As a buyer of property in Spain, there are a number of costs and taxes over and above the property price that you will have to pay. Depending on whether you are buying a new property from a developer, or a resale property from a private individual, you will either have to pay VAT & Stamp Duty, or a transfer tax. The different cases are explained below, along with the other costs and taxes that are common to both cases.
NEW BUILD FROM A DEVELOPER (OR BANK)
VAT & Stamp Duty (IVA & Actos Jurídicos Documentados – AJD)
These taxes apply for residential properties being sold for the first time (never previously occupied), or for commercial properties and plots of land. This is a national tax, so VAT is the same wherever the property is located (with the exception of the Canaries, which have their own version of VAT).
At present VAT (known as IVA in Spain) is 10% on the purchase price of residential properties (villa, apartment, etc), and 21% for commercial properties and plots of land.
The Stamp duty (known as AJD) is 1% of the price of the purchase but might go up in some regions, so be sure to check on the latest rate. Both VAT and Stamp Duty are paid by the buyer, and if any deposit is paid before completion of the sale, such deposit will be subject to VAT at the moment of payment of this deposit. In this scenario, there is no transfer tax to pay.
RESALE FROM A PRIVATE INDIVIDUAL
Transfer Tax (Impuesto sobre Transmisiones Patrimoniales – ITP)
This tax applies if the property is deemed to be a second or posterior transfer (i.e. not the first time a newly built home is bought), and is paid by the buyer. If any deposit is paid before completion of the sale it is not subject to ITP pro rata. However, the full amount of ITP still has to be paid upon completion. In this scenario, there is no VAT to pay, and stamp duty is already included in this tax.
The Transfer Tax rate is ceded to the autonomous regions, who can choose to apply the general rate or their own rate. The general (national) rule of ITP is 7%, but many of the autonomous regions have applied higher local rates. The rate you pay depends upon the autonomous region where you buy.
Income Tax Provision When Buying From Non-residents
If the seller is not a Spanish resident, the buyer has to withhold 3% of the purchase price and pay it to the tax authorities (application form 211). If this is not done the property will be considered by the tax authorities as the asset backing the capital gains tax liability of the seller. This condition is very unlikely to apply when purchasing from a developer.
COSTS THAT AFFECT BOTH NEW BUILD AND RESALE PROPERTY PURCHASES.
Estate agency fees or commissions are paid by the seller unless otherwise agreed. If the buyer uses a search agency then search fees are paid by the buyer.
Despite the ability of the internet to bring together buyers and sellers without the need for an agent most people still use agents to find property in Spain. However, you should be aware that agents charge between 2% and 10% of the sale price, depending upon the region and type of property. Unless the buyer has specifically agreed to pay the agent’s fee this cost will be built into the sale price.
You are strongly advised to hire a lawyer to help you during the buying process. Your lawyer drafts and reviews contracts on your behalf and can explain all the legal and administrative issues you face. Your lawyer should also carry out any necessary due diligence (checking ownership claim of the seller, charges on the property, permits, etc.) and arrange all the required documents to complete the process (property registration, tax payments, etc.).
A lawyer – Abogado in Spanish – will charge you according to the service you require. This will vary according to the complexity of the purchase. Many charges around 1% of the purchase price in legal fees. Be warned that some lawyers charge 1.5% or more of the sale price, which is a rip-off. Even 1% can be unreasonably high given the work that is involved in a straightforward purchase of an expensive property with no legal complications. Your best option is to try and find a good lawyer who is prepared to charge on an hourly basis. Legal fees for a purchase without any complications and charged on an hourly basis should be in the region of 1.000 to 2.500 Euros.
If you choose to buy with a mortgage then this will incur several additional costs. First, there will be the property valuation that the mortgage provider will require before granting the mortgage. This is paid for them by the buyer and can cost around 500 Euros. Then there will be the costs of the mortgage itself. This varies according to the provider, and even according to the particular branch. However, there is usually some kind of opening fee of around 1% of the value of the mortgage. Finally, a mortgage will increase the Notary expenses.
Notary expenses are nearly always paid by the buyer and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate Notary fees as being 1% of the purchase price declared in the deeds of sale. In many cases, however, Notary fees are more like 0.5% (or less) of the price declared in the deeds.
Property Registry Inscription Fees
Expenses related to inscribing the sale with the land registry are also nearly always paid by the buyer and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate 1% of the purchase price declared in the deeds, though once again it depends upon the property and the area, and the fee could be considerably lower.
Bear in mind that it may be prudent to carry out a survey of the property and that this will have a cost.
In Summary, allow for up to 15% of the purchase price in taxes and other costs.
If the buyer takes out a mortgage these costs can be somewhat higher due to an additional public deed for the mortgage and the inevitable bank charges involved. In this case transaction costs might reach between 10% and 12% of the value of the property purchased.
To pay for the property, you will more than likely need to write a banker’s cheque. In order to do that, you will need to open an account in a Spanish bank and transfer money from the bank in your country. The cost of transferring the money can go up to 0,4% of the amount transferred. The banker’s cheque will most likely cost 0,5% of its amount.