Buying property in Spain costs

• Understanding the cost of homeownership in Spain

• Taxes on secondary real estate

• Taxes on purchasing new construction

• Property tax

• Land value increment tax (Plusvalía)

• Property registration fee

• Notarial expenses

• Banking commissions

• Legal costs and fees

• Agency or realtor commissions

• Other hidden and additional expenses

• How will the Brexit process affect expenses?

• Final calculations

1. Explaining the real cost of buying property in Spain

When buying property in Spain, you are making a transaction of a fiscal nature and, accordingly, are obligated to pay certain taxes to the state budget.

When purchasing property in Spain, both individuals and legal entities, residents and non-residents of the country are subject to taxation. Taxes in Spain are paid by both parties: the seller and the buyer.

At this stage, everyone in Spain is equal — local residents and foreigners, residents and non-residents pay the same taxes. They must be paid immediately after concluding the purchase-sale agreement. Without paying state fees, the transaction cannot be registered.

The tax rate depends on whether the property is commercial or residential, new construction or “secondary housing,” as well as the region where the property is located.

Before deciding to buy property in Spain, calculate how much it will cost to maintain it. In addition to utility costs, you are obligated to pay annual taxes.

What taxes must you pay?

On the secondary market:

Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales — ITP).

On the primary market:

Value Added Tax (IVA, Impuesto sobre Valor Añadido).

These are only the main, largest state taxes when buying property in Spain. In addition to them, you will pay stamp duty (in case of new construction), registration fee, notarial expenses. This will cost approximately 2-4% of the property value. If you take a mortgage, additional expenses will increase by another couple of percent.

The property value that you see in sale advertisements never includes taxes. Accordingly, boldly add 8-15% of the object’s value to the price — and you’ll get the sum of your total expenses.

Overall, the Basque Country has the lowest expenses (approximately 8% of the object’s value), Madrid, the Canary Islands, La Rioja and Navarre are in the middle of the table (the percentage usually doesn’t exceed 10%), while Catalonia, Galicia and the Valencian Community are at the top of the ranking (expenses can reach 15%), having higher Property Transfer Tax (ITP) and stamp duty (IAJD) than other regions.

As for the seller, they pay the following taxes: municipal tax Plusvalía (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana, i.e., land value increment tax) and IRPF (Impuesto sobre beneficios, or income tax).

2. Taxes on secondary real estate

Property Transfer Tax (ITP)

El Impuesto de Transmisiones Patrimoniales — its size depends on the region; the national average is 8%.

This tax is paid within a month from the moment of signing the purchase-sale agreement. Confirmation of tax payment is necessary for registering the property purchase-sale transaction in the corresponding property registry.

Property Transfer Tax (ITP) is a tax that applies to the sale of secondary housing and depends on two factors: the amount indicated in the deed and the location.

Depending on the autonomous community, the rate ranges from 4% to 10%.

The Basque Country has the lowest rate (4%), followed by Navarre, Madrid and the autonomous cities of Ceuta and Melilla (6%). In the Canary Islands, the usual rate is 6.5%, in La Rioja — 7%. In Andalusia, Extremadura, Aragon, Asturias, the Balearic Islands, Murcia, Castile and León, 8% applies, in Castile — La Mancha the rate increases to 9%. However, the regions with the highest ITP are Catalonia, Cantabria, Galicia and the Valencian Community (10%).

If the housing purchase is financed by a mortgage, stamp duty (IAJD) is also paid. It ranges from 0.5% to 1.5% of the total mortgage obligation amount, not the loan amount.

Andalusia, Aragon, Catalonia, the Valencian Community, Galicia, Castile — La Mancha and Murcia apply 1.5% — twice as much as Madrid (0.75%) and three times more than Navarre and autonomous cities (0.5%).

Taxes on purchasing secondary real estate

3. Taxes on purchasing new construction

VAT rates (IVA) in Spain

Paid by the buyer only when purchasing new housing from a construction company.

In recent years, the VAT rate on purchasing new property in Spain has changed repeatedly: it decreased, increased and decreased again. For properties in all regions of Spain, the current IVA (Impuesto sobre el Valor Añadido) rate is the same and amounts to 10%. The exception is the Canary Islands, where VAT is called Impuesto General Indirecto Canario (IGIC) and amounts to 7%. When purchasing land or commercial property, IVA will be higher — 21%.

The tax is paid immediately upon signing the deed, since it is the seller who transfers these funds to the tax authorities.

Stamp Duty (IAJD)

This purchase tax is very similar to the one applied to mortgages. And again, Andalusia, Aragon, Catalonia, the Valencian Community, Galicia, Castile — La Mancha and Murcia lead the regional table with a 1.5% rate — twice as much as Madrid (0.75%) and three times more than Navarre and autonomous cities (0.5%). The Canary Islands are again an exception: stamp duty on purchases is higher than on mortgages — 1% versus 0.75% for loans.

Taxes on purchasing new property

4. Property tax

The tax amount depends on the object’s location, since provinces have their own tax rates. Overall, when purchasing new or secondary property, the following taxes are paid:

Summary tax table

5. Land value increment tax (Plusvalía)

Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana, or municipal tax Plusvalía, is usually paid by the seller. It is levied on the increase in land value under a residential building from the moment of its purchase to sale. The tax amount is determined by many factors: for example, the period of ownership by the last owner, the municipality to which the housing belongs, etc. Since January 2015, significant changes have been made to the tax calculation procedure toward an increase.

6. Property registration fees

Paid by the buyer and related to registering the property purchase-sale transaction in the property registry.

The expense amount depends on the housing value and officially established tariffs. Usually this is from 400 to 650 euros.

7. Notarial expenses

Paid by the buyer and related to notarial processing of purchase-sale transactions or mortgage loan agreements. The expense amount depends on the housing value and officially established notary tariffs, usually this is from 600 to 900 euros.

8. Banking commissions

Every buyer strives not to spend extra money when purchasing property. One important case that will help reduce unnecessary expenses is saving on banking commissions. Especially when it comes to exchange rates.

Money transfer

To purchase property in Spain, it’s necessary to open an account at a local bank and transfer the required amount. Unfortunately, this is quite expensive and can cost approximately 0.4% of the transferred amount. Therefore, we recommend using currency broker services.

In addition to transfers, bank checks are common practice for property payments. However, this is not as convenient due to high commissions, which can amount to about 0.5% of the sum.

Exchange rate

This is precisely when you need a currency broker or international money transfer service, as these services can save you thousands of euros! For example, if you’re buying property worth €200,000, and the current exchange rate is 1.12 (pounds sterling to euros), this will cost you 178,571 pounds. Unfortunately, the exchange rate at your bank is 1.09, so the property will ultimately cost 183,486 pounds. Using broker services saves up to €4,915!

9. Legal costs and fees

It’s impossible to buy property in another country without legal consultation.

We recommend finding a lawyer (abogado), as they are familiar with the latest requirements and legal precedents in the real estate market.

Your attorney and lawyer

If you’re not familiar with the Spanish legal and administrative system, we recommend finding a lawyer (abogado) who will conduct legal verification (due diligence), clarify all arising questions and help avoid mistakes when signing documents.

Usually lawyers charge about 1% of the total property value. We recommend finding a specialist working with hourly payment — this may be more profitable. The cost of abogado services usually ranges from 1,500 to 2,500 euros.

Power of Attorney

If you prefer to save time and money, but first of all have found an independent and reliable lawyer or perhaps a friend or family member to whom you can delegate your powers, you can arrange a Power of Attorney in their name. A bilingual document will cost you approximately €200-300. For this, you need to contact a certified English-speaking lawyer in Spain or find a Spanish lawyer in your country who will help with processing a document valid in Spain.

10. Agency or realtor commissions

Usually the agency commission is paid by the property seller or developer in case of new construction. As a rule, the commission is 5-10% of the object’s value and is already included in the price. In some cases, for example in Valencia and Málaga, historically the commission is paid by the buyer and amounts to 3% for the secondary market. Therefore, we recommend carefully clarifying this question with the chosen agency!

11. Other hidden and additional expenses

Mortgage loans entail additional expenses. The loan amount is also subject to taxes and requires additional funds.

Survey Fees

There are several types of surveys that can be conducted at your request. This is not a mandatory procedure (except for mortgages on secondary housing), but sometimes it’s better to be prepared, especially when buying on the secondary market.

The cost of this service is from €500 for a basic survey to several thousand, depending on the type of procedure.

One-time mortgage commissions

When buying an apartment or house in Spain with a mortgage, you need to be prepared for additional expenses. One-time expenses when arranging a mortgage in Spain amount to about 1% of the property value. In addition, mandatory insurance must be paid annually, which amounts to 0.2% of the purchased object’s value.

Before contacting a bank, it’s very important to know: if banks generally finance no more than 70% of the purchase value, then you must not only save the remaining 30%, but also have funds to cover taxes and expenses included in the transaction.

Property appraisal is necessary for the bank to decide on the loan amount and costs from 250 to 600 euros.

Types of mortgage commissions

Maintenance taxes

There is a category of annual taxes and expenses that you should be prepared for.

NIE processing expenses

N.I.E., or Número de Identidad de Extranjero, is a taxpayer identification number for foreigners in Spain. By the time of signing the purchase-sale agreement with a notary (the so-called escritura), you must already have a NIE.

To process NIE, you need to contact the foreign department (Oficinas de Extranjeros), which are usually located at police stations (la Comisaria de Policia Nacional), or do this at the Spanish consulate in your country.

An NIE application can also be submitted by power of attorney through a representative. In this case, your representative in Spain — usually a lawyer or gestor — will submit the necessary documents, which will cost an additional amount depending on the chosen specialist’s price list. If you decide to process it yourself, the state fee for NIE is less than 10 euros.

Other expenses

If the buyer doesn’t speak Spanish, a translator must be present during signing. The usual rate for translator services is about €100/hour, and it may take a couple of hours for careful reading and understanding of the contract. However, sometimes translator services are included in the agency fee.

In addition, we recommend having a reserve of funds for tickets to/from Spain, hotels, courier services and other arising expenses on the path to your dream Spanish home.

12. How will the Brexit process affect expenses?

1. Exchange rate fluctuations and unstable currency (£) may lead to property becoming more expensive for British buyers.

2. The most important, though unpopular tax that may significantly increase after Brexit is inheritance tax. Currently, Britons pay the same tax amount as Spaniards, but after leaving the EU they will have to pay as non-members. Inheritance tax in Spain varies from 7.65 to 34% depending on property value, degree of relationship with the deceased, etc.

3. From 2021, Britons will have to pay 7 euros for entry to Spain and other EU countries. The payment called ETIAS (European Travel Information and Authorisation System) was confirmed by the European Commission. This document will be valid for 3 years and will require providing personal data, information about criminal record and health status. Regarding the visa issue, short-term visits will not require a visa, which was also announced by the Commission.

13. Final calculations

For secondary property:

Example of purchasing secondary housing worth 150,000 euros:

To understand the difference in expenses, it’s best to give an example. Let’s calculate how much all taxes and expenses for secondary housing worth 150,000 euros will cost in regions with different ITP levels.

Overall, in any province of the Basque Country, about 10,000 euros will be required for expenses and taxes, of which about 6,000 euros will go to ITP (which is 4%). Thus, the total purchase cost will be 160,000 euros.

In the case of Madrid, expenses and taxes will amount to about 13,400 euros. Of these, the majority will go to ITP — about 9,000 euros. Thus, the total housing price will exceed 163,400 euros. In Navarre and autonomous cities, expenses will be equivalent, since ITP there is also 6%.

If the housing is located in Extremadura, Andalusia or Castile and León, where ITP is 8%, taxes and expenses will amount to 17,600 euros, of which 12,000 euros is the property transfer tax. Total cost — about 167,600 euros.

Finally, in Catalonia, Valencia or Galicia (with ITP 10%) expenses will increase by 20,700 euros, the total transaction amount will exceed 170,000 euros.

Thus, in these regions you will spend approximately 10,700 euros more on taxes and expenses than in the Basque Country for housing of the same price, and approximately 7,300 euros more than in Madrid.

For new property:

For a more visual comparison, let’s return to the example of housing worth 150,000 euros.

Overall, in any province of the Basque Country, taxes will amount to about 19,800 euros (considering IVA 10% and IAJD 0.5%), and in Madrid — about 20,600 euros (IVA 10% plus IAJD 0.75%).

If the housing is located in Catalonia or Castile — La Mancha (IVA 10% plus IAJD 1.5%), approximate expenses will amount to about 23,000 euros, increasing the total operation amount to 173,000 euros. In the Canary Islands (IVA 7% and IAJD 1%) additional expenses will amount to about 16,450 euros to the 150,000 object value (that is, almost 7,000 less than in Catalonia).