What Are the Tax Costs When Buying Real Estate in Spain?
Buying real estate in Spain involves various tax costs. In this article, you will learn about the taxes you need to pay when purchasing a house or apartment, depending on whether you are buying property from the primary or secondary market.
Buying real estate in Spain is a dream for many people, but before you make the decision to purchase a house or apartment, you need to consider various costs, primarily taxes. These costs vary depending on the type of property, its location, and whether you are buying it from the primary or secondary market. In this article, we will discuss the most important taxes you will have to pay when purchasing real estate in Spain.
1. Property Transfer Tax (ITP)
If you are buying property from the secondary market (used), you will have to pay the Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales – ITP). The rate of this tax ranges from 6% to 10%, depending on the region where the property is located.
- Costa Blanca (Alicante): The ITP is usually 10%.
- Costa del Sol (Malaga): The ITP ranges from 8% to 10%, depending on the value of the property.
The tax rate depends on the value of the property and local regulations, so it is advisable to seek information from the office or a tax advisor.
2. VAT (IVA) and Documented Legal Acts Tax (AJD)
In the case of purchasing property from the primary market (from a developer), you do not pay the ITP, but you must pay the VAT (Impuesto sobre el Valor Añadido – IVA). The VAT rate is:
- 10% for residential properties (apartments, houses).
- 21% for commercial properties (commercial premises, offices).
In addition to VAT, buyers from the primary market must also pay the Documented Legal Acts Tax (Actos Jurídicos Documentados – AJD), which ranges from 0.5% to 1.5% of the property's value, depending on the region.
3. Plusvalía Tax
The Plusvalía tax is a local tax levied by municipalities and relates to the increase in land value at the time of sale. It is calculated based on the cadastral value of the property and the number of years it has been owned by the seller.
Although it is usually the seller's obligation, it is worth ensuring that there are no clauses in the sales contract transferring this cost to the buyer. This tax is particularly significant in large cities and popular tourist regions such as Costa Blanca and Costa del Sol.
4. Notary Fees and Registration Costs
When purchasing real estate in Spain, you will also have to pay for notary services and costs related to registering the property in the land registry. These costs typically amount to about 1% of the property's value.
- Notary fees: Usually range from 600 to 1,200 euros, depending on the property's value and the number of parties in the notarial deed.
- Registration costs: Range from 400 to 700 euros, depending on the property's value and region.
5. Property Tax (IBI)
After purchasing the property, you will have to pay the Property Tax (Impuesto sobre Bienes Inmuebles – IBI) annually. This is a tax levied by the municipality, and its amount depends on the cadastral value of the property and local tax rates. On average, it ranges from 0.4% to 1.1% of the cadastral value.
6. Capital Gains Tax (IRPF)
If you plan to sell the property in the future, you must also consider the Capital Gains Tax (Impuesto sobre la Renta de las Personas Físicas – IRPF). It is calculated based on the difference between the purchase price and the sale price of the property, with tax rates ranging from 19% to 23%.
However, if the property has been your main residence for at least three years and the profits will be reinvested in the purchase of another main property, you may benefit from an exemption from this tax.
7. Taxation of Rental Income
If you plan to rent out your property, you must pay income tax on the profits earned from the rental. The tax rate for residents ranges from 19% to 23%, while for non-residents, a flat rate of 24% applies. You can deduct some costs related to the rental, such as property maintenance, insurance, or community fees.
Summary
Buying real estate in Spain involves various tax costs that you need to include in your budget. The Property Transfer Tax (ITP), VAT, notary fees, plusvalía, and the annual Property Tax (IBI) are the most significant costs that can significantly impact the final price of the property. Before purchasing, it is advisable to consult a tax advisor to fully understand all financial obligations and plan your budget in the most optimal way.