Buying a property in Spain cost breakdown

  • by Edison Fraser
  • 1 week ago
  • Spain
  • 0

Understand the costs of buying property in Spain with Edison Fraser. This quick guide highlights the costs involved when buying property in Spain. Gain a quick understanding of the costs involved with Spanish property purchasing.

What are the costs involved in buying a property in Spain?

When buying 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.

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, apartments, etc), and 21% for commercial properties and plots of land. This was increased from 4% to 10% at the start of 2013.

VAT on new homes in the Canaries is known as IGIC (Impuesto General Indirecto Canario), and currently stands at 4.5%

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. As a rule of thumb, this means when buying a home from a private individual.

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, which 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.

Income tax provision when buying from non-residents (International Investors)

If the seller is not a 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.

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 the 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, though some will try and charge more. Even 1% can be unreasonably high given the work that is involved in a straightforward purchase of an expensive property with no legal complications. In that case, we recommend trying and finding a good lawyer who is prepared to charge on an hourly basis.

Spanish mortgage costs

If you choose to buy with a mortgage then this will incur several additional costs. First, there will be the property valuation that the mortgage provider will require before granting the mortgage. This is paid for by the buyer and can cost around 500 Euros. Then there will be the costs of the mortgage itself. This varies according to the provider, and even according to the particular branch. However, there is usually some kind of opening fee of around 1% of the value of the mortgage. Up until Monday 12th November 2018 you would also have had to pay Stamp Duty known locally as Actos Jurídicos Documentados (AJD) on new mortgages (a tax which varied by region and can be as much as 3,000€ on a mortgage with a face value of 100,000€), but a change in the law means that from now on AJD will be paid by lenders.  Finally, a mortgage will increase the Notary expenses. Rates may vary over time so always check the latest tariffs in advance with a lawyer before you commit.

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, plus other administrative and paperwork costs charged by item.

Notary fees are set by the government and are comprised of a fixed element and a variable element that reflects the price of the property and the number of clauses in the deeds. They also charge a small fixed fee for every copy of the deeds (copia simple) requested by the buyer, and fees for other administrative tasks. This makes it difficult to say in advance exactly what the Notary’s fees will amount to. However, to give you an approximate idea they range from 0.1% of the declared price of a property (for properties of 400,000 Euros or more) to around 0.4% (for properties of under 100,000 Euros). The Notary will also add on some other administrative and paperwork costs (that can add up to another 0.05% of the property price) and VAT at the standard rate of the time.

If you use a mortgage then you will have to pay Notary fees on the mortgage deeds as well. Once again these will range between 0.1% of the value of the mortgage (for large mortgages over 400,000 Euros) and 0.4% (for small mortgages under 100,000 Euros). Rates may vary over time so always check the latest tariffs in advance with a lawyer before you commit.

Spanish Land Registry Inscription Fees

This is the fee you pay to have your title (and mortgage, if applicable) inscribed in the Land Registry. 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. This fee is paid to the property registrar (registrador de la propiedad).

As with the notary fee this fee is calculated on a sliding scale that reflects the price of the property, however, you can estimate it as around 0.1% (for expensive properties) to 0.3% (for cheaper properties) of the declared price of the property. VAT at the standard rate is charged on the Registry’s fees.

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 – yours.

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 may be 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.

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 bankers’ drafts, and we’ve seen them try to charge up to 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.

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.

In Summary, allow for between 12% and 15% of the purchase price in taxes and other costs, though it does depend on what and where you are buying.

Have any questions or want to know more? Book a discovery call with Edison Fraser Spain for a chat with one of our strategists.

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