Costs Incurred When Buying Property In Spain

Transactions in Spain, including buying property, are subject to taxes, whether  you are resident in Spain or not. It is also not impacted by whether you are an individual or incorporated with a legal entity. This is because fiscal activities such as these go toward the state budget and must therefore be paid off promptly after the deed of sale has been finalized.

Here is some information about the taxes for buying property in Spain and fees levied accordingly.

 

Secondary Properties

Buyers of secondary property have to pay Notary Fees (700-1200 euros), Solicitor Fees (around 1%), Property Registration (450-700 euros), and Property Tax or what is known as the Impuesto sobre Transmisiones Patrimoniales (ITP).

The Tax on Patrimonial Transmissions (ITP) is dependent on the location and deed price. For instance, The Basque Country has a rate of 4%, whereas Galicia and Comunidad Valenciana is 10%. The national average, however, is 8%.

If the buyer is financed by a mortgage further expenses of 0.5%-1.5% on the total mortgage liability will be incurred through another tax known as Stamp Duty (IAJDImpuesto sobre Actos Jurídicos Documentados).  Also, where there is a mortgage, apart from the fees mentioned above, Property Valuation (200-1500 euros), banking fees (1% of mortgage sum), and property and life insurance (500 euros) are incurred.

Sellers, on the other hand, have to pay the following taxes:

  • Agent’s Commission (5%-10%),
  • Capital Gains Tax (IRPF — Impuesto sobre la Renta de las Personas Físicas),
  • Energy Certificate (100-600 euros),
  • Land Appreciation Tax or Plusvalía (200 – 600 euros),
  • Council Tax (IBIImpuesto sobre Bienes Inmuebles),
  • Banking Fees,
  • An Income Tax Provision or Retención (3%) applicable only for those who are non-resident in Spain.

 

Primary Properties

If a buyer is intending to acquire a new-build property from a construction company, VAT rates (IVAImpuesto sobre el Valor Añadido) will apply. Currently, the rate in all regions in Spain is at 10% except for the Canary Islands where their VAT (known as Impuesto General Indirecto Canario – IGIC) is only 7%.

If someone is looking to buy commercial real estate or land, the IVA will cost about 21%. Stamp Duty (IAJD) is also paid by the buyer and works similarly to the tax payments for mortgages.

For sellers, similar rules apply. However, there are exemptions for foreign residents who are 65 and over and selling primary property. If this particular individual has legally been residing in Spain for at least three years or if the seller has not been paying taxes but has proof that they earn less than an annual amount of 11,200 euros, they will be free from paying Capital Gains Tax (IRPF).

If the seller plans to go back to their domicile country, a payment of 3% retention on the deal price will be required. However, the tax office can refund this amount with the following year’s declaration. To skip this tax altogether, a renta ventalicia or a life-long rent must be signed, and an amount of 240,000 Euros should be reinvested.

Legal Fees

According to Sergey Sinyugin, CEO of Virto Property, lawyers tend to charge about 1% of the total cost of the property. It is, therefore, recommended to find an expert who charges an hourly rate to save money. Attorney services may cost approximately 1500-2500 Euros. After which a Power of Attorney will need to be issued for validation.

Survey Fees

This is only required for arrangements on buying in the secondary market. Depending on the type of procedure, the service can cost between 500 euros up to several thousand.

Maintenance Taxes

Quite a few bills and taxes exist in reference to maintenance that you will need research further. Virto Property has articles going further in-depth on what would be required.

N.I.E. Application Expenses

Número de Identidad de Extranjero is a taxpayer number for foreigners in Spain and must already have been acquired before signing a contract to buy property. While a specialist may be able to handle the application process and documents, it can cost quite a bit of money. If done on your own, however, it would only cost about 10 euros.

Translation Services

While these are usually inclusive of the agency fees, it may not always be. It is imperative for you to have a translator present during contract signing. Charges may be about 100 Euros per hour which can add up pretty quickly since reading and understanding a contract can take time.

Changes with Brexit

  • Prices may become costly due to the instability and convertibility of the pound
  • Inheritance tax might become costly as payments may be charged as non-EU members for Brits.
  • An ETIAS (European Travel Information and Authorisation System) will be disbursed with this currently expected to start in 2022 for every entry to Spain.