Taxes and expenses of the Purchase Process

The total costs and expenses of buying a property in Spain vary depending on the type of tax applicable to the acquisition. If you are buying a resale property, Transfer Tax is applied, but if you want to buy a new property, VAT + Stamp Duty come into force.

These are the taxes, costs and expenses above the property price when you buy a property in Spain:

TAXES DERIVED FROM THE ACQUISITION

Buyers of a resale property in Spain must pay Transfer Tax, and in Andalusia it is calculated on a scale of 8%-9%-10% of the purchase price (8% applicable to any amount up to 400.000 €, 9% applicable to any amount between 400.000 € and 700.000 €, and 10% applicable from 700.000 € onwards). Resale properties are those that have been sold or occupied for a certain period before the sale, and the vendor is usually a private individual.

It is important to consider that the Tax Office might claim a higher amount for the Transfer Tax if the purchase price is lower that the minimum value fixed by the Tax Authorities for the property (property´s minimum tax value). This minimum tax value amount should be checked before completion and if the purchase price is lower, the Transfer Tax should be calculated on the minimum tax value of the property.

This tax should be fully paid to the Tax Office in a period of 30 days, counted from the signature of the Tilte Deed, and therefore should not be applied or paid to any payments on account, such as the deposit or the stage payment/s at the signature of the private contract.

In this case, Stamp Duty is included in the Transfer Tax, and therefore does not have to be paid when buying a resale property.

In the event the seller of the resale property is non-resident in Spain, the buyer should withhold from the purchase price the the 3% of the price on account of the vendor´s Non-Resident Income Tax Return, as well as the Plusvalía Tax (the tax on theincrease of the value of the land from the moment the property was bought until it is sold). This tax should be paid by the vendor when selling a property.

These amounts are taken from the purchase price and paid by the buyer to the Tax Office on behalf of the vendor, and therefore do not involve an additional cost for the purchaser, but it is important to make sure they are paid in order to avoid liabilities to the new owner.

On the other hand, buyers of a new property should pay 10% VAT + 1,5% Stamp Duty, calculated on the purchase price. The VAT is a national tax and therefore is the same in all the Spanish regions (except the Canary Island), but the Stamp Duty varies depending on the autonomous community.

New properties are those that have never been occupied or sold before, and in this case the vendor is usually a developer or a bank.

The 10% VAT should be added to any amount paid to the vendor on account of the price of the property, including the stage payments before completion (deposit, private contract amount,…), whilst Stamp Duty is paid after completion, in a 30 day period from the moment the Title Deed is signed.

The 10% VAT applies for residential properties, but for plots of land or commercial assets the tax rate ascends to 21% of the purchase price. And this 21% is also applied if a certain number of properties is exceeded or not purchased in lots (i.e. the 10% VAT applies for a residential property + 2 garages + 1 sotorage room, and any other extra garage or storage room will be taxed at 21%).

NOTARY AND LAND REGISTRY FEES

The buyer usually pays the Notary expenses arising from the signature of the Title Deed, as well as the Land Registry fees related to registering the sale and new ownership.

These fees vary depending on the price of the property and the number of pages or complexity of the Title Deed, but together do not normally exceed the 1,5%-2% of the purchase price.

LEGAL FEES

It is highly recommendable to be assited by a lawyer, and each party should pay for their own legal advice. The legal fees are usually fixed in the 1% + VAT (21%) of the purchase price.

MORTGAGE COSTS

Since June 2019, these costs have been reduced for the buyer, since the bank has to pay the bank agency fees, the Notary and the Land Registry fees and the Stamp Duty applicable to the Mortgage Deed.

The buyer will only have to pay the property´s valuation (approx. 450-700 €) and the first copy of the Mortgage Deed (approx. 50-80 €). A bank opening fee might also be charged, depending on the bank.

After completion, the new owner of the property in Spain should face the ongoing costs of the property (local property tax (IBI tax), rubbish collection, community of owners, utilities home insurance policy,…). For the period the acquisition takes place, these are usually apportioned between the parties, attending to the days of ownership of the property.

Finally, the owner has to submit the taxes applicable to any owner of a property in Spain. These taxes are different for residents and non-residents, and will also vary depending on some facts: if the property is leased, if the price exceeds 700k,…

It is crucial to be well informed and have clear from the beginning the real costs and taxes involved in the acquisition.

Our full and personalized service includes the complete assistance along the purchase process, including a detailed breakdown of all the costs, taxes and expenses arising from the acquisition, as well as the description of the taxes and expenses to be paid after completion as owners of the property.

Click here to know more about the purchase process in Spain and a description of the procedure.

We do also offer a combined service for non-Europeans interested in both the assistance along the Purchase Process and the Golden Visa application procedure. Please click here to know more about the Golden Visa.

And if you are looking for the best property in Spain, please click here to know more about our listings. We are here to help you, and please don´t hesitate to contact us.