Buying a second-hand property not only involves paying the price of the property, but also a series of taxes and expenses that must be added, which range between 10% and 15% of the value of the property.

In terms of taxes to be paid when buying a second-hand property, the buyer will have to pay the Transfer Tax (Impuesto sobre Transmisiones Patrimoniales, ITP), and the Real Estate Tax (Impuesto de Bienes Inmuebles, IBI).

  • ITP: The ITP is levied on property transfers, and is payable by the buyer who purchases a second-hand property. The rate varies between 4% and 10%, as this tax is set by each Autonomous Community. For more detailed information on the Property Transfer Tax, see this page of the Ministry of Finance.
  • IBI: This tax is paid annually by all property owners. Each year on the 1st of January it is the owner who is responsible for paying this tax. However, a 2016 Supreme Court ruling established that the IBI must be paid between the buyer and the seller proportionally, based on the number of days that each has owned the property in the year in which the sale and purchase takes place. This apportionment must be agreed between buyer and seller and be reflected in the title deed.

What expenses must be taken into account?

When it comes to the expenses that the buyer has to bear in the purchase of a property, a distinction must be made as to whether the purchase is made in cash or with a mortgage.

If the purchase is in cash, the expenses will be lower, as only the notary’s fees and the Land Registry fees will have to be paid.

  • Notary. All deeds of sale must be signed by the notary, who will also check the identities of the buyer and seller, the registration status of the property, the methods of payment, etc. All notaries charge the same, as their fees are set by the government based on the price of the property. These are between 0.2% and 0.5%.
  • Land Registry. The buyer of the property will have to go to the Land Registry to register the deed once it has been signed by the notary. And also to the Land Registry before the sale and purchase transaction to request a report to check that the property is free of encumbrances. The price of the report is around 9 euros, while the price of registration depends on the value of the property, though it is usually between 400 and 650 euros.
taxes second hand property spain

When the purchase is carried out with a mortgage, the costs are higher. However, since the entry into force of the new mortgage law, it is the bank that has to pay the lien on the mortgage loan. The rate varies between 0.5% and 2% of the price of the property, depending on the Autonomous Community in which the property is located. Thus, it is the banks that have to pay the notary’s fees, the Land Registry and the Stamp Duty Tax.

The costs incurred by the buyer of a second-hand property with a mortgage are the same as for a cash purchase (notary and Land Registry). Plus the following additional costs:

  • Valuation of the property. The market value of the property is the collateral for the mortgage loan requested from the bank, so an expert valuation is always mandatory. Its price is between 300 and 500 euros. In some cases, the bank may reach an agreement with the buyer to cover these costs.
  • Mortgage origination fee. This is the commission that has to be paid to the bank when the mortgage is formalised, which can reach 2% of the loan. However, just as in the previous case, if the buyer formalises the loan, this commission may not be charged by the bank.
  • Copies of the title deed. This is a minimal expense, but if the buyer wants copies, the cost will have to be borne by the buyer.
taxes second hand property spain

How much is the VAT on a second-hand property?

Contrary to what happens with the purchase of a new home, where you have to pay VAT, the purchase and sale of a second-hand home is exempt from this tax. Instead, you have to pay the Transfer Tax (Impuesto sobre Transmisiones Patrimoniales), as we have seen in the previous sections.

However, if the buyer of a second-hand property is self-employed or a professional and wishes to use it as an investment (either to rent it out or to resell it), it is possible to pay VAT instead of ITP, as the buyer will be able to deduct the VAT in the corresponding tax return.

At Sonneil we can help you with all the formalities involved in the purchase of your property. We offer legal assistance in all matters relating to the purchase!