Property Purchase Costs
The costs of buying property in Spain
Buying your Spanish property will generate numerous costs in addition to taxes, and it is not always obvious why you are paying them or to whom. This guide is intended to clarify any doubts that you may have.
The buyer pays:
- The seller, the agreed purchase price, less the deposit.
- The property finder is contracted by the buyer and will be paid the agreed fee on the day of completion of the sale.
- Lawyers’ fees are usually 1% of the purchase price plus 21% VAT (IVA) but could vary depending on the complexities attached to a property purchase.
- Notary fees are set by the Tariff & Regulatory Fee and are usually between 0.5% – 1% of the price declared in the title deeds.
- Registry fees are also set by a tariff. Allow for 1% of the value on the deeds.
- Transfer tax is 8% of the purchase price under 400,000€. 9% between 400.000€ and 700,000€ there after it increases to 10%. When buying a new property from a developer the purchase tax is replaced with 10% VAT (IVA) plus 1.5% stamp duty. However, if you are buying a plot of land or a commercial property then 21% VAT (IVA) will be added.
- Bank costs you will need to write perhaps several banker’s cheques or pay for money transfers. Allow 0.5% of the amount to be transferred some banks may waiver some of this amount should you decide to take out a home insurance with them.
- Mortgage costs if you require a mortgage then you will need to account for a valuation approx. 500€ plus the arrangement fee. There will be additional notary fees as you will need to sign a separate title deed for the mortgage.
The seller pays:
- The estate agent is normally contracted by the seller and will be paid by the seller for their services.
- Plus Valía is the municipal tax based on the officially assessed increase in value of land since the current seller purchased the property. The rate can vary considerably so the exact amount would be obtained from the town hall. Buyers need to be aware that if the seller is a non-resident in Spain and the tax is not paid they will be responsible to pay for it. The lawyers will make certain that there is a retainer held to cover the plus valia in this case.
Running costs of a property in Spain
- IBI (Property Ownership Tax) or otherwise known as ‘contribución urbana’ is a local annual tax based on the ‘valor catastral’ the cadastral value of the land and building. This value often does not match the market value or even the value stipulated on the title deeds. The rate is decided by each municipality and will vary considerably.
- Rubbish Collection Tax (Tasa de Recogida de Basuras) This tax will vary depending on the type of property and the location. The rate is set by the local council and is usually paid once or twice a year.
- Water and Sewerage Rates (Tasa de Abastecimiento de Agua y Alcantarillado): This is normally a quarterly payment and the rate is set out by the local council and is based on water consumption. In some case water rates are paid as part of the community fees.
- Community Fees: If the property is part of a community with shared communual areas such as swimming pools, spa, gardens, internet/WIFI, garages/parking, along with entrance halls and corridors these all must be maintained by the community which is set up once the building or development has been completed. The administration of a community is decided by the property owners at the AGM where a president and vice president will be elected and normally this responsibility is rotated between all of the property owners. The accounting is normally carried out by a Gestoria (management agency that takes care of administrative procedures, finances and paper work). The community fees and how often they are paid are set out by the community office.
- Income Tax for non-residents (IRNR, Renta de No Residentes):
- If the owner rents the property they must pay 20% of the rent (24% if the tenant is a non-EU citizen).
- If the owner uses the property, he or she must pay 20% of the 1.1% of the cadastral value (2% of the value if it has not been revised since 1994). For non-EU citizens the rate is 24%.
- Income Tax for residents (IRPF, Renta de las Personas Físicas): Any person who is a resident in Spain for more than 183 days per calendar year will have to file and declare all of their Income Tax annually, regardless of where the income was generated.
- Electricity: is a monthly payment and the bill is broken down into two sections. The first is a basic rate payable whether the property is occupied or not and the second is the consumption which is metered. However for most of the year the rate will be set out according to the estimated use.
- Landline telephone and Internet: There are many local providers with different rates and packages that may include cable TV services. These are normally monthly payments.
- Cleaning and Gardening Services: If you contract these services for your property the amount will depend on whether the people are paid an hourly rate or are contracted full or part time. If they are not self-employed or hired through a company, then you must bear in mind the additional cost of social security contribution which is 40€ of the monthly salary.