All the taxes that need to be paid when buying a house in Spain

For many years, the process of buying and selling real estate in Spain has been a highly costly endeavor, involving a massive financial turnover. Before finalizing transactions, we need to consider many nuances. Among these nuances, taxes that both the buyer and the seller must pay should certainly be included. Both parties in the transaction are required to fulfill their tax obligations.

When purchasing real estate, the buyer needs to consider that the amount of tax payments usually amounts to about10%from the total cost of housing. This is quite a significant amount that should be taken into account when raising funds for the transaction, including both personal and borrowed funds. It is important to understand what taxes are associated with purchasing property.

New real estate

If you decide to buy a new property directly from the developer, this process, regardless of its future use (for personal residence, for rental purposes, or other needs), is subject to taxation in the form of value-added tax (VAT).

The term "new real estate" refers to a property that is being sold for the first time after its construction or renovation and has not been used for an extended period exceeding two years.

The VAT rate on the purchase of housing in Spain is10%from the agreed price, except for the Canary Islands, where the Canary Islands General Indirect Tax (IGIC) is applied at the rate6.5%These rates may vary depending on whether it concerns housing that falls under the category of social protection or public construction.

Tax on the transfer of ownership rights

In addition, individuals purchasing new real estate must pay the property transfer tax and documentary actions tax (ITP-AJD), particularly regarding the documentary actions (AJD) part. This tax is also a certain percentage of the property's value and is transferred to the level of autonomous communities.

Thus, the AJD tax rate varies depending on the location of the property:

• The lowest fee for notarial documents is usually0.75%that is relevant for the Canary Islands and Madrid.
• In the Basque Country and Navarre —0.5%.
• The rate in1%used only in La Rioja.
• Rate1.2%— in Andalusia and Asturias.
• Rate1.5%— in a number of other regions, such as Aragon, the Balearic Islands, and others.

It is important to pay attention to which specific rate is applied in each particular case.

Secondary housing

When it comes to purchasing secondary housing, VAT is not paid in this case. Such transactions are subject to the property transfer tax (TPO), which is another type of ITP-AJD. The TPO rate also varies depending on the autonomous community where the property is located and generally ranges between6%and10%from the total amount of the transfer of rights.

At the same time, there are various benefits that depend on a number of factors, such as the buyer's age, the presence of a disability, or belonging to large families. Therefore, before purchasing a home, it is advisable to find out what rate will be applied in the region where the purchase is planned.

It should also be noted that the transfer of ownership is formalized through notarial acts, which implies the payment of a fixed fee for documentary actions. This fixed amount pertains to the notarial paper required for the formalization and amounts to0.30 eurosfor the sheet and0.15 eurosper page of the document.