When you decide to buy a house in Spain it is important to know the necessary expenses and procedures that must be done and the costs of buying a property in Spain will generate after its acquisition:
Payments for the purchase of a property in Spain to a bank or external developer
The cost of this transaction, as well as the management, resulting from the purchase of a Spanish property that has not been sold before and that is offered for sale by a developer or bank:
VAT and Documented Legal Acts – AJD (stamp service)
These payments must be made when you buy properties in Spain that have never been occupied. They also apply to commercial properties and plots. They must be paid by the buyer and may vary in some regions, so you need to consider each case.
The VAT is a national tax that currently represents 10% of the purchase price in the case of residential properties, while a 21% must be paid if they are commercial.
This tax is valid throughout the national territory, regardless of where the Spanish property is located at, except for the Canary Islands, which have their own VAT version known as IGIC (Canary Islands General Indirect Tax, for its initials in Spanish), which is around 4.5%.
On the other hand, the stamp tax (known as AJD) that must be paid corresponds to 1% of the purchase price of a property in Spain.
Additionally, the VAT should be taken into account if you are paying a deposit before closing the sale process, and if that happens, the payment of a transfer tax is not considered.
Costs for the purchase of a resale property in Spain
If you are going to buy a Spanish property these are the costs if the property has been sold before, that is “when you buy a house from a private person.”:
VAT and Documented Legal Acts – AJD (stamp service)
Acquiring a second-hand property in Spain implies expenses that the buyer must face, such as paying the Property Transfer Tax (ITP), which depending on the corresponding Autonomous Community where the property is located at, it would mean applying a tax or other charge, or simply the ITP general rule in the country that is 7%, which is rare.
The amount of this tax will also depend “on the nature of the asset and its value” among other characteristics and must be paid considering:
• That VAT would not be paid, and the stamp tax is already included in this tax.
• If an advanced payment (deposit) is made before closing the sale, this ITP is not subject to pro rata, and only the total payment must be made at the end of the transaction.
Find out and pay the amount on time in the Autonomous Community of Andalusia with the services of our team of solicitors available in municipalities such as Nerja, Malaga, Velez-Malaga or Torrox.
Income tax return payments if a property is purchased from a non-resident citizen
If the seller of the property in Spain is not a resident, the individual buying the property (resident or non-resident) must withhold “3% of the purchase price and pay it to the tax authorities as the IRNR” (Spanish non-resident tax regime for its initials in Spanish). This amount must be paid using form model 211 and provide a copy of the payment to the non-resident (seller) so he/she completes the corresponding procedures and can deduct “the withholding of the fee to be paid resulting from the income tax return declaration.”
In this way, the non-resident individual pays the tax and the Treasury guarantees the collection of this tax, even if the non-resident (foreigner) returns to his/her homeland.
- If the money is not withheld and paid in a timely manner, “the property will be considered by the tax authorities as the asset that supports the tax obligation for the seller’s capital gains.”
- If the amount withheld exceeds the fee to be paid, the excess refund can be obtained.
- The form model 211 must be presented by the buyer for three months, starting as of the following month after the date of sale of the property.
- If the property being transferred is owned jointly by a marriage in which both spouses are non-residents, a single declaration can exceptionally be made.
Expenses that buyers of a new or second-hand property in Spain must pay
Regardless of whether the Spanish property is new or not, the buyer must consider these expenses:
Fees to be paid to the Spanish real estate agency
This amount must be paid by the seller or by the buyer if he/she hired the services of an agency to search for the property.
Although the use of the internet has influenced the Spanish real estate market, being able to bring together sellers and buyers, thus, reducing the participation of a Spanish real estate agent (who earns between 2% and 15% of the sale price of the property), many still use this figure to find properties in Spain.
Legal fees to consider
The best recommendation before you buy a property in Spain is to hire a lawyer to draft, and efficiently review, the necessary documents to expedite the procedures since this professional is up-to-date in terms of the requirements and payments requested.
Choose the best option for legal advice that offers a reasonable price and a quality service. You can contact us to get more information.
Consider the costs of buying a property in Spain with a mortgage
- Property valuation: This requirement is requested by the mortgage provider before granting the mortgage.
- Payment of the mortgage itself.
- An increase in the expenses to be paid to the Notary.
Notarial expenses in Spain
For the most part, notary expenses are paid by the buyer “and are calculated in relation to the purchase price declared in the deeds of sale.” Usually, they do not exceed 1%.
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The buyer must consider the registration fees in the Property Registry of Spain
The buyer usually makes this payment as well. The calculation is made in relation to “the purchase price declared in the deeds of sale” and corresponds to 1% depending on the property and the area where the property is located.
Other payments to consider for the purchase of properties in Spain
These transaction costs should also be considered if you buy a property in Spain:
At the time to close the purchase operation, it is wise to have the money necessary to carry out the transaction in your bank account. Therefore:
You need to have a bank account in Spain.
In case you need to transfer money from overseas, you must find out the costs of said transfer with the corresponding banks.
Once you have enough money in your account, you need to request a bank check and take it to the office of the notary to give it to the seller when the signature of the deeds is formalized.
Check with your bank what is the cost of issuance of that check.
Payment of the Municipal Capital Gains Tax
The municipal capital gains tax is a tax that the seller must pay to the corresponding municipality when a land is transferred in some way, in this case, due to a sale.
Even though this can represent a problem for the buyer if the tax is not duly paid by the seller, the issue is that there is a court order issued by the Constitutional Court (2017) that ratifies the decision to exonerate any payment of this tax and declares the unconstitutionality of the municipal measure.
Thus, the payment cannot be applied automatically in cases where there is no revaluation of the property; therefore, taxpayers who have been affected can already claim their money.
Considering also that the refund of such undue income prescribes after 4 years (starting as of the date of payment of the corresponding Municipal Capital Gain).
Costs of ownership in Spain
If you own a property in Spain, you must pay the costs for repairs, cleaning, maintenance, payment of services, etc. based on the magnitude of the property you acquire. To these rates, you need to add the payment of some taxes that must be paid by property owners in Spain:
Property Tax (IBI)
It is a local tax (required by the Municipalities) that must be paid by the owners of houses in Spain.
The amount to be paid is determined calculating the cadastral value (which is established for all real estate in each municipality that are included in a census) and applying the type of tax established by the City Council corresponding to such value (a rate that ranges from 0.4% to 1.1% of the cadastral value). Get more information about the Cadastre in Spain.
City Councils even offer the possibility of making the payment of the receipt by direct debit to be deposited in a bank account, so the payment complies with the terms set, avoiding extra charges. This term varies in each municipality between the last three or four months of the year.
Annual payment of Wealth Tax
This tax must be paid by those taxpayers whose tax base exceeds 700,000 Euros, for what is considered the price of all their assets that includes the value of the main residence (up to a maximum of 300,000 Euros).
It is worth mentioning that the calculation is made based on the net worth of the person as of December 31 of each year.
The income of this amount varies considerably from one autonomous community to another as they manage it.
Taxes that non-residents must pay
- Properties not rented
The calculation of this cost is made based on “an imputed (fictitious) income of 1.1% of the cadastral value (2% if that value has not been revised in the last 10 years) and then applying another percentage of 25% to this percentage.
If the property has been rented during part of the year, the attributed rent (1.1-2% of the cadastral value) will decrease in proportion to the number of days during which the owner has occupied the property.
- Rented properties
Non-residents who rent properties in Spain must pay the yield tax. They can also discount all the expenses arising from the property (in proportion to the period when the property has been rented): Community payments, IBI repairs, expenses for maintenance or improvement of the property, etc.
Payments to the Residents’ Association
The owner of a property in Spain must be part of the community of neighbours (owners) who share the common areas of the building or complex; thus, making all payments of the corresponding community fees for the maintenance of common areas and other expenses as agreed by a majority in a meeting of the Residents’ Association.
We invite you to read this interesting guide to buying a property in Spain from Rightmove, also their articles about Spanish property news.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
Author: Rosana Tejada
Biographical Info: Rosana Tejada Crespo is a tax advisor holding a Master’s Degree in International Taxation. She specialises in companies and freelancers, tax regulations concerning foreign employees (Beckham Law), non-resident tax, inheritance tax and Spanish income tax. She is one of the founders of Tejada Solicitors, which comprises a group of English speaking solicitors, economists and architects.