When we are faced with making a relevant investment decision and we have to choose to invest between several investment options, whether they are real estate, financial assets, business assets, tangible or intangible assets, extreme caution must be used and valuation methods must be used that They allow us to contemplate, not only the financial profitability or return on investments, but also the fiscal impact and, above all and more so today, the effect of inflation on the valuation of real estate assets.

The effect of the same allows to know the profitability of an investment in real and not nominal terms, given that, in a scenario with high inflation, the flows generated by the assets can depreciate a lot if they are not reinvested at rates similar to the same inflation, and that today, only assets that incorporate a large volatility-risk component allow it.

Taxation is also very important to take into account, whether it is a natural person subject to personal income tax, with progressive rates in the taxable base of the savings tax base, or if the investor is taxed in the IRNR with a fixed tax rate ( normally 19%).




Well, it is clear that inflation is today the factor that most worries investors and the Central Banks of the planet.

Its impact generates scenarios of economic slowdown due to the drop in consumption, a rise in the cost of financing for economic agents in the markets and a drop in the valuations of financial assets, among other negative effects.

In Spain, as of the date this article was written, according to the Bank of Spain, general CPI inflation stood at 10.3% in August and if we compare it with the same month in 2021, inflation has increased by 10.5%!

What does this mean in monetary terms?

The returns generated by real estate in 2022, although nominally similar, due to the effect of inflation do not have the same economic value as in the previous year and therefore directly affect the real financial return of the asset ceteris paribus.



Well, every investor must take into account the following factors when making their investment decisions:

1. The inflation of the environment in which the asset is located (investing in Argentina with an inflation of 71% in July 2022 according to the Expansión newspaper is not the same as investing in Switzerland, for example).

2. The tie, effective interest rate, which we will use to update the cash flows. This must be at least similar to that of risk-free assets (10-year bonds from a solvent State) plus a risk premium, due to the "volatility" or uncertainty that these flows incorporate. If we had a fairly extensive history of the same, we could extrapolate the average of the expected cash flows with enough certainty.
The tie will also be affected by the periodicity of the collections generated by the asset (monthly, quarterly, or irregular...).

3. The tax pressure to which the investor is exposed in his particular case, while we are talking about the marginal tax rate of the tax.

4. The fiscal peculiarities that directly affect the asset (withholdings and payments on account and local taxes, such as the IBI and the garbage rate).

5. The terms for liquidation of the taxes accrued for the generation of income (the filing term for a non-resident is not the same as for a resident).




The last two points are not very relevant, so they can be simplified in the financial calculations, but the first 3 are.

It is evident that investing in an environment of high inflation and a high tax rate is not the most appropriate due to its negative impact on the final real net return, despite the fact that the asset generates high returns and profits derived from its transmission.

In Spain, a non-resident private investor has a tax rate of 19% on the net tax base (income generated by the rental minus the expenses associated with those rentals in the proportion of the days of rental with respect to the full year and minus the amortizations



At Abahana, we can assist you in the selection and purchase process among various real estate items, based on objective valuation methods that take into account your current and future personal circumstances.

This work is not insignificant and provides added value to our services, since it allows us to quantify and anticipate the effect of a decision to be made today, but whose fruits will come in the future.

As is well known, and more so in this type of investment whose amounts are so high, the more information that is available to the investor, the more success he will enjoy in his decisions.

Our Abahana tax expert,

Gabriel Díaz.