- firstly, from the region where the property is purchased (each autonomy sets its own rates for many taxes);
- secondly, on the condition of the property, because new and secondary real estate are taxed differently;
- thirdly, on whether a mortgage loan is taken out.
The seller is required to pay only two taxes:
- tax on the increase in the value of urban land (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana – IIVTNU, better known as Plusvalía),
- personal income tax (Impuesto sobre la Renta de las Personas Físicas – IRPF) in case of sale of property for a profit (if the seller is a legal entity, then income tax will be calculated instead of IRPF).
In the case of a mortgage loan, the bank will pay part of the taxes – but only those related to the notarization of the mortgage agreement.
So, buying property in Spain and taxes: what should a buyer prepare for? You can find a complete guide to buying property in Spain here.
VAT when purchasing real estate in Spain
The purchase of real estate in Spain may be subject to VAT (Impuesto sobre el Valor Añadido – IVA) at a rate of 10 or 21% (with the exception of the Canary Islands, Ceuta and Melilla, where a special tax regime applies). The tax is calculated based on the value of the property indicated in the deed of sale.
21% VAT is charged if an object is purchased at the stage of construction in progress, or if the object has been completely built but has not yet been put into operation. The same rate applies to the purchase and sale of commercial real estate in Spain, as well as parking spaces and storage rooms, if the latter are not purchased at the same time as housing, or are located on the territory of another residential complex.
10% VAT is charged in the case of the purchase of new, commissioned housing, as well as in the case of the simultaneous purchase of parking spaces (maximum 2 spaces per apartment) and storage rooms.
Property transfer tax in Spain
If the purchase of real estate in Spain takes place on the secondary market, and the seller is a private person who is not required to keep VAT records, then the transaction will be subject to property transfer tax (Impuesto sobre Transmisiones Patrimoniales Onerosas – TPO).
The rate of this tax is set at the autonomy level. Catalonia and the Valencian Community currently charge 10%.
Tax in Spain on documented legal acts
Another tax imposed on real estate transactions in Spain is the tax on documented legal acts (Impuesto sobre Actos Jurídicos Documentados – AJD). The buyer pays this tax in one single case – when purchasing new real estate in Spain, when the transaction is accompanied by the accrual and payment of VAT. The tax rate is regulated at the autonomy level, as in the case of TPO. In Catalonia and the Valencian Community the rate is 1.50%.
If a resale property is purchased in Spain, AJD tax is not charged. If a mortgage loan is issued, the tax for notarization of the mortgage agreement must be paid by the bank.
Other costs when buying property in Spain
In addition to the above taxes, purchasing real estate in Spain entails additional costs associated with the transaction. These costs include: payment for notary services, fees for registering the deed of sale and mortgage agreement in the Property Register, assessment of the property before registration of the mortgage, insurance (life and real estate insurance), services of a management company.
Payment for notary services and state fees for registering property rights occurs at officially fixed rates, which, in turn, depend on the value of the object.
For example, when purchasing an object up to 100,000 €, the notary’s fee will be about 850 €, and when purchasing an object up to 250,000 € – up to 1,000 €. On average, state fees cost from 200 to 600 €. If real estate is purchased on credit, the mortgage agreement is notarized along with the deed of sale. Accordingly, notary costs increase. The notary’s fee for certifying the mortgage agreement is calculated based on the borrowed amount.
The services of a management company cost about 300 euros. An assessment of the market value of the property will cost 300-600 €. An assessment is required if a mortgage loan is taken out. This assessment is carried out by special third-party companies, which, when preparing a conclusion, take into account the characteristics of the property, its condition, the average price for similar real estate in a given area, etc.
The appraiser’s report is an important document. Some additional costs are calculated from the market value of the property indicated in it. For example, additional taxes if the property was purchased at a price below the market price, as well as insurance. Prices for basic property insurance in Spain start from 100 €.