There are several taxes that must be paid when buying property in Spain; they are added to other expenses that are required when completing purchase and sale transactions. In this article we will look at each of them in detail, as well as the rules of application and the applicable rates. If real estate is purchased in mortgage, the total amount of taxes and expenses will increase slightly. In general, it is recommended to include 10 to 12% in the purchase estimate for notary fees, registration fees, taxes and other expenses.

Taxes when buying new property in Spain

When purchasing property in Spain, you must pay several taxes, regardless of whether the property is new or purchased on the secondary market.

VAT when purchasing real estate in Spain

VAT (IVA) – the main tax that must be paid when purchasing a new home. It is paid by the buyer at the time of the transaction, and the developer then transfers it to the budget.  The VAT rate for the purchase of new housing in Spain is 10% of the value indicated in the notary deed, with the exception of social housing with VPO (Vivienda de Protección Oficial) status, for which a reduced rate of 4% may apply. In the latter case, it is necessary to look at the standards and legislative framework of the autonomous community on whose territory social housing is located.

Also, the purchase of storage rooms, parking spaces (no more than two) or garages is taxed at a rate of 10% if this occurs simultaneously with the purchase of a residential property and the transaction is completed by one notarial act.

In the Canaries, instead of VAT, another local tax is applied – Impuesto General Indirecto Canario (IGIC), the rate of which is 6.5%.

Also, the purchase of real estate in Spain may be subject to VAT at a rate of 21%. This happens in the case of the purchase of commercial properties, real estate at the construction stage before commissioning, as well as auxiliary facilities (storage rooms, parking spaces and garages) separately from the residential property, i.e. with a separate notary deed of sale.

Stamp tax

Another tax that must be paid when purchasing property in Spain is the IAJD (Impuesto de Actos Jurídicos Documentados) stamp tax. IAJD is compatible with VAT, calculated from the price of the object indicated in the notarized bill of sale at rates established at the level of autonomy.

Today in Spain the following rates of this tax apply: Andalusia – 1.2%, Aragon – 1.5%, Asturias – 1.2%, Balearic Islands – 1.5%, Canary Islands – 1%, Cantabria – 1.5%, Castilla y Leon – 1.5%, Castilla La Mancha – 1.5%, Catalonia – 1.5%, Valencian Community – 1.5%, Extremadura – 1.5%, Galicia – 1.5%, Madrid – 0.75%, Murcia – 1.5%, Navarre – 0.5%, Basque Country – 0.5%, La Rioja – 1%, Ceuta and Melilla – 0.5%.

Many autonomies have preferential rates or complete tax exemptions for certain categories of buyers: youth, large families, people with disabilities, etc.

Taxes when purchasing real estate in Spain on the secondary market

Purchasing real estate in Spain on the secondary market is also subject to taxes.

Property transfer tax ITP

ITP (Impuesto sobre las Transmisiones Patrimoniales) is a tax that is paid only when purchasing housing on the secondary market. Its rates are also set at the autonomy level, and there are benefits and deductions for certain categories of buyers.

Main ITP rates: Andalusia – 7%, Aragon – 8%, Asturias – 8%, Balearic Islands – 8%, Canary Islands – 6.5%, Cantabria – 9%, Castilla y Leon – 8%, Castilla La Mancha – 9%, Catalonia – 10%, Valencian Community – 10%, Extremadura – 8%, Galicia – 8%, Madrid – 6%, Murcia – 8%, Navarre – 6%, Basque Country – 4%, La Rioja – 7%, Ceuta and Melilla – 6%.

Valor de referencia: approximate cadastral value

From January 1, 2022, Spain has an approximate cadastral value – Valor de referencia, which serves as the basis for calculating a number of taxes, including the ITP property transfer tax.

Valor de referencia is calculated on the basis of already completed transactions with similar objects, is subject to annual revision and serves as a guide to market value. After the introduction of Valor de referencia, understating the cost of purchasing real estate in a deed in order to minimize taxes lost its meaning, because To calculate the ITP tax, the law requires that the higher of two amounts be used as the tax base: Valor de referencia or the actual transaction price.

The current approximate cadastral value of the property can be found in the cadastre by requesting the appropriate certificate on the official website. If the property is not assigned a Valor de referencia, the ITP will be calculated based on the price indicated on the bill of sale.

If the taxpayer believes that the estimated cadastral value does not correspond to the real market value, he has the right to challenge it before the tax administration. As evidence, you can use the appraiser’s conclusions, photographs and any other documents confirming the actual condition of the object.

Stamp tax

Stamp tax is incompatible with ITP, so transactions with Spanish property on the secondary market are not subject to it. IAJD will have to pay a small amount just for issuing a paper notarized bill of sale: the calculation is carried out at a fixed rate of 0.15 € per page.

Additional costs when purchasing property in Spain

Notary fees are the first place to start. The notary’s fee should be taken into account both when purchasing new and resale real estate. It usually ranges from 0.2 to 0.5% of the transaction price. Registration of the transfer of ownership in the Property Register is another necessary step. The duty will range from 0.1 to 0.25%.

In the case of a mortgage, the buyer is required to order and pay for an independent assessment of the property. The services of an appraiser and the preparation of the corresponding conclusion will cost 250-600 €. If you obtain a mortgage loan, additional costs may arise in the form of mandatory real estate insurance and the life of the borrower.

Also in the list of additional expenses you can include the services of a lawyer accompanying the transaction, the services of a tax consultant, commissions from real estate agencies, and translation services. If the buyer is a non-Spanish resident, you may need to obtain NIE number, which is necessary for registering the owner with the tax authorities as a taxpayer.

Finally, the current law allows the amount of the annual IBI real estate tax to be divided between the seller and the buyer in proportion to the time of ownership in the year of the transaction. This agreement must be enshrined in the reserve agreement.