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In addition to the agreed purchase price for buying a property in Spain, the transfer cost for a normal purchase will be around 10% of the purchase price without contracting supply contracts for water or electricity. These are normally set up with a resale property. Here you will find the most important costs for buying a property in Spain.
Note: this will give you some idea of the costs involved – it is intended as a general guide only. At Inmoinvestments we will guide you through your own property purchase with our customary care and attention to detail.
- Value Added Tax (VAT or IVA)
(Impuesto sobre el Valor Añadido (IVA).)
This tax is levied when buying a newbuild property or a property in Spain in the course of construction and is fixed to 7%, applicable to the official purchase sum. It is paid directly to the developer / vendor. In addition you would have to settle the 0,5% Stamp Duty. If you purchase parcels of land, commercial premises or garage spaces, the IVA rate is 16%, plus 0,5% Stamp Duty. However, if you purchase the garage with the property, the IVA is reduced to 7% (the maximum numbers of garages that can be included is two).
Transfer Tax (ITP)
Impuesto sobre Transmisiones Patrimoniales Onerosas.
When purchasing a second hand property in Spain, a transfer tax of 7% is applied to the official purchase sum. This tax is not the same as Value Added Tax, which does not apply to second hand property, neither does the 0,5% Stamp Duty tax.
Stamp Duty Tax
Impuesto sobre Actos Jurídicos Documentados (IAJD)
The stamp duty rate of 0,5% is applicable to certain types of spanish notarial and commercial documents executed in Spain or abroad if they have legal or economic effects in Spain. It is applicable with VAT when a new property, plot of land or commercial property is purchased.
Notary fees and registration fees
The Notary charges according to a fixed scale tarif by the goverment and depending on the official value of the property. Minimum charge is approx. 300 €.
Inscription in the Municipal Property Land Registry
Registro de la Propiedad similar to the notary fee.
Lawyer's fees
In case you decide to be assited by a lawyer with te purchase he will charge you for the service provided.
- The Municipal Capital Gains Tax (Plusvalía)
Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana or Impuesto Municipal sobre las Plusvalías.
In general this tax burdens the increase of value of lands between the moment of its acquisition and its sale, and is levied by the local Town Hall based on a) the particular area where the property is located; b) the surface area of the plot; c) the catastral value; d) and on the date of the previous title deed (escritura). This tax may range from a few euros to as much as hundreds of thousands of euros on larger properties with a lot of land. By the law the vendor is obliged to pay this tax, however it has become customary to negotiate this, why it is not uncommon that the purchaser settles this amount. - Mortgage costs
This varies from bank to bank and can also be negotiated. Normally there is a default fee of 2% in constitution costs or subrogation costs, 0,5% is charged with parcial or full cancelation. In addition, there would be smaller fees to cover originating from the property registry, the Notary, Stamp Duty and appraisal and the banks' study of each individual case.
Posterior costs to the purchase
- Supply contracts: Any supply contract as water or electricity is normaly set up for a second hand property. Therefore only the ownership of these contract is required. Depending on the company this could be between 15 or aprox. 50 €.
- Insurance: Buying property in Spain with a mortgage will require you to take out a Home Owners Insurance Policy and a Life Insurance policy. Even without a buying with mortgage it is highly recommended to arrange an insurance against water, fire or burgler damage.
- Local property tax (IBI)
IBI: Impuesto sobre Bienes Inmuebles
This tax is levied by the local town hall and is paid annualy. It is based on the fiscal or rateable value, the valor catastral, of the property, and takes into account the value of the land plus the value of the building, according to type, location, and usage. Upon this value, each municipal Town Hall decides on the percentage to be charged in respect of local rates. In the case of Marbella, the formula applied is 0.85% of the rateable value of the property, which is usually far less than its true market value. - Community fees: When you purchase a home in Spain there are also normally fees connected to the running of a community in which the apartment, townhouse or villa is located, for instance a gated residential complex or urbanisation or a residential zone with a shared administration. These fees depend on the area and the size of the community and covers maintenance of gardens, pools, security etc. Please also note that there is a local litter collection tax to be paid to the local Town Hall annualy.
- What is the 3% retention tax on non-residents in Spain?
When a non-resident in Spain sells a real estate situated in the Spanish territory, the purchaser of the property, whether or not resident in Spain, must withhold 3% of the purchase price and pay this amount to the Inland Revenue to cover the vendor’s liability for tax on the gain obtained on the transfer. The vendor can deduct this amount in his annual tax return from the capital gain of the sale, and if the amount withheld exceeds the tax finally payable, the excess is refundable. The tax does not apply to properties with title deeds issued previous to 31 December 1996.
- Wealth tax (patrimonio)
Impuesto sobre Patrrimonio
The Patrimonio tax is set on your assets in Spain, mainly property, bank account, car, bonds, stocks and shares. Non-residents are subject only to wealth tax on their assets in Spain, whereas residents in Spain also pay taxes on their off-shore assets, altough they are exempt from the dwelling in the tax form if it has a value of less than approx. 150.000 Euros. Non-residents are subject to Wealth Tax on any property located in Spain at the same rates as residents, and a tax return must be filed and presented every year to the Tax Authorities. The tax on urban property is based on the highest value among the catastral value, the purchase value or the value given by the Tax Authorities in an evaluation carried out for other tax reasons. This is the base value for taxation and the final taxable value is determined by the difference between this base value and the charges or liens on the property and the main debt invested in the property, if there are any. A tax scale is applied to this final value in order to determine the payable tax amount. For values of assets up to 163.848 Euros , the wealth tax is set to 0,2% depending on the location. For superior values the rate increases gradually.
Income tax (IRPF)
IRPF: Impuesto sobre Ia Renta de las Personas Físicas
Also non-residents are liable to personal income tax in Spain, on property included, as the Spanish Tax Authorities assume that the owner of the property is receiving an annual income from it. Income on property is set to 2% of the catastral or rateable value of the property and then a rate of 25% tax is applicable to the base value. This tax is filed annualy. The tax on capital gains is 35%. Non-residents must file a tax return within 30 days from the date the income is collected. This tax return can be filed monthly or quarterly in certain cases.
Capital gains tax on property
Impuesto sobre Incremento de Patrrimonio
Capital gains is due with the sale of a property and the tax is calculated as the difference between the value of the property at the time of its acquisition and the value at the time of its sale. The tax rate is 18% applied to the base value.
Disclaimer: This introduction to taxes is only orientative and we strongly recommend seeking help from professional tax counsellors when purchasing a property or acquiring any other asset in Spain, as the Spanish tax system may result quite complicated. Please also note that according to Spanish law, all non-residents with assets in Spain are required to appoint a fiscal representative to secure the carrying out of tax duties.
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