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Direct access to Spanish property without an estate agent.
There are several taxes and costs involved when buying a property in Spain, as it makes a difference if you buy a new property from the developer or a resale we will explain both.
New property from a developer:
VAT, (IVA in Spanish), this tax is applicable if the property is sold for the first time by a property developer. VAT is 7% of the purchase price in case it concerns residential property such as apartments, villas, etc and 16% in case it concerns plots of land without a building and commercial premises. Deposits and any other payments made prior to completion are subject to VAT. The buyer pays this tax.
Stamp duty, (AJDin Spanish) is 1% of the purchase price. The buyer pays this tax.
Resale property:
Transfer Tax (ITP in Spanish), this tax has to be paid when buying a property that has already been sold before and therefore is not from the developer. The tax is 6% or 7% pending on the Spanish Autonomous Region where the property is bought. This tax is to be paid by the buyer. The tax has to be paid in once and full on completion.
Costs for both resales and new developments:
Agency fees:
Unless otherwise agreed the estate agent commission is to be paid by the seller. Only if the buyer uses a search agent the buyer must pay those fees. Usually the commission of the estate agent is built in the sales price.
Legal Fees:
However you are not obliged to use a lawyer we strongly advise you to hire one. Your lawyer will look after your interests and can explain and guide you through the whole buying process. A lawyer usually charges 1% of the purchase price but make sure to negotiate if you buy a more expensive property as the work involved stays the same.
Mortgage costs:
When you want to finance your purchase with a mortgage on your property in Spain you will come across several extra costs. There is the valuation which your mortgage provider will require before approving the mortgage. This is to be paid for by the buyer and can costs between € 250 and € 500. Secondly there are the costs of the mortgage itself. They vary by mortgage provider and other financial products you will buy with that same provider but usually there is an opening fee of 1% of the amount of the mortgage. At last a mortgage will increase the notary expenses.
Notary Expenses:
These expenses are usually paid for by the buyer and are based upon the purchase price declared in the title deeds. If you take 1% of the purchase price you will be on the safe side as it can end up going as low as 0,5%.
Property Registry Inscription Fees:
These expenses are also paid for by the buyer and are also related to the declare purchase price in the title deeds. If you take 1% you will be on the safe side and pending upon the type of property and the area it can be considerably lower.
Other Costs:
It might be prudent, pending on the type of property you plan to buy, to carry out a survey of the property, this too will have a cost
Adding everything up, take 10% of the purchase price in taxes and costs if you do not take on a mortgage. If you do take out a mortgage you should add another 2% so the total than would be about 12%.
Costs of owning property in Spain.
Besides the standard costs of owning a property such as maintenance, cleaning, repairs, utility, etc there are a few taxes and fees that have to be paid for by the owner.
Property Ownership Tax (IBI in Spanish):
The owner, being a Spanish resident or not, has to pay this local tax. It is calculated on the basis of an administrative value (valor catastral) which usually is (substantially) lower than the actual market price. The rate varies from 0,4% til1,1% depending in which region and area the property is located.
Annual Wealth Tax (Impuesto Sobre Patrimonio): (there is talk that this tax might be cancelled starting 2008)
Also independent of being a Spanish resident or not the owner has to pay the wealth tax on the net wealth on the end of the year. Non residents only have to pay this tax on their assets that are actually located in Spain. The tax rate varies between 0.2 and 2.5%.
Personal Income Tax (IRNR):
If you are non resident and only own a property you pay income tax based upon the value of the property. This is a fixed rate of 25% of 2% of the valor catastral of the property.
If you as non resident do rent the property out you usually have to pay a flat rate of 25% of the gross income you earn from renting the property out.
If you are a Spanish resident you will have to pay income tax based upon your total annual income of which rent can be a part of. The tax rate depends on the level of income.
Community Fees:
If you have a property that is part of a development or have communal zones with other property owners you are by law obliged to be a member of the community of owners (Comunidad de Propietarios). You will have to pay for the use of common areas and services the community wants. Each year their must be general meeting where the budget must be presented and approved by the owners
Insurance:
Household insurance will depend on the type of property and the amount that has to be insured.
Costs to bear in mind when selling a property in Spain:
Local Capital Gains Tax (Plusvalia):
This tax is a local capital gains tax and that applies to the increase of the value of the land upon which the property stands. The amount depends on how long the seller has owned the property. This tax is usually paid for by the seller.
Capital gains tax:
A Spanish property which is sold will be charged capital gains tax at 18% of the gains, with a 3% withholding provision of the purchase price if the seller is non resident.
Costs involved when buying a property in Spain.