Purchasing real estate in a province other than where you live is gaining popularity due to the increase in telecommuting. Many people are considering becoming homeowners in a location other than the one where the offices they no longer need to return to are located. However, it is important to note that although the basic purchase process is similar, there are differences in terms of taxation that need to be considered.

First of all, it is essential to take into account the use that will be given to the property, as this may influence the applicable taxes. Buying a house in Cantabria to establish it as a main residence is different from buying a property in Malaga for the purpose of holiday rentals.

1. Taxes when buying a home

In general, both for the purchase of a primary residence and a second home, the differences in the common taxes that must be paid when buying a house are determined by the type of property and the autonomous community. Some relevant taxes are presented below:

- VAT: This tax is levied on newly constructed properties. The general rate is 10% on the value of the property, but for social housing a 4% rate is applied. It should be noted that in the Canary Islands it is replaced by the Canary Islands General Indirect Tax (IGIC), which has a rate of 6.5% for the purchase of homes.

- Stamp Duty (AJD): This tax is also applied to new homes and its amount varies according to the autonomous community. For example, if you buy a house in Malaga for 200,000 euros, you will have to pay approximately 2,400 euros in concept of AJD, which represents 1.2% of the value of the property. The percentages range from 0.5% in communities such as Navarra, the Basque Country, Ceuta and Melilla, to 1.5% in most of the territories. Some autonomous communities, such as Asturias (1.2%), the Canary Islands (1%), Madrid (0.75%) and La Rioja (1%), apply lower tax rates.

- Property Transfer Tax (ITP): This tax is applied to the purchase of second-hand homes and its amount depends on the autonomous community. It varies between 4%, which is the lowest and is applied in the Basque Country, and 10% in communities such as Cantabria, Catalonia and the Valencian Community.

2. PERSONAL INCOME TAX

Taxation related to the purchase and sale of a property, whether in a province other than the province of residence or not, is not limited to the taxes paid at the time of the transaction. If the intention is to invest, it will also be reflected in the Personal Income Tax (IRPF). In general, if it is not the habitual residence and it is not rented, the property will be taxed between 1.1% and 2% depending on its cadastral value.

The situation changes if it is decided to rent the property, and there are also differences depending on whether it is a long-term or tourist rental. In the first scenario, the income obtained is considered as income from real estate capital and a reduction of up to 90% can be applied if the rental price is reduced by at least 5% in a stressed market area, according to the new Housing Law (the usual percentage is 50% (before the new regulations it was 60%).

If the property is intended for tourist rental, this reduction cannot be applied for and the income will be taxed as income from economic activities. However, the autonomous communities are in charge of determining whether or not a property is suitable for this purpose. For example, in Castilla-La Mancha, in addition to submitting a responsible declaration to the corresponding tourist agency, the dwelling must have a maximum of 12 beds, good direct ventilation to the outside and be fully equipped.

3. Wealth tax

Less well known is the wealth tax, which is levied not on income, but on assets and properties.Again, it is the autonomous communities that establish the conditions, but in general terms, the Tax Agency establishes that all taxpayers who have a tax liability or assets of more than 2 million euros must file the tax. However, the minimum exemption from this tax is set at 700,000 euros and the first 300,000 euros of the value of the main residence are not taxed. It is important to take into account that communities such as Madrid and Andalusia do not apply this tax, while others, such as Asturias, Balearic Islands or Catalonia, offer bonuses that exceed 90%.

In conclusion, if you are considering buying a house in a province other than the one where you live, it is advisable to look for local experts who can advise you on the positive and negative aspects of the operation. A local real estate agency, a "gestoría" or a lawyer specialized in real estate can be of great help.

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