Costs of buying property in Spain

As a buyer of property in Spain there are a number of costs and taxes over and above the property price that you will have to pay. Depending upon whether you are buying a new property from a developer, or a resale property from a private individual, you will either have to pay VAT & Stamp Duty, or a transfer tax. The different cases are explained below, along with the other costs and taxes that are common to both cases.
In Summary, allow for up to 10% of the purchase price in taxes and other costs.

New build from a developer
VAT & Stamp Duty (IVA & Actos Jurídicos Documentados - AJD)

These taxes apply if the property is being sold for the first time, and the seller is a property developer. The VAT (known as IVA in Spain) is 7% on the price of the purchase in the case of built residential property (villa, apartment, etc), and 16% in the case of plots of land (without built property) and commercial premises. The Stamp duty (known as AJD) is fixed at 1% of the price of the purchase. Both VAT and Stamp Duty are paid by the buyer, and if any deposit is paid before completion of the sale, such deposit will be subject to VAT at the moment of payment of this deposit. In this scenario there is no transfer tax to pay.

Resale from a private individual
Transfer Tax (Impuesto sobre Transmisiones Patrimoniales - ITP)

This tax applies if the property is deemed to be a second or posterior transfer. The Transfer Tax is 6% or 7% on the price of the purchase, depending on the Spanish Autonomous Region in which the property is located. The transfer tax is paid by the buyer. If any deposit is paid before completion of the sale it is not subject to the transfer tax. However the full amount of the transfer tax still has to be paid upon completion. In this scenario there is no VAT to pay, and stamp duty is already included in this tax.

Income Tax Provision When Buying From Non-residents

If the seller is not a Spanish resident, the buyer has to withhold 3% of the purchase price and pay it to the tax authorities (application form 211). If this is not done the property will be considered by the tax authorities as the asset backing the capital gains tax liability of the seller. This condition is very unlikely to apply when purchasing from a developer.

Legal Fees

You are strongly advised to hire a lawyer to help you during the buying process. Your lawyer will do the following on your behalf: Click here to sea the conveyancing process.

A lawyer - Abogado in Spanish - will charge you according to the service you require. This will vary according to the complexity of the purchase. Many charge around 1% of the purchase price in legal fees. Be warned that some lawyers charge 1.5% or more.

Notary Expenses

Notary expenses are nearly always paid by the buyer and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate Notary fees as being 1% of the purchase price declared in the deeds of sale. In many cases however Notary fees are more like 0.5% (or less) of the price declared in the deeds.

Property Registry Inscription Fees

Expenses related to inscribing the sale with the land registry are also nearly always paid by the buyer, and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate 1% of the purchase price declared in the deeds, though once again it depends upon the property and the area, and the fee could be considerably lower.

Other Costs

Bear in mind that it may be prudent to carry out a survey of the property and that this will have a cost.

If the buyer takes out a mortgage these costs can be somewhat higher due to an additional public deed for the mortgage and the inevitable bank charges involved. In this case transaction costs might reach between 10% and 12% of the value of the property purchased.

Costs of owning property in Spain

There will of course be costs associated with owning a property in Spain. Some of these will be maintenance costs, such as cleaning, repairing, reforming, utility bills, rubbish collection, and so on. These will be determined by the size and type of the property you buy. Obviously a large villa with a garden and pool will require much more effort and cost to maintain than a small apartment. For cleaning a figure of 10 Euros an hour is fairly typical throughout Spain.

Apart from the general maintenance costs referred to above, there are a number of costs in the form of taxes and fees that property owners in Spain face.

Property Ownership Tax (Impuesto Sobre Bienes Inmuebles - IBI)

A local tax on the ownership of property in Spain, irrespective of whether the owner is a resident or not. Calculated on the basis of the valor catastral (an administrative value that is usually lower than the market value, sometimes considerably so) set by the town hall the tax rate goes from 0.4% - 1.1% of the valor catastral depending on the Spanish region.

Annual Wealth Tax (Impuesto Sobre Patrimonio)

Both residents and non-residents have to pay an annual wealth tax on the net wealth they own on 31st December of each year. For non-residents this tax only applies to assets located in Spain. Non-residents who only own property in Spain (and no other types of assets) can expect to pay a wealth tax based on the value of the Escritura Publica or the valor catastral, or a value assigned by the tax administration for the purposes of other taxes - whichever being highest. The tax rate varies between 0.2 and 2.5%.

Personal Income Tax (Impuesto sobre la Renta de No Residentes - IRNR)

Non-residents who own property in Spain have to pay an annual income tax that varies according to whether the property is rented out or not.
Non-resident property owners who do not rent out their property and who do not have any other source of income in Spain pay income tax based on the value of their property. The tax rate is fixed as 25% of 2% of the valor catastral of the property.
If non-residents rent out their property and receive an income in exchange, they are obliged by law to declare this income and pay taxes on it. The taxable base and the tax rate will be determined by the laws as they apply to each person's particular circumstances (taking into account the double taxation treaty - if any - between Spain and the country of origin of the non-resident). In many cases non-residents simply pay a flat rate of 25% of the gross income they earn from their property in Spain.
Residents in Spain will have to pay the income tax based on their income earned during the year. The tax rate depends on the level of income.

Community Fees
Owners of property that is part of any development, building, or complex in which common zones are shared with other owners are by law obliged to be members of the community of owners, know as the Comunidad de Propietarios. This will entail paying community fees for the upkeep of the common areas, and any other services that the community vote for. The fees will vary according to the magnitude of the common areas, the costs of maintaining them, and the services that the community vote for. A budget for annual community expenses is approved by majority vote of all owners (or representatives) who are present at the annual general meeting of the Comunidad de Propietarios.

Insurance
Household insurance will vary according to the circumstances of the owner and the type of property. However it should be born in mind as a cost that all property owners will face.

NOTE: Costs to bear in mind when selling a property in Spain.

Plusvalia
A special reference should be made to the local capital gains tax - known as Plusvalía. This is a local / municipal tax that only applies to the increase in value of the land upon which urban properties are built, and that is levied at the time of transfer of such properties. It is calculated on the basis of the valor catastral (an administrative value that is usually lower than the market value, sometimes considerably so) of the property. The amount to be paid will depend on how long the seller has owned the property: the longer the period of time during which the seller has owned the property, the higher the amount of tax.
This tax should be paid by the seller.

Capital gains tax
Spanish property sold by a non-resident owner will be charged capital gains tax at 18%, with a 3% withholding provision.

Related  Information
IVA
Mortgage