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Taxes on Buying Spanish Property

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The following article has been summarised to avoid unnecessary tax technicalities. The quoted tax rates are subject to change from one year to the next. Seek professional legal advice on your matter – see disclaimer below.
By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of December 2018

Introduction

The new Stamp Duty law brought about by the landmark ruling of Spain’s Supreme Court last October, calls for an updated version of this key taxation article.

The most notable change is that borrowers will no longer be paying Stamp Duty on applying for a mortgage loan in Spain. This translates into saving thousands of euros, on average.

As a rule of thumb purchase costs add 10 – 13% over and above the purchase price. I collate below the taxes and associated fees on buying.

Be aware there are minor discrepancies from one region to the next, as Spain’s seventeen Autonomous Communities have competence, within limits, over some taxes i.e. Property Transfer Tax (ITP) and Stamp Duty (AJD). Each region is empowered to fix the tax rate within a sliding scale that varies between 6 to 11% for ITP and between 0.5 and 1.5% for AJD.

Buyers should be mindful of the Complementaria or ‘Bargain Hunter Tax’. It is a supplementary tax the seventeen regional Spanish Tax Offices levy on buying property as a result of today’s low real estate values post-crash (particularly for resales).

I will split my article distinguishing between two property types for taxation purposes:

I.   New-build (or off-plan).
II. Resale.

The tables below are a simplified approximation.

I. New-Build or Off-Plan Property

You can read further in our articles 8 Tips on Buying Off-Plan in Spain and Buying Property in Spain from a Developer (Off-Plan Property).

Taxes & FeesRate
  
VAT (IVA)10 %
Stamp Duty (AJD)0.5 – 1.5 %
Land Registry fees0.1 – 2 %
Notary Public fees0.1 – 2 %
Lawyer’s fees1%
Mortgage loan (if finance is required) a few hundred euros

II.  Resale Property

You can read further in our articles Buying Property in Spain from a Private Seller (Resale Property) and How to Buy Rural Property in Spain.

Taxes & FeesRate
  
Property Transfer Tax (ITP)6 to 11 %
Land Registry fees0.1 – 2 %
Notary Public fees0.1 – 2 %
Lawyer’s fees1 %
Mortgage loan (if finance is required)a few hundred euros

Post-Completion Taxes and Maintenance Upkeep

I refer to our in-depth article Non-Resident Taxes in Spain.

Once you have purchased, you will face the associated running expenses. Make sure you have budgeted these expenses carefully so as to avoid unpleasant surprises! Some of the luxury gated communities with lush tropical gardens and beautiful infinity pools that dot the Spanish coastlines have pretty steep maintenance expenses (tallying several hundred euros a month!).

  1. IBI tax: 0.4 – 1.1% of cadastral value per annum (this is not the market value, it is well below it).
  2. Rubbish collection tax.
  3. Community fees (if you buy into a Community of Owners).
  4. Non-Resident Imputed Income Tax (NRIIT): 1.1% or 2% of a property’s cadastral value per annum.*

*Distinction is made between EU and non-EU/EEA-residents as well as revised/unrevised cadastral values on calculating Imputed Income Tax.

Conclusion

Take thorough legal advice to budget your purchase carefully before you commit. Request a full breakdown of taxes, fees and associated expenses. Initial reservation contracts, that strike the property off the market, are normally non-refundable. So, if finance fails the real estate agency and/or seller are entitled to withhold the initial reservation deposit unless specific wording is added to the reservation contract to safeguard against this event.

Attaining finance from a lender should not be taken for granted. Spanish lenders are risk-averse these days and expect a non-resident buyer to come up with a 30 to 40% deposit. That said, lenders are once again dipping their paws brazenly into the market, luring borrowers with enticing 100% mortgage loans.

We are in a buyer’s market. There is plenty of property to choose from, do not rush in or be pressurised to sign on the dotted line. Take your time to consider matters carefully and budget accordingly.

And to close, my shameless plug; hire an experienced law firm such as Larraín Nesbitt Lawyers.

We offer the most competitive fees in the market.

Conveyancing – Buying

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Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Article also published at Larraín Nesbitt Abogados: Taxes on Buying Spanish Property.

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