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If you are thinking about buying property in Spain, it is important that you know what taxes are paid and the cost of buying a house. Although the amount of taxes in Spain varies depending on the price of the property, it is advisable to take this into account before you embark on a purchase.
Also, here you have some other things to consider when buying a house in Spain.
After all, enjoying a home in Spain also has its formalities.
Buying property in Spain: taxes
They are not many, I promise. But they are very necessary. If you wonder how to buy real estate in Spain, start with getting familiar with this. These are the taxes that you will have to pay when buying property in Spain.
VAT IVA
The Value Added Tax, or VAT (IVA, for its acronym in Spanish), is an indirect tax on consumption.
In 2020, the tax rate is 10% of the purchase price of housing and 21% for commercial properties and plots of land. A 21% rate is also applied if a certain number of properties is exceeded and not purchased in lots. For example, if you buy a house with two garages and a storage room, you will pay 10% of the overall price. However, if you add an extra garage or storage room to that lot, that property will be taxed at 21%.
This is a national tax, so it is the same wherever the property is located, with the exception of the Canary Islands, where it is 6.5%.
If a deposit is paid before completion of the sale, said deposit is also subject to VAT applicable at the time the deposit is paid.
Stamp Duty
If you are buying propery in Spain with a bank mortgage, then you will have to file this tax. It taxes the signature before a notary public and the inscription of the ownership of a property in the Land Registry. Good news: since 2018, this tax is paid by the bank that grants the mortgage. The tax rate varies depending on the autonomous community. In the Valencian Community, for instance, it is 2% of the price of the property.
Real Estate Tax
As they say, he that would have the fruit must climb the tree.
The Real Estate tax (or Property tax in Spain) will be paid once you own the property. It is a local tax that is levied on the ownership of a property, whether you are a resident in Spain or not. The tax rate varies according to the region where it is applied and is calculated based on the cadastral value of the property. The cadastral value is the administrative value attributed to the property, based on the value of the land and the construction. More good news: the cadastral value is usually lower than the price of the property.
Non-Resident Income Tax. Form 210.
When it comes to real estate in Spain and knowing what taxes are paid when buying propery, non-residents should take into account how to pay the Non-Resident Tax. This tax varies depending on whether the property is rented or not.
- If you plan to rent the house and, therefore, receive an income, you must declare it and pay taxes on this income. The tax varies depending on to the circumstances. In many cases, you simply pay a tax of 25% of the income from renting the property.
- If you are not planning to rent it out, the tax is paid according to the value of the property (25% of 2% of the cadastral value).
If you are a foreigner but resident in Spain, you will pay this tax according to the income obtained during the year.
Capital Gains Tax on property
Whether you are a resident or a non-resident, if you own property in Spain you must present the Capital Gains Tax on property. You will submit it as long as:
- The value of the property exceeds 700,000 euros and the result is payable. The value of the property exceeds 2,000,000 euros, although the result is negative.
- If it is your habitual residence, you only have to file it if it exceeds 300,000 euros.
Watch out!: The Capital Gains Tax on property in Spain changes on a regional basis. For example, in the Comunidad Valenciana, the minimum is 600,000 euros. Check out the corresponding legislation.
Come on, there is less left!
(Btw, maybe you are wondering “Is it good time to buy property in Spain?”. Yes, it is. Check this out).
Costs when buying property in Spain
In addition to the taxes you pay when buying property in Spain, it is also good to consider the additional costs that may arise.
Land Registry
Once the notary public has signed the deeds, it is advisable to register the purchase in the Land Registry. The cost of this procedure also depends on the price of the property. It usually ranges from 400 to 650 euros.
In the event that there is a mortgage, the bank that grants it is the one responsible for the payment.
Notary fees
Leave it to the experts. When it comes to drafting and signing the deed of sale, the work of the notary public is essential to ensure that it is well done. Some of the tasks of the notary public are to confirm the encumbrances on the property (if any), to check the distribution of the costs of the sale, to attest to the authenticity of the document…
The notary fees are calculated based on the price of the property and the complexity of the deed, the length, the number of copies, etc. If there is a mortgage, the bank that grants it is the one responsible for the payment.
Bank costs
When transferring money from abroad to Spain, transaction costs may arise, especially if you use a currency other than the Euro. The help of a currency exchange specialist can reduce these costs.
Please note: the bank also charges for issuing the bank transfer to pay for the property. Be sure of the costs!
Legal fees
Don’t be afraid of the fine print. You can count on the services of a lawyer who specializes in these types of contracts. The lawyer may represent you before the notary public, carry out procedures on your behalf at public institutions, handle your application for a Foreigner Identity Number (NIE), etc. Hire the services of a lawyer before signing any type of document or paying deposits.
They are independent professionals, so the legal fees are not regulated and usually vary.
Mortgage fees
When you apply for a loan at a bank, you will probably be charged a commitment fee. This is basically what you have to pay to the bank for applying for the mortgage. This amount is deducted from the money you are loaned and is usually between 0.25% and 3.00%. It is important to know that not all banks charge this fee. And, if they do, you can negotiate the percentage.
In addition to the commitment fee, we must not forget the life insurance and the home insurance, which will be deducted from the amount of the mortgage.
Keep in mind that you will have to pay a property valuation. Depending on the entity that values the property and the valuation of the property, this procedure usually costs between 250 and 800 euros. The valuation will be valid for up to 6 months from the date of issue.
Good! Now you know what taxes are paid when buying a house in Spain. Don’t let these formalities bother you. With the help of professionals, you will carry them out in the blink of an eye.
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