What taxes do I need to pay?
Generally speaking, there are two main categories of taxes you need to consider when buying a property in Spain: sales taxes and maintenance taxes.
Sales taxes are due at the time you buy or sell your property, whilst maintenance taxes are payable on an ongoing basis.
Sales taxes
Which taxes are payable depends on whether the property is a new build or a resale. There are also a number of fees due on every property purchase.
New builds
A new build is a property that is being sold for the first time. You’d normally buy this kind of property from a developer or a bank.
As a buyer, there are two taxes you’ll need to pay on new builds: VAT (called IVA in Spain) and stamp duty.
This is currently set at 10% of the purchase price, except in the Canary Islands. Here, VAT is known as IGIC (Impuesto General Indirecto Canario), and it’s 4.5% of the sale price.
You’ll also have 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 is normally 1% of the purchase price. However, it may vary in different regions, so it’s a good idea to check with the regional government. In Andalucia, for example, stamp duty is 1.5%, while in Murcia it’s 2%.
You’ll usually need to pay at least part of the VAT and stamp duty at the time you make your deposit, settling the rest when you sign the contract of sale.
Resale properties
A resale property is any property that isn’t being sold for the first time.
In this case, you won’t have to pay VAT or stamp duty. Instead, you’ll need to pay transfer tax (impuesto sobre transmisiones patrimoniales), which is due upon signing the contract of sale.
As a general rule, transfer tax is 7% of the purchase price. However, many regions apply their own rate of tax (which can be as high as 11%), so you’ll need to check with your region.
Land appreciation tax (Plusvalía)
Land appreciation tax is payable on every transfer of property, whether it’s a new build or a resale.
It’s a tax on the increase in value of a property since the last transfer of ownership, and it’s due to the municipality where the property is situated, within 30 days of the date of sale.
The tax is calculated as a percentage of the property’s cadastral value – the value given to the property by the municipal government – but it can vary quite a lot. Factors affecting it include the property’s size, whether it’s a new build or an old one, the number of years the seller has owned the land and even the municipality’s population.
Land appreciation tax is normally payable by the seller. However, it’s not unusual to negotiate its payment during a sale, and some vendors will insist the buyer should pay it directly, or at least refund it. You can confirm the cost at the municipal tax office (recaudación municipal) before you sign the contract of sale.
Capital gains
As a seller, you’ll have to pay capital gains tax on your profits from the sale. This is calculated as a percentage of the sale price.
Capital gains tax is 19% for non residents, while residents pay it on a sliding scale as follows:
- 19% on the first €6,000;
- 21% on €6,000 to €50,000; and
- 23% on €50,000 and above
If you’re a resident, however, you can apply for tax relief; provided you’ve lived in the property for at least three years before selling it.
Normally, the buyer holds 3% of the purchase price and pays part of the capital gains tax on the seller’s behalf. As a seller, you’ll then have to file a tax return and pay the remainder within one month of the sale.
Sometimes, it may turn out that you’re due a refund. Unfortunately, tax due is payable immediately, whereas you’ll have to wait at least a few months for a refund. Either way, you’ll need to obtain proof of original payment from the buyer in order to file your return. This is a form called Modelo 211.
Other fees
Strictly speaking, these aren’t taxes, they’re still due on every property purchase and they can add up. You’ll need to take them into consideration when budgeting for your purchase or setting your sale price.
Registration fees
When you purchase a property, you’ll need to register your title deed with the land registry.
The fee will vary depending on the property and the area. However, you should expect to pay between €400 and €800. A portion of the fee is due as part of your deposit, and the rest is payable on the day you sign the contract of sale.
Notarial fees
As a rule, notarial fees are paid by the buyer. You should expect to pay between 0.5% and 1% of the purchase price.
Banking fees
Many sellers will only accept a banker’s cheque issued by a Spanish bank as payment. Most banks will charge a fee to issue a banker’s cheque, often in the region of 0.3% to 0.5% of the amount.
Obviously, you’ll need to transfer money into your Spanish account, so you should also take international transfer fees and the exchange rate (if applicable) into account. Your bank should have a schedule of fees that outlines all the fees and charges involved.
If you’re paying for your property with a mortgage, you’ll need to budget for a number of additional costs.
Most banks will want to value the property before approving your mortgage. You should expect to pay about €500 for this. Very often, you’ll also have to pay an opening fee and a processing fee.
A mortgage will also increase notarial fees.
Legal fees
While it isn’t strictly necessary, it’s a very good idea to hire a good lawyer well versed in Spanish property law to act on your behalf.
Your lawyer will explain the process to you, draft contracts, carry out any background checks, prepare the relevant documentation and generally ensure that you are not being treated unfairly or illegally.
Legal fees will vary depending on the amount of work involved. We can give you the details of several independent trusted lawyers to help with this process.
Maintenance taxes
As a property owner, you’ll need to pay property ownership tax and wealth tax, whether you’re a resident or a non-resident.
If you’re a non-resident, you’ll also have to pay income tax on real or potential income generated by your property.
Property ownership tax
Property ownership tax (impuesto sobre bienes inmuebles, or IBI), is due to your local government authority.
Because it’s a local tax, it varies from area to area. Factors that are usually taken into account when calculating the tax include whether the area is urban or rural (urban areas typically have higher taxes), the building’s age, the type of property and it’s overall size.
As a general rule, IBI is about 0.3 to 0.5% of your property’s cadastral value, which is usually about 70% of your property’s real value. You can check the total amount of tax due at your local town hall.