What taxes need to be paid when buying or selling a property in Spain?

What taxes need to be paid when buying or selling a property in Spain - Costaluz Lawyers

When buying or selling property in Spain, there are always multiple parties that are owed a share of the cake. Practically every transaction will involve a payment to a notary, a property registrar, an estate agent and, of course, the taxman.

Taxes to pay when selling a property in Spain

All transactions in Spain are subject to taxation. As a result, anyone looking to sell their home in Spain must consider three taxes: 

  • 1) IRPF (Impuesto sobre la Renta de las Personas Físicas). All personal earnings in Spain are taxed progressively depending on your income for that financial year. Along with your salary, income from property sales must also be declared on your annual income tax return. The IRPF rate in Spain varies from 19% for less than €12,450 to 47% for over €300,000.

  • 2) Municipal capital gains tax. This tax is charged by the local town hall when a property is sold. The IIVTNU (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana) taxes any increase that occurred to the value of the urban land where your property is located during your ownership of the property. This needs to be paid within a month of the sale. 

  • 3) IBI (Impuesto sobre Bienes Inmuebles). This is a type of council tax paid to the local town hall annually. When a sale takes place, however, the two parties must come to an arrangement about who pays the tax for the remaining portion of the year. Either the amount can be split proportionally in relation to the sale date or the seller can pass on the remaining tax by increasing the final sale price.

Taxes to pay when buying a property in Spain

The taxes payable on a property that you purchase can vary. Factors such as the type of property, the municipality it’s in and total floor space have to be taken into consideration.

If you’re purchasing a brand-new property, you’ll have to pay two types of taxes:

  • 1) IVA (Impuesto sobre el Valor Añadido). Value-added tax (VAT) is a general tax on the purchase of goods or services. VAT on new-builds is at a reduced rate of 10% and it is as low as 4% in the case of publicly-subsidised housing. This must be paid when the property is transferred into the buyer’s name, or when they sign the title deeds.

  • 2) AJD (Impuesto sobre Actos Jurídicos Documentados). This stamp duty is an indirect tax applied to transfers of property. It is applied to the purchase price and rates vary in each region.

On the other hand, if the property isn’t new, instead of paying VAT, the buyer has to pay the ITP transfer tax (Impuesto de Transmisiones Patrimoniales). This rate also varies according to Autonomous Community. In Andalucía, for example, it has been recently reduced to 7%, while in the Basque Country it’s as low as 4%.

There are also reductions available for certain demographics (under 35s, first-time buyers, people with disabilities, those with large families etc.).

It’s important to be aware that from the moment the property deed is signed or the transaction is closed, the buyer has 30 working days to pay the ITP and/or AJD. If the payment is late, penalties or fees will be charged. 

In the case of both transfer tax and stamp duty, these are payable at your local public tax administration offices.

If you require assistance with the administration of either the purchase or sale of a property in Spain, we can help. Get in touch for a no-obligation chat now!

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