Guide to taxes required when buying a house in Spain

Have you been renting house for a long time and want to have your own home in Spain? Do you want to seize the opportunity and buy a house during the pandemic? This article today will inform you with all the taxes you need to consider when buying a house in Spain.

1. Taxes needed to be paid at House Buying Stage

• Stamp Duty (AJD)-paid when new houses are traded

The stamp duty rate is 1%~2% of the total house price (The tax may fluctuate depending on the different autonomous).

• Value-Added Tax (IVA)-paid at the time of new house transaction  

A 10% value-added tax of the house price must be paid in the new housing transaction. For example, if the house is worth 200,000 euros, you will have to pay those 200,000 euros plus 20,000 euros (10% x 200,000 euros) of VAT. You do not have to do any paperwork regarding the payment of the tax since it will be the seller who does the paperwork of that tax in the Treasury.

(This picture shows the tax of AJD and IVA in different regions of Spain)

• Transfer Tax (ITP)-paid when the second-hand house is traded     

When you buy a second-hand home, the operation does not carry VAT, but it is not tax-free. This is where the Onerous Asset Transfer Tax, known as TPO or ITP, comes into effect.

In this case, you are the one who is obliged to prepare and present the tax paperwork. It is an extra cost not included in the price, similar to when we talk about VAT before.

The transfer tax of 6%-10% of the house price This tax is paid after signing the public deed (the total amount). This is important to know as all the deposits that are paid before the end of the sale won’t include the corresponding prorated ITP percentage. If you are paying property tax you won’t be paying extra stamp duty (AJD). That is because property transfer tax contains the AJD tax within. 

(This picture shows the ITP tax value of each region in Spain)

• Land registry fees

The Land Registry (Registro de la Propiedad) officially records the ownership of the property in your name once the purchase has been completed. Real estate registration fee is about 0.1%~2% of the total house price, depending on whether a mortgage is involved. This seemingly simple note of registration requires the status check of the property, which would help to detect if the property has hidden vices.

• Notary fees

The notary charges for preparing the title deeds for the sale and witnessing the signature of the deeds by both parties. The amount of this tax may depend on several factors:

1) The agreed price of the property

2) If there is sany mortgage

3) The number of pages/sections the contract has

4) How many parties interfere in the transaction

5) The notary itself, as some offer lower rates than others

• Mortgage costs and bank charges

If the buyer needs to apply for a loan to purchase a house, the bank will require an initial property valuation, the price of which is about 500 euros, depending on the type of property to be evaluated and other decisions. Then you should also take into account the specific mortage costs (interest payment) you agree with the bank.

• Estate agent costs or legal expenses

Usually, expats will search for help of estate agents or lawyers. You should also consider these costs according to your specific case.

2. Taxes to be paid at Home Ownership Stage

• Real estate tax (IBI)

The tax rate is 0.4%~1.10% of the total house price (net value). (The tax rate fluctuates according to the municipal value of each city)

• Non-residential real estate tax
  • If you own a Spanish real estate but are not living in Spain, you are required to pay a non-resident tax of approximately 2% of the total house price. The amount will be indicated in the real estate tax bill. (IRNR)
  • If you are renting out a house, you need to pay personal income tax at 18-24% of the rental income. (IRPF)

• Property management fees

The property management fee varies according to the house type and the difference of the real estate purchased by the customer. The property management fee for ordinary residential buildings and elevator rooms with independent residential buildings ranges from 40 to 200 euros per month.

• Urban garbage tax

According to different regions, the urban garbage tax can vary from 60 to 190 Euros per year.

Finally, we want to sugget you to consider buying a housing insurance and let Adeslas Home Insurance protect you and your home! Adeslas has the highest market share (31%) and the widest coverage in Spain, with a customer satisfaction rate of more than 95%. It has been continuously rated as the most trusted insurance company in Spain and the first choice for Spanish families.

References:

[1]Los gastos e impuestos por la compra de una vivienda en 2021... con o sin hipoteca. (2021). Retrieved 20 July 2021, from https://www.idealista.com/news/finanzas/hipotecas/2017/09/20/748073-los-gastos-e-impuestos-que-debes-afrontar-al-comprar-una-vivienda-tras-los-cambios-mas

[2]BOE.es - BOE-A-2004-4527 Real Decreto Legislativo 5/2004, de 5 de marzo, por el que se aprueba el texto refundido de la Ley del Impuesto sobre la Renta de no Residentes. (2021). Retrieved 20 July 2021, from https://www.boe.es/buscar/act.php?id=BOE-A-2004-4527

[3]Taxation via Value Added Tax, or ITP and AJD?- Tax Agency. (2021). Retrieved 20 July 2021, from https://www.agenciatributaria.es/AEAT.internet/en_gb/Inicio/_Segmentos_/Empresas_y_profesionales/Empresas/IVA/_Tributacion_por_IVA_o_por_Transmisiones_Patrimoniales_/_Tributacion_por_IVA_o_por_ITP_y_AJD_.shtml

Our contents will be updated according to the most recent legislation. Last update: 24/08/2021