We analyze the expenses and taxes for buying a property in Spain
Buying a property in Spain can be a great choice, since it is considered one of the greatest holiday destinations on the planet.
The level of security, pleasant climate, delicious food and numerous cultural and entertainment offers make Spain a first-class destination to invest in buying a property.
It is recommended that a Spanish lawyer advise you throughout the entire purchase process.
The lawyer will ensure that the buying operation is carried out with the necessary diligence and will manage all the necessary documents to complete the process.
Although, there are some expenses to take into account in order to guarantee that it will be a smart investment. Here is a list of the most common fees involved when buying a property in Spain
Property transfer tax
If you are buying a property in Spain you will be required to pay VAT (IVA) and AJD taxes (Stamp duty). A new build is a property that is being sold for the first time. For new builds, VAT (IVA) is currently set at 10% of the purchase price. You will also be required to pay VAT if you purchase a commercial property or a plot of land. In this case, the amount of VAT payable is 21% of the purchase price.
Stamp duty (AJD) is normally 1,5 % of the purchase price. However, it could vary depending on the region where you are buying a property.
A resale property is any property that is not being sold for the first time. In this case, you will not have to pay VAT or stamp duty (AJD). Instead, you will need to pay transfer tax (ITP), which is due upon signing the contract of sale. As a general rule, transfer tax (ITP) is between 8-10% of the purchase price. However, many regions apply their own rate of tax, so you will need to check with your region to determine the exact rate.
Notary costs
Notaries are essentially public officials who play a neutral role in drafting and witnessing many types of contracts in Spain. Notary fees are set by the government according to the number of clauses in the deeds and the declared value of the property.
In general, Spanish law states that the notary costs for buying a property should be distributed by the signing parties.
Land Registry inscription fees
The surest way to protect title to a property in Spain is to get it inscribed in the register, which buyers should always check prior to committing to a property.
Spain’s Property Registry records all deeds of sale that have been notarized and inscribed in the register. As is the case with notary costs, the Land Registry cost is set by law and the amount depends on the price of the property or right to be inscribed.
Lawyer fees
A lawyer will charge you according to the service you require. It is advisable to contact a lawyer at the early stages of a sale. They will confirm their fees and will also inform you about taxes, etc.
Estate agent fees
When buying a property in Spain through an estate agent, the buyer will not have to pay any commission fees. Normally in Spain, it is the seller who pays to the estate agent. Watch out for dodgy sales by tender tactics where the estate agent tries to get fees from both the seller and buyer.
Banking fees
If you are paying for your property in Spain with a mortgage, you will need to budget for a number of additional costs. Fees depend upon the bank but is normally 1-1.5% of the loan.
IBI (Local Taxes)
IBI, or Spanish real estate tax, must be paid by whoever was the owner on 1. January of the same year in which the conveyance occurred. The purchaser will begin to pay the following year. The amount varies based on location and the value of the property.
Community Charges
For those owning community property, such as an apartment within a complex, there are maintenance and service charges to pay. Potential buyers should consider these charges before purchasing. Charges vary according to the size and quality of the complex, as well as the facilities of the property, such as lifts, swimming pool, gardens, tennis courts, etc.
Income Tax Provision for non-residents (Seller)
If the seller is not a Spanish resident they are required to pay 3% income tax provision, or retention, which goes directly to the tax office to cover any taxes resulting from the sale. However, the seller can claim for a refund if they believe that their tax liability is less than 3%.
