Tax advisor in Alicante for non-residents, Costa Blanca expats and Valencian Community businesses

Tax advice in Alicante and the Costa Blanca: serving Europe’s most international coastal community

The province of Alicante is home to the largest concentration of British residents anywhere in continental Europe, and one of the largest concentrations of German, Dutch, Belgian and Scandinavian residents in Spain. In municipalities like Torrevieja — where foreign residents account for nearly a third of the registered population — the local economy and social fabric are fundamentally international in character.

This demographic creates a specific tax environment: a very large number of property owners and residents with tax obligations in Spain that intersect with their home-country fiscal positions in ways that require genuinely specialist advice. BMC has built its Alicante practice around the needs of this international community, with deep expertise in the double tax treaties most relevant to Costa Blanca property owners and residents.

Non-resident property tax obligations: the Costa Blanca compliance picture

There are thousands of non-resident property owners on the Costa Blanca who are not fully compliant with their Spanish tax obligations. The most common situations we encounter include:

• Properties owned for years with no annual modelo 210 imputed income filings
• Rental income declared at the wrong tax rate (particularly post-Brexit for British owners)
• Capital gains tax on property sales that has been incorrectly calculated or not filed at all
• Wealth tax obligations for property owners above the Valencian Community threshold not identified
• Voluntary regularisation of prior-year non-filings to avoid escalating penalties

BMC manages voluntary regularisation of these situations sensitively and efficiently, bringing clients into full compliance at the lowest possible cost.

IBI: the property tax that every Alicante owner must pay

The Impuesto sobre Bienes Inmuebles (IBI) is an annual municipal tax payable by all property owners in Spain, resident and non-resident alike. It is collected by each municipality separately — Alicante city, Torrevieja, Benidorm, Jávea, Calpe, Dénia — and the rate varies by council. Unlike IRNR, which is a national tax managed through the AEAT, the IBI is a local tax with its own collection procedures. Non-resident owners who are unaware of the IBI may accumulate arrears that come to light when they try to sell the property. BMC advises on IBI verification and, where needed, resolution of arrears situations.

The post-Brexit tax position for British nationals on the Costa Blanca

Post-Brexit, British nationals who are not Spanish residents are treated as non-EU, non-EEA nationals for IRNR purposes. This creates two significant consequences compared to EU national property owners:

IRNR rate on rental income. EU and EEA residents can deduct expenses — mortgage interest, repairs, community fees, IBI — against rental income and pay 19% on net rental profit. Non-EU/EEA residents (including British nationals since 2021) pay 24% on gross rental income with no expense deductions. For a British owner earning €10,000 in annual rental income with €4,000 in deductible costs, this means paying €2,400 (24% gross) versus €1,140 (19% net) — a difference of over €1,200 per year solely attributable to Brexit.

Inheritance tax on Alicante property. The Valencian Community offers generous ISD reductions for direct-line heirs — the 99% reduction available to descending and ascending relatives under Valencia’s regional rules significantly reduces the inheritance tax burden on Spanish property. Following ECJ jurisprudence, non-EU nationals of countries that have free movement of capital agreements with the EU (which includes the UK) can access the most favourable treatment between the national framework and the regional framework. BMC navigates this complex area for British families inheriting Alicante property.

Tax planning for retiring to Alicante

The Costa Blanca is one of the most popular retirement destinations for British, German and Northern European retirees. The tax planning for retirement in Alicante covers several distinct areas:

Pension income treatment. The UK-Spain double tax treaty (2013) allocates UK government pensions (civil service, armed forces, NHS, teaching) exclusively to the UK for tax purposes — these pensions remain subject to UK income tax only and are not taxable in Spain. UK private and occupational pensions are taxable in Spain as Spanish resident income at progressive IRPF rates. The distinction between government and private pension income is frequently misapplied, resulting in either over-declaration (government pensions included in IRPF) or under-declaration (private pensions excluded).

ISA and UK investments. ISA savings vehicles, though tax-free in the UK, are not recognised as tax-exempt by Spanish tax law. Income and gains within an ISA are taxable in Spain from the moment the holder becomes a Spanish resident. Options include closing the ISA before establishing Spanish residency, continuing with the ISA and declaring Spanish tax on the internal income, or exploring whether the income can be structured to minimise effective Spanish tax through the savings income base rates.

Timing of Spanish residency. Retiring to Spain part-way through the year creates a split-year residency situation in both Spain and the UK that requires coordinated tax planning. HMRC’s statutory residence test and AEAT’s domestic residency criteria both apply, and the Spain-UK treaty tie-breaker sequence determines which country has primary taxing rights for the transitional year. BMC manages the transition year for UK nationals retiring to Alicante, coordinating with UK-based advisors to ensure no income is doubly taxed or omitted from either return.

Buying and selling property in Alicante: the tax obligations in full

Property transactions in Alicante have tax obligations at every stage. Understanding them before contracting avoids surprises at the notary.

Buying a resale property. The purchaser pays ITP at the Valencian Community rate — generally 10%, with reductions for qualifying first-home purchases and under-35 buyers. The ITP must be filed and paid to the Conselleria de Hisenda within 30 days of the deed. Failure to file on time triggers penalties of 5% of the tax (if within 3 months), 10% (3-6 months), 15% (6-12 months) and 20% (over 12 months), plus late-payment interest.

Buying a new-build property. VAT at 10% (plus AJD at 1.5%) replaces ITP for new-build properties. The VAT is paid to the developer; the AJD is filed with the Conselleria. BMC verifies which regime applies — which is particularly important in the case of properties that have had significant work done since their original construction, where the new-build versus resale classification may not be obvious.

Selling as a non-resident. As described above: 3% retention by the buyer, IRNR Modelo 210 within four months, plusvalía municipal to the local Ayuntamiento, and EPC in place before marketing. Non-residents who have declared the property correctly year-on-year are in a far stronger position with the AEAT at the point of sale — their acquisition cost and any improvements are documented. BMC maintains a complete tax history file for each non-resident client’s properties.

Voluntary regularisation of prior-year non-filing. Many non-resident property owners on the Costa Blanca have not filed annual Modelo 210 imputed income returns for some or all of their period of ownership. Voluntary regularisation before an AEAT review reduces the applicable penalty significantly: 1% per month for the first 12 months (so 12% for a one-year voluntary disclosure), 15% plus late-payment interest for disclosures beyond 12 months but within 18 months, and 20% plus late-payment interest beyond 18 months. The AEAT’s Land Registry cross-referencing means non-filers are increasingly identifiable. BMC manages voluntary regularisation programmes for Costa Blanca property owners with accumulated non-compliance.

German and Dutch nationals on the Costa Blanca: treaty specifics

The Costa Blanca has large German and Dutch resident and non-resident communities. Their treaty positions with Spain have features worth highlighting:

Germany-Spain double tax treaty. The Germany-Spain treaty (1966, updated) contains provisions on private pensions that operate similarly to the UK-Spain treaty — German private pensions and Riester-Rente are generally taxable in Spain once the recipient is resident in Spain. German Kapitallebensversicherung (life insurance policies with investment components) may be classified as investment income in Spain and taxed at savings base rates. German residents owning Spanish property pay IRNR at 19% on rental income with the right to deduct expenses applicable to EU residents.

Netherlands-Spain double tax treaty. The Netherlands-Spain treaty allocates most passive income items to the state of residence, which for non-residents with Spanish property means Spain has taxing rights on Spanish-source rental and imputed income. Dutch residents inheriting Spanish property can access the Valencian Community ISD reductions (as EU nationals with access to regional rules). Dutch national-wealth-box (box 3) deemed return on Spanish property may credit against Spanish IRNR in some circumstances — BMC maps the interaction for each client.

Alicante businesses: Corporate Income Tax and VAT specifics

For businesses established in Alicante and the Valencian Community, the standard national tax framework applies with Valencian Community-administered taxes (ITP/AJD, ISD) handled through the Conselleria de Hisenda in Alicante. Key practical points for local businesses:

AEAT’s Alicante delegation has an active tourism and hospitality sector inspection programme, given the province’s economic dependence on these activities. Cash transaction compliance (the €1,000 professional payment limit under Ley 7/2012) and documentation of seasonal employment contracts are frequent inspection areas. Businesses with significant online or platform-economy revenues also face cross-referencing of declared income against data from booking platforms and payment processors that the AEAT obtains under information exchange obligations.

BMC advises Alicante businesses on Corporate Income Tax planning with all available deductions (capitalisation reserve, equalisation reserve, R&D where applicable), VAT regime optimisation for tourism and hospitality activities, and annual compliance management before both the AEAT Alicante delegation and the Conselleria de Hisenda.