There will of course be costs associated with owning a property in Spain. Some of these will be maintenance costs, such as cleaning, repairing, reforming, utility bills, rubbish collection, and so on, but apart from these general costs , there are a number of costs in the form of taxes and fees that property owners in Spain face.
Property Ownership Tax (Impuesto Sobre Bienes Inmuebles – IBI)
A local tax on the ownership of property in Spain, irrespective of whether the owner is a resident or not. Calculated on the basis of the valor catastral (an administrative value that is usually lower than the market value, sometimes considerably so).Set by the town hall, the tax rate goes from 0.4% – 1.1% of the valor catastral depending on the Spanish region.
Personal Income Tax (Impuesto sobre la Renta de No Residentes – IRNR)
Non-residents who own property in Spain have to pay an annual income tax that varies according to whether the property is rented out or not.
Not rented out
Non-resident property owners who do not rent out their property and who do not have any other source of income in Spain pay income tax based on the value of their property. The tax rate is fixed as 25% of 2% of the valor catastral of the property, i.e.
The tax on a property with a valor catastral of 200,000€ would be as follows:
Property value for tax purposes = 200,000€
Taxable base (2%) = 4,000€
Tax (25%) = 1,000€
If non-residents rent out their property and receive an income in exchange, they are obliged by law to declare this income and pay taxes on it. The taxable base and the tax rate will be determined by the laws as they apply to each person’s particular circumstances (taking into account the double taxation treaty – if any – between Spain and the country of origin of the non-resident). In many cases non-residents simply pay a flat rate of 25% of the gross income they earn from their property in Spain.
Residents in Spain will have to pay the income tax based on their income earned during the year. The tax rate depends on the level of income.
Owners of property that is part of any development, building, or complex in which common zones are shared with other owners are by law obliged to be members of the community of owners, know as the Comunidad de Propietarios. This will entail paying community fees for the upkeep of the common areas, and any other services that the community vote for. The fees will vary according to the magnitude of the common areas, the costs of maintaining them, and the services that the community vote for. A budget for annual community expenses is approved by majority vote of all owners (or representatives) who are present at the annual general meeting of the Comunidad de Propietarios.
Household insurance will vary according to the circumstances of the owner and the type of property. However it should be born in mind as a cost that all property owners will face.
You are strongly advised to hire a lawyer to help you during the buying process. Your lawyer drafts and reviews contracts on your behalf and can explain all the legal and administrative issues you face. Your lawyer should also carry out any necessary due diligence (checking ownership claim of the seller, charges on the property, permits, etc.) and arrange all the required documents to complete the process (property registration, tax payments, etc)
If you do not have a Spanish solicitor or Asesoria, we can recommend a reputable local one for you, who speaks English.
As a buyer of property in Spain there are a number of costs and taxes over and above the property price that you will have to pay and it is important to be clear from the outset the real costs you will face when you buy property in Spain
Depending upon whether you are buying a new property from a developer, or a resale property from a private individual, you will either have to pay VAT & Stamp Duty, or a transfer tax. The different cases are explained below, along with the other costs and taxes that are common to both cases
Buying a New Build Property from a Developer or Bank
These taxes apply for residential properties being sold for the first time (never previously occupied), or for commercial properties and plots of land. This is a national tax, so VAT is the same wherever the property is located
At present VAT (known as IVA in Spain) is 10% on the purchase price of residential properties (villa, apartment, etc), and 21% for commercial properties and plots of land
The Stamp duty (known as AJD) is 1% of the price of the purchase, but may be dearer in some regions
Both VAT and Stamp Duty are paid by the buyer, and if any deposit is paid before completion of the sale, such deposit will be subject to VAT at the moment of payment of this deposit
Buying a RESALE from a Private Individual
This tax applies if it is not the first time a property is bought, and is paid by the buyer. Stamp duty is included in this tax and you must pay this tax before the Escritura (title deed) can be registered in your name
The Transfer Tax rate is decided by the autonomous region where the property is located, and they can choose to apply the general rate, or their own rate
The general (national) rule of ITP is 7%, but many regions charge higher local rates
Income Tax Provision When Buying From Non-residents
If the seller is not a Spanish resident, 3% of the purchase price has to be withheld and paid to the tax authorities
Notary expenses are always paid by the buyer and are calculated in relation to the purchase price declared in the deeds of sale.The Notary’s fees can vary between 450€ to 1000€ but average at 1% of the declared value of the property
Estate agency fees or commissions are paid to the agent by the seller. Agents charge between 2% and 15% of the sale price and you may be asked to contribute to the cost if more than one agent is used. As a rule, the cost is built into the sale price
A lawyer – Abogado in Spanish – will charge you according to the service you require. This will vary according to the complexity of the purchase. Many charge around 1- 1.5% of the purchase price
If you choose to buy with a mortgage then this will incur several additional costs. First there will be the property valuation that the mortgage provider will require before granting the mortgage. This is paid for the by the buyer and can cost around 500€. Then there will be the costs of the mortgage itself. This varies according to the provider, and even according to the particular branch. However there is usually some kind of opening fee of around 1% of the value of the mortgage. Finally a mortgage will increase the Notary expenses
To pay for the property, you will more than likely need to write a banker’s cheque or make a money transfer. In order to do that, you will need to open an account in a Spanish bank and transfer money from the bank in your country. The cost of transferring the money can go up to 0,4% of the amount transferred. The banker’s cheque will most likely cost 0,5% of its amount. Currency Exchange companies offer a more competitive rate for transfers than banks and we can put you in touch with some we have used in the past
In Summary, allow for up to 15% of the purchase price in taxes and other costs
Once we have helped you find your ideal property or building plot, you will be asked to pay a €6,000 deposit to reserve the property for you whilst the paperwork is being checked. The deposit is held by the agent or solicitor and is always refundable if there are legality issues which cannot be resolved at or before the time of purchase. However, should you pull out of the deal for any other reason, your deposit is forfeited under Spanish law
Once the paperwork has been checked and you have been given the green light to go ahead by your solicitor, we move to the Compra-Venta (Purchase Contract)
The contract will be drawn up by our legal representative, and will show details of the property, the agreed price and a proposed completion date. The reservation deposit is increased to 10% of the purchase price and once you sign the contract and pay the balance of the deposit, the contract is legally binding for all parties. The deposit is paid to the seller.
On completion day, the sale is completed in front of a Notary and the balance of the purchase price is paid. If you pull out of the deal after signing the Compra-Venta and before the sale completes, your deposit is forfeited as allowed for by Spanish law