Taxes on the purchase and subsequent use of real estate

Having decided to buy real estate in Spain, you should familiarize yourself well with the Spanish tax system. In any country, tax is a very serious and responsible matter, Spain is no exception. Although, it is worth noting that the tax when registering the purchase of real estate in Spain is considered flexible, sometimes even ambiguous, because several factors affect the calculation of the tax amount. For Spanish real estate, there are the following types of tax:

1. IVA (Value Added Tax) – the buyer pays this tax only in the case of purchasing new housing from a developer company. This type of tax is paid immediately upon signing the purchase documents and the seller transfers this amount of money to the tax office.
2. ITP (property transfer tax) – the buyer pays this tax when purchasing real estate on the secondary market. It is paid within a month after signing the sales documents. Confirmation of payment of this tax is required to register the purchase and sale transaction in the Property Register.
3. IAJD (stamp duty or tax on the documentary execution of legal acts) – the buyer pays this tax when buying a new home. The amount of this tax depends on the region in which the purchased property is located.
4. IRPF (income tax) – the seller of real estate pays this tax when filing a declaration for the year (one-time, that is, for the year in which the sale of the real estate itself took place).

Having dealt with these main types of taxes related to the purchase of real estate, let's move on to specific interest rates. The above-mentioned IVA tax when buying a new property from a developer is 7% in Spain. If you buy a property from the secondary market, this tax will be 6-7% (for example, for Madrid and Catalonia this tax is 7%, in other regions of the country – 6%). Stamp duty in Spain is 1%, the fee for registering real estate in the State Property Register will be from 0.3 to 0.5%. Notary services for drawing up a loan agreement will cost you 0.5-1%, tax for drawing up a loan agreement – 1%. The bank will also take a commission for opening and maintaining a current account for a mortgage, which is 2%. From 250 euros per year, you can also take out insurance for your property. As a result, we have approximately 10-15% of the cost of housing total costs for taxes when buying real estate in Spain. This is not the end of the story with taxes, because there are also fees for the further use of the property you purchased in Spain. You, as a buyer, should also know about this. Our company DENIZ ESTATE is in a hurry to share this information with you. The first tax is a property tax, which is paid annually in December. The amount of tax depends on the cadastral value of the property (for example, if the property is worth up to 167 thousand euros, the tax will be 0.2%, from 167 to 334 thousand euros – 0.3%, over 334 thousand euros – 0.4%). The second tax is an annual municipal tax. It is paid once a year and is from 0.3 to 0.5 percent. The amount of tax depends on the region in which your property is located. The main purpose of paying such a tax is to improve the amenities and infrastructure of the city, since it goes to the local budget. The third tax is a tax on income from renting out your property. If you have purchased an apartment or a house in Spain in order to rent it out and earn money from it, then you should know that you must pay a tax for this type of business. It is 0.5% of the cadastral value of the property. In principle, we have considered the main costs of buying and maintaining real estate, it is only worth adding that some of the costs will also be for paying for utilities. We wrote about this in a separate article.