Buying a property in Spain involves more than just the purchase price; there are additional costs, mainly taxes, that must be considered. Understanding these expenses is crucial to avoid unpleasant surprises and ensure a smooth buying process. Gilmar Off Plan provides a comprehensive guide to help you understand all the taxes you need to pay when buying a house in Spain, whether it’s new or second-hand.

What taxes are paid when buying property in Spain?

When you buy a house in Spain, the taxes vary depending on whether the property is new or second-hand. Knowing the differences between these taxes is essential to plan your budget effectively. Additionally, you must meet certain requirements to purchase a home in Spain.

VAT for new properties

Value Added Tax (VAT) is applied exclusively to new properties. This tax represents 10% of the total purchase price across most of Spain. In the Canary Islands, the equivalent is the IGIC (General Indirect Tax of the Canary Islands) at a rate of 6.5%. Additionally, social housing (VPO) has a reduced VAT rate of 4%. This means that if you purchase a new property for €200,000, you must pay €20,000 in VAT.

VAT is not limited to residential properties; it also applies to garages and storage units bought together with the property, provided they do not exceed two parking spaces.

Transfer tax (ITP) for second-hand properties

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The Transfer Tax (ITP) is applied when purchasing second-hand properties. This tax is variable, as each autonomous community sets its rate. Generally, rates range between 6% and 10%. For example, in Andalusia and Madrid, the ITP is 7%, while in Catalonia, it can reach 10%. It is important to check the applicable rate in your region, as some communities offer reduced rates for young people under 35, large families, and people with disabilities.

Calculating the ITP is simple: multiply the property’s price by the applicable rate. For example, to purchase a second-hand house priced at €150,000, if the ITP in your community is 8%, you would pay €12,000 in tax.

Stamp duty (AJD)

The Stamp Duty (Actos Jurídicos Documentados – AJD) is a tax paid when formalizing the public deed of sale. The AJD applies to both new and some second-hand properties, although it is more common in new purchases. The percentage varies between 0.5% and 1.5%, depending on the autonomous community. This tax is calculated based on the sale price and is mandatory to pay at the time of signing the deed.

It is important to note that some groups can benefit from reductions in the payment of AJD, and there are exemptions for people purchasing properties through certain social housing programs.

Differences between taxes on new and second-hand properties

The main difference between buying a new and a second-hand property lies in the taxes that must be paid. Knowing these differences can help accurately calculate the total costs associated with the purchase and decide which is the best option for your needs.

Comparison of taxes and costs when buying a house

For new properties, the predominant tax is VAT, which represents 10% of the sale price. On the other hand, the purchase of second-hand properties is subject to the ITP, with rates ranging from 6% to 10%. Although both taxes represent a percentage of the property’s value, the rate can significantly impact the total cost.

Additionally, the AJD is paid for both new and some second-hand properties, but the amount can vary depending on the transaction’s characteristics. For example, if you buy a new property on the Costa del Sol for €300,000, you would pay €30,000 in VAT. Conversely, if you purchase a second-hand home of the same value with an 8% ITP, you would pay €24,000.

Other additional costs when buying a property

In addition to the taxes payable when purchasing a property, there are other additional costs you should consider when planning your budget. These expenses include notary fees, registration, administration, and if you decide to finance the purchase, mortgage-related costs.

Notary, registration, and administration fees

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The purchase deed must be formalized before a notary, and notary fees vary based on the property’s price and the transaction’s complexity. Notarial costs usually range between €600 and €1,000.

Once the deed is formalized, the property must be registered with the Land Registry, which has an additional cost that typically ranges between €400 and €650. Hiring an administration service (gestoría) is not mandatory, but it can be useful for handling all administrative procedures, with an average cost of around €300.

Mortgage costs (optional)

If you finance the purchase with a mortgage, you must add additional costs, such as property appraisal, opening fees, and home insurance. The appraisal usually costs between €250 and €600, depending on the appraiser and the property’s location. Additionally, some banks charge opening fees ranging from 0.5% to 1% of the requested capital.

When and how are these taxes paid?

The payment of taxes for property purchases varies depending on the type of property and the autonomous community. Knowing the deadlines and procedures is key to avoiding possible penalties and extra costs.

Deadlines for paying VAT, ITP, and AJD

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VAT and AJD must be paid when signing the public deed of sale, while the ITP must be paid within 30 business days following the signing of the deed at the corresponding tax office. In case of delay in the payment of ITP, penalties and surcharges may apply.

How to pay property purchase taxes in Spain

To pay the ITP and AJD, you must submit the official forms to the tax office. Payments are usually made online through the website of the tax authority of each autonomous community, although they can also be processed at physical offices. It is recommended to hire the services of an administration service to avoid errors and ensure all documents are submitted correctly.

Tips for saving on property purchase taxes

There are ways to reduce the tax burden when buying a property in Spain, and it is essential to know all the available options to take advantage of the deductions and tax benefits that may apply. If you’re reading this, you’re probably interested in learning more about why living in Spain is a great option.

Tax benefits and deductions

Some autonomous communities offer reduced ITP rates for certain groups, such as young people under 35, large families, and people with disabilities. There may also be tax benefits if the purchase is made within social housing programs or if the property will be your primary residence.

Recommendations to avoid surprises

Before finalizing the property purchase, make sure you have all the details clear regarding the taxes and additional costs to be paid when buying a house. Having a well-planned budget that includes all these expenses will help you avoid unexpected issues. Additionally, it is always advisable to consult a tax advisor or a lawyer specializing in real estate law to ensure compliance with all legal and tax obligations.