As in most countries, you will also need to account for paying property tax in Spain, if you are planning to buy a house or apartment there. Whether you are buying a new-build property or pre-owned, you should be aware that neither operation is exempt from taxes.
Before we proceed, it’s important to remember that although the taxes for the purchase of a home are, qualitatively and quantitatively, one of the most important expenses for this type of operation, they are not the only ones that you will have to face. You will also have to bear the expenses derived from the procedures performed by the notary, which can be around a few thousand euros, as well as the property registration fee (ITP) which is usually around 8-10% of the asking price. Also, you may want to appoint a lawyer, which will cost approximately 1% of the asking price. Furthermore, if you are requesting a mortgage, do not forget to add the fees of this loan, the loan interest amount, as well as the valuation and arrangement/opening fee.
Different Types of Property Tax in Spain
Next, we present the taxes that you will have to pay when you buy a house in Spain, so pay attention.
New Spanish Property VAT (IVA)
The VAT or as it’s known in Spanish IVA (impuesto sobre el valor añadido ) for the purchase of a new home in Spain, that is to say not pre-owned, is currently 10%. Therefore, if you bought an apartment of 800,000 euros, you would have to pay 8000€ VAT. On the other hand, remember that anyone buying social housing (VPO) has to pay VAT of only 4%, although this may change according to the Autonomous Community in which the home is acquired, such as Andalusia or Catalonia for example.
Stamp Duty in Spain (IAJD)
The equivalent of stamp duty tax in Spain is the IAJD or ‘Impuesto de Actos Jurídicos Documentados’. This is the second tax that you will have to pay when you buy a new-build home. This tax includes notarial, commercial and administrative documents associated with both the purchase of the home and the formalization of the mortgage loan. Again, the rate depends on the Autonomous Community in which the property is located, and ranges between being exempt to 1.5% of the property value.
Property Transfer Tax (ITP)
This is the most relevant tax you would have to pay if you have purchased a pre-owned home. Its amount will depend on two factors: the Autonomous Community in which the operation is carried out and the percentage to be applied in relation to the deed price. Broadly speaking, its rate is usually between 6 and 10%. However, reduced rates are implemented for cases such as young people, social housing and large families.
On-going Spanish Property Taxes
IBI Tax Spain and Spanish Property Tax for non-residents
Finally, although it is not entirely the topic of this blog, we thought it would be interesting for you to know what taxes you will have to pay on a regular basis once you have purchased your new property. In Spain, IBI (Impuesto sobre Bienes Inmuebles) is basically property tax, or the equivalent of the old-style council tax in the UK, which is paid annually. The amount is based on the cadastral or appraised value of the property and varies from 0.405% to 1.166% depending upon the region i.e. Malaga, Cadiz or Granada. Furthermore, if you are planning to buy a property to rent out, but do not have a residence in Spain, you will need to pay Spanish property tax for non-residents, which is around 19% for EU members and 24% for residents of other countries.
In short, when you decide to buy a house in Spain, you will not only have to value the price of the property, but also the taxes that you will have to pay. No doubt this aspect must be present in your purchase decision from the initial moment, and accounted for within your budget, once you have decided on the area in which you want to reside or invest, because as we mentioned above, taxes may vary depending on the community.
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