Tax

In most French-speaking countries, when we talk about acquisition costs, we are referring to notary fees.

In Spain, the role of the notary is different. For example, the notary is not bound by any legal obligation regarding the carrying out of administrative checks related to a property purchase.

Spanish acquisition costs may include other elements. Various parties such as lawyers, agencies and specialist advisors are involved in a real estate transaction in Spain in addition to the notary. What fees must the buyer pay to each party? What taxes will he have to pay? How can I get an estimate? Answers.

How much are the costs of acquiring a property in Spain?

Buying a house or apartment in Spain involves paying several types of fees, taxes and duties. In order to know the overall amount, the acquisition costs are estimated at around 11% of the purchase value of the property excluding consulting and support costs. In more detail, there are 3 main categories of acquisition costs:

Notary fees:

They include both the remuneration of the latter, the costs of evaluating the property and the costs of registering the property in the property register. They are estimated at 1% of the purchase value with a minimum of €1,500.

Taxes:

ITP, IVA… this category varies depending on the type of real estate (old or new), see below.

Other costs:

• Lawyer fees (between 1% and 4%) or specialist advisor fees (3% on average, paid only if the project is successful);

What are the expenses associated with buying an old property?

A good part of the costs and taxes goes into the coffers of the various administrations. A sum which, on average and depending on each Autonomous Community, is between 8 and 12% of the price of the house.

What taxes are we talking about?

The most important of all due to its amount is the property transfer tax (ITP). For more information on the ITP. This tax is paid in second hand or second transmission. Let us specify that it can be a brand new house, but in which a first transfer to a financial institution has already been made, for example, and whose purchase is already considered a second transfer and, therefore, does not carry VAT.

The management of the ITP is entrusted to the autonomous communities and its percentage varies between 6 and 10%. We invite you to check on the website of each Autonomous Community. The percentage will be applied to the value of the property transferred.

Documented legal acts (AJD), in the case of second-hand housing, it only applies at the time of establishing the mortgage, on the amount thereof.

Costs of sale

Now you have to add the costs of the sale. Here are some of them:

• Public deed at the notary's office. The notary's fees are set by regulation and their amount depends on the amount of the housing. Although it can be increased by aspects such as the number of copies, extension of the deed, etc. A reduction in rates is applied to social housing and subrogations.
• Registration in the property registry. These are the costs generated by registering the sale and purchase in the property registry. They are set by regulation and their amount depends on the price of the property.
• Management. In charge of collecting all the paperwork and payments. This is especially important when the transaction involves a mortgage. Their prices vary depending on the paperwork they have to do, both for the sale and for the mortgage.

Mortgage Loan Costs

The usual thing is that a good part of the buyers resort to a mortgage loan. Here more expenses and taxes are added that this implies. These expenses can vary depending on the entity that deals with it.

• Opening commission to the financial institution: this is charged at the time the loan is granted for the costs of analyzing the viability of the operation faced by the financial institution.

• House valuation. This depends on the size of the property.

• Property register. In addition to the registration of the sale, the mortgage deed must be added.

• Notary: the notary is the one who gives public proof of the deeds of sale and the mortgage loan.

• Agency processing fees: administrative procedures (registration, payment of taxes, etc.).

• Damage insurance: The person requesting the loan must take out, by legal obligation, damage insurance which covers the value of the property appraised.

• The constitution of a mortgage loan is subject to the Tax on Documented Legal Acts (AJD), a tax that depends on the Autonomous Community and which is between 0.5 and 1.5% of the value of the mortgage guarantee and which we have discussed in detail before.

After checking all these concepts, it is advisable to have at least 30% savings, since the mortgage usually represents a maximum of 80% of the estimated value of the apartment.

What are the expenses associated with purchasing a new property?

Unlike the second-hand house, which we talked about earlier, the main tax for the purchase of a new property is VAT. This tax belongs to the State and represents 10% of the price of the property and 4% if it is an official protection under a special regime. This VAT is also applied to parking spaces purchased with the house, up to a maximum of two.

In case the new parking spaces are purchased independently, they will be subject to 21% VAT.

In the new property taxes, the documented legal acts (AJD), are paid twice: on the purchase amount and on the mortgage. As it is transferred to each autonomous community, they can decide what the percentage is. This tax is levied on the legal documents necessary for the transmission of the property and corresponds to a percentage of the value of the property.

Currently, it is between 0.5% and 1.5% of the price of the property, depending on the location of the property. In turn, it applies to the constitution of the mortgage, more precisely to its amount, also depending on the amount.

But this tax is full of exceptions in each Community. An example to prove it. In Andalusia the general rate of the AJD on the loan is 1.5%, but if the buyers are under 35 and the value of the loan does not exceed 130,000 euros, 0.3% is applied in the constitution of the mortgage loan.

This indicates that a new house pays VAT (10% or 4%) and AJD (0.5% – 1.5%).

These are the taxes of a new or first-time home, regarding the costs, both of the sale and of the mortgage, they do not differ from a second-hand home.

• Public act at the notary's office
• Registration in the property register
• Management
• Home appraisal
• Mortgage Loan Opening Commission
• Assurance

It is important to note that in the event that the buyer acquires a new home from a developer and takes over the mortgage (this is not obligatory), he will not have to pay the housing valuation costs or the opening commission.

In total, including charges and taxes, a new home without a mortgage results in an addition of approximately 13% to the price of the property.

Buying a new or old home: what are the differences?

As we explained above, regardless of the type of property purchased, the notary and property registration fees are the same. While these fees are comparable between the purchase of an existing property and the construction of a new home, this is not the case for the taxes that future owners are liable for.

Taxation when buying an old home in Spain

This formula has a number of advantages: available immediately, access to privileged neighborhoods, charming housing, etc. However, you will have to pay the wealth transfer tax, also called "Impuesto de Transmisiones Patrimoniales" or, more generally, "ITP". This tax varies from 3 to 11% depending on the region of Spain. It represents 10% of the purchase price of the property in the Comunidad Valenciana, 8% of the amount of the property in Andalusia, etc. In particular, you will need to add the notary fees.

Taxation in the context of new construction or housing

When purchasing a new home or a construction project in Spain, the tax paid by future owners is different from that of an old home. To benefit from the quality of a new home, the buyer must pay the Value Added Tax ("IVA") which corresponds to the Value Added Tax (VAT) in France. Called Impuesto al Valor Añadido in Spain, this tax represents 10% of the value of the property.