Costs when buying a property in Spain
What are the costs involved in buying a 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.
1. Costs associated with buying a new home from a developer (or bank)
These are the costs you will face when buying a new home in Spain from a developer or bank. It doesn’t matter how long ago the property was built. To count as a new home it must never have been sold before.
1.1 VAT & Stamp Duty (IVA & Actos Jurídicos Documentados – AJD)
These taxes apply for residential properties being sold for the first time (never previously occupied), or for commercial properties and plots of land. This is a national tax, so VAT is the same wherever the property is located (with the exception of the Canaries, which have their own version of VAT).
At present VAT (known as IVA in Spain) is 10% on the purchase price of residential properties (villa, apartment, etc), and 21% for commercial properties and plots of land.
VAT on new homes in the Canaries is known as IGIC (Impuesto General Indirecto Canario), and currently stands at 4.5%
VAT on newly-built homes rose from 4% to 10% on 01/01/2012.
The Stamp duty (known as AJD) is 1% of the price of the purchase, but might go up in some regions, so be sure to check on the latest rate. 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.
2. Costs associated with buying a resale home in Spain
These are the costs you will face when buying a Spanish property that has been sold before. Generally speaking, that means when buying a home from a private individual.
2.1 Spanish Transfer Tax (Impuesto sobre Transmisiones Patrimoniales – ITP)
This tax applies if the property is deemed to be a second or posterior transfer (i.e. not the first time a newly built home is bought), and is paid by the buyer. If any deposit is paid before completion of the sale it is not subject to ITP pro rata. However the full amount of ITP 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.
The Transfer Tax rate is ceded to the autonomous regions, who can choose to apply the general rate, or their own rate.
The general (national) rule of ITP is 7%, but many of the autonomous regions have applied higher local rates. The rate you pay depends upon the autonomous region where you buy (for more information see Transfer tax on resale homes – Impuesto de Transmisiones Patrimoniales (ITP))
2.2 Income tax provision when buying from non-residents
If the seller is not resident in Spain, 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.
3. Costs associated with both new build and resale property purchases in Spain
These are the additional expenses you are likely to face when buying any property in Spain, regardless of whether the property is new or not.
3.1 Estate agency Fees
Estate agency fees or commissions are paid by the seller, unless otherwise agreed. If the buyer uses a search agency then search fees are paid by the buyer. Unless the buyer has specifically agreed to pay the agent’s fee this cost will be built into the sale price.
3.2 Legal Fees
You are strongly advised to hire a lawyer to help you during the buying process. Your lawyer drafts and reviews contracts on your behalf and can explain all the legal and administrative issues you face. Your lawyer should also carry out any necessary due diligence (checking ownership claim of the seller, charges on the property, permits, etc.) and arrange all the required documents to complete the process (property registration, tax payments, etc.).
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 of the sale price, which is a rip off. Even 1% can be unreasonably high given the work that is involved in a straightforward purchase of an expensive property with no legal complications. Your best option is to try and find a good lawyer who is prepared to charge on an hourly basis. Legal fees for a purchase without any complications and charged on an hourly basis should be in the region of 1.000 to 2.500 Euros.
3.3 Spanish mortgage costs
If you choose to purchase with a mortgage, this will only cost one extra cost. The valuation of real estate that the mortgage provider needs before the mortgage is issued. This is paid by the buyer and can cost around 500 euros or more depending on the size of the property. Thanks to the new mortgage law (June 2019), all other costs are borne by the bank that granted the mortgage.
3.4 Spanish notary costs
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.
3.5 Spanish Land 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.
4. Other costs associated with buying property in Spain
Though not strictly transaction costs like fees and taxes, there are other costs to bear in mind when buying a home in Spain. After all, they all come out of the same pocket – namely yours.
4.1 Banking Costs
To buy property in Spain you will almost certainly need to open an account with a bank in Spain, and may need to transfer money from abroad. There maybe international transfer costs – check with both banks – and if you need to exchange currency to buy Euros make sure you use a currency broker to get a good rate of exchange and overpaying for Euros.
Once you have got the funds in place, you will need to pay the vendor on the day you complete the purchase. The most common way to do this is to take a banker’s cheque along to the notary’s office to give to the vendor when you sign the deeds. Banks try to charge as much as they can for issuing banker’s drafts, and I’ve even known them to charge 0.5% of the cheque’s value. However, you can also get them for as little as €50 to €60. It all depends on the deal you have with your bank. Make sure you clarify this with your bank before you ask for the cheque.
4.2 Furniture Costs
Once you own a property you will need to furnish it. The cost of furnishing a property depends entirely upon what you want. However as a very general rule of thumb a 2 bedroom apartment will cost around 10,000 to 15,000 Euros to furnish nicely if you buy everything new. Of course there is no limit to how much you can spend, though you can also get away with less than 10,000 if you are on a tight budget .
4.3 Plusvalía Municipal Tax
This is normally paid by the vendor, but it can become a problem for the buyer if the vendor fails to pay it. Buyers have to be particularly careful with this tax when the vendor does not live in Spain. See the section below on costs to bear in mind when selling property in Spain for more information.
Before buying a property in Spain you may also wish to have a building or structural survey done, and that will have a cost. Find out more about building surveys in Spain.
In Summary, allow for between 12% and 15% of the purchase price in taxes and other costs, though it does depend what and where you are buying.
source : spanishpropertyinsight.com by Mark Stücklin