
Rubbish Collection: Annual tax payable by all residents and non resident property owners.
Social Security: Isn't strictly a tax but is payable by employees and the self employed.
Value Added Tax (IVA): Payable on a wide range of goods and services at varying rates.