Buying a property in Spain is subject to specific costs as well as taxes. In Spain, taxes apply which are comparable to property transfer tax and the yearly real estate tax. The tax rate is dependent on different factors. For example, for resale properties a different tax rate needs to be applied than for newly built properties. The place of permanent residency also has impact on the tax rate. People with a permanent residence in Spain have to pay different tax amounts than people who, for example, live in the Netherlands.
Below you will find an overview of the most important expenses and taxes.
As mentioned above taxation depends on whether you buy a resale property or a newly built property. When buying a resale property, you have to pay property transfer tax, so called Impuesto sobre Transmisiones Patrimoniales (ITP). The standard tax rate is 10% of the property value described in the title deeds. ITP is the biggest expense that comes with investing in Spanish real estate.
If you buy a newly built property of which you will become the first owner, you don't have to pay ITP. In this case, VAT is applicable. VAT is called IVA in Spain: Impuesto sobre el valor añadido. The IVA tax rates is also 10% of the property value.*
Next to IVA, buying a newly built property is subject to AJD: Impuesto sobre Actos Juridicos Documentados. The tax rate is between 0,5% and 1,5% but may vary by province and even by municipality.
Property tax, taxation based on the value of the property, occurs with resale properties as well as newly built properties. This tax, Impuestos sobre Bienes Inmuebles (IBI), has to be paid every year and depends on the value of the property. Tax rates vary between 0,3% to 0,9%.
Finally, a mortgage tax applies when financing your property with a Spanish mortgage. The tax rate will be about 1% of the total mortgage amount.
If you decide to finance your Spanish property with a Spanish mortgage you have to pay a bank commission which is around 1%. In addition, there will be a valuation on request of the bank. This will cost between EUR 250 and EUR 500. Note: this valuation always takes place, regardless whether the property already has been valued or not.
Finally, you can opt for a life insurance. In this case, you can feel comfortable about your relatives not having a heritance consisting of real estate that comes with debts. This insurance ensures that the outstanding debts with respect to your property will be paid in case of decease. The life insurance is included in some mortgages but needs to be closed separately with other mortgages.
The notary charges for his services when signing the title of deeds. This charge will be between 0,5% and 1% of the property's value. You also have to pay for registering your ownership at the Spanish land register. The registration is subject to a fee between 0,3% and 0,7% of the property's value.
In summary: many of these taxes and expenses deal with dependencies which makes it difficult to name an exact amount for these additional costs. In general, the additional costs and expenses will be between 12% and 14% of the purchase price of the property.
* In some cases the high IVA rate of 21% has to be paid. These are exceptions. We will inform you when this rate applies to your property.