Taxes Payable – Buy a Home in Spain

Buying a home represents an important investment and without a doubt, it involves significant expenses for both the seller and the buyer.

how much tax do you pay on spanish property

If you are thinking about buying a house in Spain, specifically at La Axarquía, in municipalities such as Alarrobo, Benajarafe or Competa, you can contact us for accounting or solicitor services related to taxes associated with it. We offer more details about it in this article.

Seller

The person who sells must pay the capital gains to the Treasury (IRPF, Income Tax Return for Individuals for its acronym in Spanish), the taxes or municipal capital gains tax, and pay off the mortgage (if there is one on the house).

The payment that should be made by owners who sell a property must be declared, paying the taxes established, along with the corresponding Income Tax Return if they reside in Spain.

If they do not reside in Spanish territory, they will be subject to the Non-Resident Income Tax.

As for the cost of the municipal capital gains tax, the same will only be paid if there is profit in the sale of the house. If it is sold for less money (which is considered an equity loss) this tax should not be paid. You can find more details about this in our articles “claiming the municipal capital gains tax” and capital gains tax exemption in Spain.

Whoever sells the property must be aware if the property is free of charges referred to the IBI (Property and Real Estate Tax, for its acronym in Spanish), charges and community expenses among others.

There is another point worth mentioning, in terms of the doubts that have always arisen about the payment, particularly of the IBI, which corresponds to the seller if he/she is the owner of the house on January 1st.

An internal agreement between buyer and seller may involve a proration of the amount in which each one has been owner (holder) of the property.

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    Buyer

    The person who acquires the home must consider the VAT to begin with and the Spanish Tax on Property Transfers.

    When a house is bought new (first transfer) the VAT payment is considered based on its two variables: 10% if it is free and 4% if it belongs to the social housing system or to a special regime.

    The VAT also applies to the parking spaces that are purchased with the property (a maximum of two).

    On the other hand, the Spanish Tax on Property Transfers is paid in the case of acquiring second-hand housing (or second transfer). Some variables should be noted such as the fact that no one has ever lived in the house and a transfer to a financial institution had already been made.

    The costs for the formalities of notarized documents, the Tax on Documented Legal Acts (AJD, for its initials in Spanish), which are set by regulations and calculated based on the value of the property cannot be excluded. These taxes can be paid in fixed or variable installments. And the expenses can increase due to administrative details (extension of the deed, number of copies, etc.).

    Another important step is the registration in the Property Registry and the fees that this step implies. Likewise, the amounts are fixed by regulation and the cost is proportional to the price of the property.

    Considering time and the different places of management, it may be easier to hire the services of an administrative agency or service bureau (known as Gestoría in Spanish) to take care of everything related to this paperwork.

    If you are looking for an accountant or solicitor, you can contact us.

    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.

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    Taxes Payable - Buy a Home in Spain
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    Buying a home represents an important investment and without a doubt, it involves significant expenses for both the seller and the buyer
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    Tejada Solicitors
    Tejada Solicitors
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