Buying costs in Spain – Who Pays What
"In comparison with many countries property buying costs are high in Spain but there are big regional differences."
In comparison with many countries buying costs are high in Spain. Therefore, when you are calculating your budget for a property it is important to know which taxes and fees the buyer is responsible for. One of the first questions I ask potential clients about their budget is whether it includes all the extras on top of the actual property because these can amount to between 10% - 15%, depending on the region. That’s because property purchase taxes are set by the autonomous regions. And what you pay also depends on whether you are buying new from a builder or developer or a resale from a existing owner.
This category is not just for secondhand properties already lived in but includes properties that were bought off-plan by an investor for resale. Even though the property has never been occupied and is, in effect, brand new, it still counts as a resale for transfer tax purposes.
The biggest single item is the transfer tax (ITP) and it varies by region. Leaving aside the Canary Islands which has its own system, the lowest level of 6% of the purchase price applies in Madrid. It was reduced in the wake of the 2008 financial meltdown to kickstart the recovery and has stayed at that level ever since. Next comes Andalucía. After years of a sliding scale system between 8% - 10%, the regional government moved to a flat rate 7% as a temporary measure to boost the market during Covid-19. They then surprised everyone in October 2021 by making that change permanent. (There is a 6% level in Andalucía but it only applies to purchases under €150,000 for permanent residence). VAT (IVA) is not applied to resales.
Cataluña operates a 10 % flat rate of transfer tax up to €1m rising to 11% on any amount above €1m while Mallorca is on a sliding scale from 8% for transactions up to €400,000. After that, it’s 9% on the portion between between €400,000 and €600,000, 10% on €600,000 up to €1m and 11.5% on any amount over €1m. Therefore, a €2m property in Cataluña would incur €210,000 transfer tax, in Mallorca it would be €205,000 while in Andalucía it comes out at €140,000.
VAT (IVA) and Stamp Duty (AJD) are the taxes that affect purchases of new properties, both apartments and houses, when bought from a builder or developer. The current VAT rate is 10% plus a stamp duty (AJD) of up to 1.5% depending on the region. For example, when Andalucía lowered the ITP to 7% as already described, the AJD was also reduced, from 1.5% to 1.2%. So, a €2m new-build in Andalucía would generate costs of €224,000 compared with the €140,000 for a resale.
On all purchases, whether resale or new-build, the buyer’s legal fees should come in between 0.5% and 1%. In addition, the buyer is responsible for the notary and registry fees and until you have chosen a property these can only be estimated but allow 0.5% for each.
There is one more tax, the plusvalía, but this is the seller’s responsibility. It is a municipal tax levied on the increased value of land since the previous sale; it has nothing to do with the bricks and mortar. A buyer should never agree to pay this but it was common practice in the past for it to be dumped on the buyer. Do not agree to this. According to the law it is a seller's tax. If you are buying a resale which the current seller has owned for a long time, during which time land values may have increased substantially, this tax could amount to many thousands of euros. Likewise, if a developer has held land in a land bank for many years it could be substantial and will be hidden in the price list so be very sure that everyone knows right from the outset that the seller is going to pay it.
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