Property tax in Spain and other expenses you should be aware of

There are many things to consider when purchasing a property in Spain including its proximity to your favourite restaurants, beaches and other leisure facilities. However, another important consideration should be how property tax in Spain and other associated costs affect the final price. This article is here to help give you a guideline on what costs you can expect when purchasing your dream Spanish home.

However, we would like to remind you that taxes in Spain can be complicated and you could be subject to fines or penalties if you miss a deadline or don’t do your taxes properly. Advisably, you should seek fiscal advice from an expert to avoid possible complications.

What are the kinds of property tax in Spain?

All properties involved in a sale are subject to property tax. Somebody buying a new-build home will have to pay both VAT and stamp duty. Homes that are being resold are subject to a transfer tax. In Spanish, this is called ‘Impuesto sobre Transmisiones Patrimoniales’, or ITP for short.

How much does VAT and Stamp Duty cost?

The standard rate of VAT (IVA) in Spain is 21%. However, for some purchases including property, it is reduced to 10%. This VAT only applies to residential new-build properties being sold for the first time and is a national tax. Because it is national, the amount is the same everywhere in the country with the exception of the Canary Islands. Stamp duty varies regionally. For instance, it is 1.5% in the Valencia region. Therefore, you should check your local municipal government for precise details of the stamp duty amount where you are going to purchase a property.

What is the transfer tax?

Transfer tax applies to the purchase of homes that are re-sales. Like stamp duty, there are regional variations so check your local authority for the most accurate and up-to-date figures. For example, in Valencia, you can expect to pay 10%. In the Murcia region, however, transfer tax is 8% of the sale price. In Andalucia, it differs further. The government charge properties with a value of €400,000 and below 8%. Properties valued between €400,001 and €700,000 are charged 9% transfer tax and anything above that is charged a maximum of 10%. 

Other external costs 

Many of the usual costs associated with moving are renovating and decorating, buying new furniture and the removals service. There are, however, other costs added to these and the taxes described above for which you need to be ready.

We strongly recommend that you hire the service of an independent legal adviser who can help you with the purchase process and the management of your taxes. Expert legal advice helps the process go more smoothly and avoids common pitfalls. 

The purchase of a new property in Spain will also be subject to notary, land registry and legal fees.

If you apply for a mortgage to make the purchase, then the bank you choose will charge costs and interest that will add to the cost of the purchase. The cost depends on your personal circumstances and the bank that you choose. So, check the associated costs carefully before signing anything. 

Costs can vary; keep researching

As you have seen, costs may vary considerably from region to region. Therefore, it is important that you check with local authorities about taxation costs. It is also important to get a variety of quotes for legal advisors and different banks before making any decisions. Despite these variances, you should expect to add between 12% and 14% (including the tax) of extra expenses beyond the title deed price. Your ideal property in Spain is still within reach so please do not hesitate to get in contact with us at Ábaco Advisers for any information about the process of buying a house in Spain or the management of Spanish taxes.