It is important to know the taxes and expenses involved in the purchase of a property in Spain, as this directly affects the price of the property and should be taken into consideration before making such a decision.
What taxes are paid when buying a property in Spain?
We do not like taxes, but they are necessary. Here is a list of taxes that you should take into account when buying a property in this country.
- Value Added Tax (VAT). This is an indirect tax on consumption. This tax amounts to a tax rate of 10% on the purchase of homes and 21% on premises and plots of land. Another note to take into account is that if you buy a house with two garages and a storage room, the tax rate will be 10%. However, if you add a garage to this lot you will pay 21% only on this additional garage to the lot. This tax rate will be paid on new construction properties where the interested party is the first buyer.
- Tax on Documented Legal Acts (IAJD). If you plan to ask for a bank mortgage, this tax is levied on the signature before a notary as well as on the registration of the property in the Land Registry. Currently, this tax is paid by the banks, but if you are buying the property from a seller who pays VAT, you will have to pay this tax and it is usually around 2% of the price of the property.
- Real Estate Tax (IBI). If you already own a property, congratulations! The IBI tax rate varies depending on the region and is calculated according to the cadastral value, which is usually lower than the price of the property.
- Non-Resident Income Tax (Form 210). This tax, as its name indicates, is for those non-residents in Spain and varies depending on whether the property is rented or not.
- If you are going to rent the property, you will receive an income and therefore you have to pay this income tax through the form 210.
- If you are not going to rent the property, the tax is paid according to the value of the property (25% of 2% of the cadastral value).
- Wealth Tax (IP). This tax affects you whether you are a resident or not. You must file it when the following conditions are met:
The value of the property exceeds 700,000 euros and the result comes out to pay.
The value of the property exceeds 2,000,000 euros, even if the result is negative.
If we are talking about a habitual residence, it will be presented in case it exceeds 300,000 euros.
The IP changes according to the Autonomous Community, so I advise you to consult the legislation corresponding to your case.
Other expenses attributable to the purchase of the property:
- Land Registry. After signing the deed of sale, it is necessary to register it in the Registry and this entails a cost of approximately 450 euros. I remind you that if you ask for a mortgage, it is the bank who is in charge of paying the inscription.
- Notary fees. At the time of writing and signing the deed of sale, the work of the notary is very important to make sure that we do it well. The notary must confirm the charges of the house (if any), the distribution of the sale and purchase expenses, and attest to the veracity of the document, among other tasks.
The prices are calculated according to the price of the house and the complexity of the deed, the extension, the number of copies, etc.
- Banking costs. When issuing a bank transfer from abroad to Spain, transaction costs may arise, especially if you use a currency other than the Euro. The help of a currency exchange specialist can reduce these costs.
- Mortgage costs. When you apply for a loan at a bank, you are likely to be charged an origination fee. This is basically what you have to pay the bank for applying for the mortgage. This amount is deducted from the money you borrow and is usually between 0.25% and 3.00%. It is important to know that you can negotiate this percentage.
In addition to the opening commission, the bank will ask you to contract the life insurance and the home insurance, which will be deducted from the amount of the mortgage. Keep in mind that you will have to pay an appraisal of the property. Depending on the entity that appraises the house and the valuation of the same one, this procedure usually costs between 250 and 800 euros. The appraisal will be valid until 6 months after the date of issue.
Congratulations! Now you know what taxes and expenses are paid when buying a property in Spain. Do not be overwhelmed with these procedures, because with all this information and the help of professionals, you will be able to carry it out. Living in Malaga has its price and deserves an effort, but in LivinMalaga we can help you.