Taxes you need to pay to buy a house in Spain
Buying a property is an important decision because of the amount of money involved, and you need to be extra cautious.
Value Added Tax (IVA)
Do I have to pay IVA (Value Added Tax) when I buy a property in Spain? Only for commercial properties. According to the VAT Law, when buying a new property, the buyer has to pay IVA to the seller; if it is a second-hand property, there is no VAT to pay. The VAT is paid directly by the buyer to the seller, who then submits it to the tax office. The current law provides for a 10% VAT rate on housing.
Property Transfer Tax (ITP)
As mentioned above, if it is a new house, then the buyer only has to pay VAT. On the contrary, if it is a second home, then the buyer needs to pay the property transfer tax (“ITP” in Spanish). The transfer tax should be declared and paid by the buyer to the tax office. The rate of the transfer tax is set by the local government, so it varies from place to place. In Catalonia, for example, the default is 10%, while in Madrid the default is 6%.
The transfer tax and the VAT cannot be paid at the same time, but one or the other depending on the situation. All rights reserved . Local authorities may reduce the tax rate depending on the individual circumstances of the buyer, such as young people buying a house, housing or families with many children.
Property tax (IBI)
The IBI, directly translated, is a tax on real estate. It is a tax levied on the owner of real estate and is collected annually by the local municipality. The tax is not payable at the time of purchase, but annually after the purchase of the property. Nevertheless, during the purchase process you need to verify that the seller has paid all the taxes for the previous years, as the tax risk will be transferred to the buyer.
Related article: Spanish IBI real estate tax explained
Stamp duty (AJD)
There are two types of stamp duty in Spain:
- Fixed Stamp Duty. This is based on the number of pages of the notarial deed of sale and purchase of the property and is 0,15€ per page.
- Floating Stamp Duty. This is calculated on the price of the property. The tax rate varies from region to region and is around 0,5-2,5%.
In Madrid, for example, the default variable stamp duty rate is 0,75%, while in Catalonia it is 1,5%. It is important to note that there is no variable stamp duty for the purchase of a second home from a private individual (not a business).
