Buying a house in Spain involves related taxes and expenses, which amount to a lot extra on top of the purchase price. For this reason, buying a property and only thinking about its price tag is a big mistake.
Related taxes and expenses can add a lot to the price so you need to factor them into your budget. For example, the taxes alone represent around 10% of the price of the house. And recent changes in the property tax law mean these taxes are calculated in a slightly different way.
What is the Property Tax? Is VAT or Transfer Tax?
The answer to this question depends on the seller and the type of property.
Buying a new home
If you’re buying a new house in Spain, ie from a developer, you pay VAT at 10% (this is reduced to 4% if the property is social housing). In addition to this, you have to pay stamp duty: the rate varies between the different regions in Spain. There are also varying bonuses and discounts in the regions.
Read your free guide to buying property in Spain.
Buying a resale home
If you’re buying a resale property from an individual seller, you pay a transfer tax. It is subject to variations based on location, the use and the condition of the buyer. Every region has its rules and rates. For example, the current rate in Andalucia is 7% of the purchase price.
Can the property be registered before payment of taxes?
If you’re buying a property, you must pay property tax (VAT or Transfer Tax) before you can register the property in your name. When it comes to Plus valia (a local Capital Gains Tax paid by the seller), the vendor must pay this so that you can register the property. If the seller is reluctant to pay the tax, the buyer can inform the Local Council so the property can be registered.
What is the value we take as base for Transfer Tax calculations?
A new Law to prevent and fight against tax fraud has recently made an important change on the value we take for the calculation of this tax.
Previously, the base for the tax was set according to the real value, which unless proven otherwise, was the one declared by the taxpayer in his self-assessment.
Under the new law, the tax base is the reference value: a value set by the Land Registry on statistical data.
To ensure you pay all the right taxes and can duly register your property, use the services of a real estate lawyer. Our team has been helping foreigners buy property in Spain with complete peace of mind for over 15 years. Get in touch for a free consultation now.
Maria Luisa Castro
This material is fabulous! It’s full of incisive information and the points you make are rational and solid. Also thanks for sharing information about Recent changes in Property Tax Law when buying a house.
Thanks, Charles!