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Buying property in Spain: costs, taxes and hidden charges

Purchase taxes and costs, land tax, registration fee, notary, banking fees and others, final calculations.

1. The actual costs of buying a home in Spain explained

By purchasing property in Spain, you make a transaction that is of a fiscal nature, and, accordingly, you must pay certain taxes to the state budget.
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When buying 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.
Secondary Property
Newly Built Proprety
At this stage, everyone in Spain is equal, local and foreigners, residents, and non-residents pay the same taxes. They should be paid immediately after the conclusion of the deed of sale. Without payment of state fees, the transaction cannot be registered.

The tax rate depends on whether the property is commercial or residential, new building or "secondary housing", as well as, the region where the property is located.
Before you decide to buy housing in Spain, calculate how much its maintenance will cost you. In addition to the cost of utilities, you are obliged to pay annual taxes.

Which taxes you must pay?

In the secondary market:

Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales - ITP).
In the primary market:

Value Added Tax (IVA, Impuesto sobre Valor Añadido).
These are only the key, the largest state taxes when buying property in Spain. In addition, you will pay stamp duty (in case of new property), registry fee, notary fees. It will cost you about 2-4% of the price of the property. If you take a mortgage, additional expenses will increase by another couple of percent.
The cost of the property, which you see in the ads of sale, never includes taxes. Accordingly, feel free to add to the price 8-15% of the property cost, and you get the amount of your total expenses.
In general terms, the Basque Country registers the lowest expenses (approximately 8% of the property price), while Madrid, Canary Islands, La Rioja, and Navarra are in the middle of the table (the percentage usually does not exceed 10%) and Catalonia, Galicia or Valencian Community are in the upper part of the ranking (in its case, the expenses can reach 15%), having a Tax on Patrimonial Transmissions (ITP) and a Stamp Duty (IAJD) higher than other regions.

Speaking about the seller, they pay the following taxes; Plusvalía Municipal (Impuesto sobre el Incremento del Valos de los Terrenos de Naturaleza Urbana, that is Land Value Increase Tax) and IRPF (Impuesto sobre beneficios, or Income tax). More about the expenses, that are covered by the seller, you can read here.

2. Taxes for resale 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 deed of sale. Confirmation of tax payment is necessary for registering a real estate purchase and sale transaction in the relevant property registry.

The Transfer Tax (ITP) is the one that affects the sale of used homes and depends on two things, the amount of the deed price, and the location.
Wooden letters TAXES
Depending on the autonomous community, one can pay from 4% to 10%.
The Basque Country has the lowest rate (4%), followed by Navarra, Madrid and the autonomous cities of Ceuta and Melilla, with 6%. In the Canary Islands, the usual rate is 6.5% and, in La Rioja, it's 7%. In Andalusia, Extremadura, Aragon, Asturias, Balearic Islands, Murcia and Castile, and Leon applies 8%, a figure rises to 9% in the case of Castilla-La Mancha. However, the regions with the highest ITP are Catalonia, Cantabria, Galicia and Comunidad Valenciana with 10%.

If the purchase of the house is financed by a mortgage, the other payable tax is the Stamp Duty (IAJD). It assumes between 0.5% and 1.5% on total mortgage liability, not on the amount of the loan.

Andalucía, Aragón, Cataluña, Comunidad Valenciana, Galicia, Castilla-La Mancha and Murcia apply 1.5%, double Madrid (0.75%) and three times more than Navarra and the autonomous cities (0.5%).
Taxes on the purchase of a resale property

3. Purchase taxes for new builds

VAT (IVA) rates in Spain

Paid by the buyer only in the case of the acquisition of new housing from a construction company.

In recent years, the VAT rate on the purchase of new property in Spain has changed many times. It was reduced, increased and reduced again. For properties in all regions of Spain, currently, the IVA (Impuesto sobre el Valor Añadido) rate is the same, which is 10%. Except for the Canary Islands, where VAT is called Impuesto General Indirecto Canario (IGIC) and accounts for 7%. If you buy land or commercial real estate, IVA will be higher, in this case, 21%.

The tax is paid immediately upon signing the deed, as it is the seller who transfers this money to the tax authorities.

Stamp duty (IAJD)

This tax on the purchase is very similar to the one applied to mortgages. Once again, Andalucía, Aragón, Cataluña, Comunidad Valenciana, Galicia, Castilla-La Mancha, and Murcia lead the regional table by establishing 1.5%, double Madrid (0.75%) and three times more than Navarra and autonomous cities (0.5%). The Canary Islands is once again the exception and the purchase apply a higher IAJD than in mortgages, which in this case, it is 1%, compared to 0.75% of loans.
Taxes on the purchase of a new property

4. Property tax

The amount of the tax depends on the location of the property, as provinces have their own tax rates. All in all, the following taxes are paid when buying new or used property:
Property tax table

5. Land appreciation tax (Plusvalía)

Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana or Plusvalía Municipal is usually paid by the seller. Accrued on the increase in the value of land under the built housing from the moment of its purchase until the sale of the property. The size of this tax is imposed due to many factors, for example, the period of time when it was owned by the last owner, the municipality to which the dwelling belongs etc. Since January 2015, significant changes have been made to the upward tax calculation procedure.

6. Property Registry fees

Paid by the buyer and associated with the registration of the sale of real estate in the property register.

The amount of expenses depends on the cost of housing and officially set tariffs. Usually, it is between 400 and 650 euros.

7. Notary fees

Paid by the buyer and related to the notarization of sales transactions or contracts for the provision of a mortgage loan. The amount of expenses depends on the cost of housing and the officially established tariffs of notaries, normally it is around 600 - 900 euros.

8. Banking fees

There is no doubt everyone is looking forward not to waste money when buying property. One important case, that could help you reduce unnecessary fees, is saving on banking fees. Especially, when we talk about the exchange rate.
Money transfer
In order to buy property in Spain, you need to open an account in the local bank and transfer the necessary sum of money. Unfortunately, it is rather expensive and can cost you around 0.4% of the sum transferred. This is why we recommend you use the service of money brokers.

Except for the transfer, the usual practice of paying for the real estate is bank checks. However, this is not so handy due to high fees, which can be around 0.5% of its amount.
Exchange rate
This is when you require a money broker or international money transfer service because these services could save you thousands of euros! An example of this is if you are purchasing a property that costs €200.000, and the current exchange rate is 1.12 (GBP to EUR), it will cost you 178.571 GBP. Unfortunately, the exchange rate in your bank is 1.09, so the property ends up costing you €183.486. Using a broker service saves you up to €4915!

9. Legal costs and charges

It is impossible to buy property in a foreign country without any legal advice.

We recommend you find a lawyer because they are familiar with the latest requirements and cases on the property market.
Money
Saving here, you risk losing money later!
Your Lawyer and solicitor
If you are not familiar with the Spanish legal and administrative system, we advise finding a lawyer (abogado) that can perform due diligence, explain all the arising questions and help you not to make a mistake with the papers you sign.

Normally, lawyers charge around 1% of the total cost of the property. We recommend you find a specialist that accepts the hourly payment, which may be a bargain. The cost of abogado services should be around 1500-2500 euro.

The lists of authorized lawyers in Spain can be found here (English-speaking lawyers version) and here (Complete list of lawyers).

Power of attorney
If you prefer to save time and money, but first of all, found an independent and trusted lawyer, or maybe a friend or family member that you can delegate your power to, you can issue a Power of Attorney at their name. The bilingual document will cost you around €200-300. In order to do so, you will need to contact an authorized English-speaking lawyer in Spain or find a Spanish lawyer in your country that can help you with advice on where to issue this document so that it will be valid in Spain.

10. Agency or estate agent fees

Usually, the agency fees are covered by the seller of the real estate, or the developer in case of a new property. Normally the fee is 5-10% of the property price and is already included in it. In some cases, like in Valencia and Malaga, historically the fee is paid by the buyer and accounts for 3% for the secondary market. This is why we advise you to thoroughly clarify this matter with the chosen agency!

11. Other hidden and additional costs

Mortgage loans incur additional costs. The loan amount is also taxed and requires some extra money.
Survey Fees
There are several types of surveys, that can be performed upon your request. It is not a necessary procedure (except for the mortgage on a secondary market property), but sometimes it is better to be prepared, especially when buying from the secondary market.
This service can cost you from €500 for the basic survey to several thousand, depending on the type of procedure. More on survey types you can read here.

Mortgage one-time fees

When buying an apartment or house in Spain with a mortgage, you need to be prepared for additional expenses. One-time costs when you take a mortgage in Spain is about 1% of the property value. In addition, each year you need to pay for obligatory insurance, which is 0.2% of the value of the purchased property.

Before you go to the bank, it is very important to know that, if as a general rule they do not finance more than 70% of the purchase price, not only should you have saved the remaining 30%, but also to be able to cover the taxes and expenses included in the transaction.

The appraisal of the property is necessary for the bank to decide how much money it is going to give the client via mortgage and costs between 250 and 600 euros.

Maintenance taxes

There is a category of annual taxes and expenses that you should be ready for. You can read the full version about these costs here.

NIE application expenses

N.I.E., or Número de Identidad de Extranjero, is the taxpayer number for foreigners in Spain. By the time of signing the sales contract with a notary (the so-called escritura), you should already have an NIE.

In order to issue NIE, you need to contact the Foreign office (Oficinas de Extranjeros), which are usually situated at police stations (la Comisaria de Policia Nacional), or you can do it at the consulate of Spain in your country.

An application for an NIE may also be processed by power of attorney through a representative. In this case, your representative in Spain, normally a Spanish lawyer or gestor will hand in the necessary documents, which will cost you an additional sum of money, that depends on the price list of a chosen specialist. In case you decide to do it on your own, the national tax on NIE is less than 10 euros.

Other costs

If the buyer is not fluent in Spanish, a translator must be present at the signing. The common rate for the translator's service is around €100/hour and it may take a couple of hours to carefully read and understand the contract, however, sometimes translator's work is included in agency fees. The complete list of authorized English-speaking translators can be found here.

Furthermore, we recommend you have some spare money for tickets to/from Spain, hotels, couriers and other appearing costs along your way to the Spanish Home of your dreams.

12. How will the Brexit process affect costs?

1
Fluctuation of the exchange rate and unstable currency (£) may lead to more expensive prices of the real estate for British customers.
2
The most important, though unpopular tax, that can turn too expensive after Brexit, is an inheritance tax. Currently, Brits pay the same amount of tax as Spaniards, but after leaving the EU, they will have to pay as non-members. The succession tax in Spain varies from 7.65 to 34% depending on the price of the real estate, relationship to the deceased, etc.
3
Brits will have to pay 7 euros from 2021 onwards to enter 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 require personal information, criminal records, and medical conditions. Concerning the visa issue, the short stays will not require any of its kind, which was also stated by the Commission.

13. Final Calculations

For used property:
An example of a second-market house of 150,000 euros:
To understand the differences involved in the pocket, there is nothing better than an example. We will calculate how much money all the taxes and expenses would cost for a used house of 150,000 euros in regions with different levels of ITP.

In general terms, in any province of the Basque Country, some 10,000 euros would be required for expenses and taxes; about 6,000 euros would be for the ITP (which stands at 4%). Therefore, the total cost of the purchase would amount to 160,000 euros.

In the case of Madrid, it would be around 13,400 euros for expenses and taxes. Of this amount, most would correspond to the ITP, which is about 9,000 euros. Thus, the total price of the house would rise above 163,400 euros. In Navarra and the autonomous cities, the expenses would be equivalent, since they also have an ITP of 6%.

If the house were in Extremadura, Andalusia or Castilla y León, where the ITP is 8%, taxes and expenses would amount to 17,600 euros, of which 12,000 euros would come from the tax on property transfers. Thus, the total cost would be around 167,600 euros.

Finally, in the case of Catalonia, Valencia or Galicia (with an ITP of 10%), the cost would rise by 20,700 euros, shooting above 170,000 euros the final amount of the deal.

Thus, in those regions, you would spend about 10,700 euros more on taxes and expenses than in the Basque Country for a house of the same price, and about 7,300 euros more than in Madrid.
For new property:
To see the differences more clearly, we return to the example of the house of 150,000 euros to know how much taxes and expenses depend on autonomy.

In general terms, in any province of the Basque Country, the tax would be about 19,800 euros (taking into account an IVA of 10% and an IAJD of 0.5%), while in Madrid, it would amount to 20,600 euros (10% VAT plus an IAJD of 0.75%).

If the house was in Catalonia or Castilla-La Mancha (VAT of 10% plus IAJD of 1.5%), the approximate cost would be around 23,000 euros, raising the total amount of the operation to 173,000 euros, while in the Canary Islands (VAT of 7% and IAJD of 1%) we would speak of an additional 16,450 euros to the 150,000 of the property (that is, almost 7,000 less than in Catalonia).
Thank you for your attention! For more information please contact the managers of our agency. It is our pleasure to assist you on a way to your dream!
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