Blog What are the Costs & Taxes When Buying a Property in Costa del Sol?
One of the most common questions from buyers is: What is the cost of buying a property in Spain? This guide gives you a complete list in order to plan your budget and think ahead.
Please note that Spain has numerous regions with distinct rules and taxes. This guide refers only to taxes applicable in Andalusia only.
1. Resale (second hand) properties in Andalusia
When buying a resale property in Andalusia, the regional land transfer tax known as ITP or “Impuesto Sobre Trasmisiones Patrimoniales” applies. The rates are as follows:
(i) 8% applicable to the initial bracket of €0-€400,000 of the purchase price.
(ii) 9% applicable to the second bracket of €400,000-€700,000 of the purchase price.
(iii) 10% applicable to third and final bracket of €700,000 and above of the purchase price.
The ITP therefore applies to resale purchases and consists of the bulk of the transaction costs. No other taxes apply.
By way of example:
If someone buys a resale property for €200,000, he will pay 8% ITP totalling €16,000, as the whole of the purchase price falls within the first bracket.
Whilst if someone else buys a resale property for €1,000,000, he will pay 8% ITP on the first €400,000 (€32,000 of ITP), together with 9% ITP in the amounts between €400,000 and €700,000 (€27,000 of ITP) and 10% ITP in the amounts between €700,000 and €1,000,000 (€30,000 of ITP); therefore, paying a total of €89,000 of ITP.
ITP becomes payable upon completion of the purchase (when title is transferred at the notary). It is paid by your lawyer or filing agent (gestor) within 30 days from completion.
2. New-Built properties purchased from a developer
When buying a new-built property from a developer, a national tax known as IVA or “Impuesto sobre el Valor Añadido” will apply. IVA is the equivalent of VAT or “Value Added Tax” in the UK and Ireland.
The IVA rate applicable to a completed dwelling (such as an apartment, townhouse or new villa) is 10%. Unlike ITP, this rate applies irrespective of the value (there are no separate brackets).
Buyers should be aware that it is normal for Spanish developers to advertise prices exclusive of IVA and other applicable costs.
IVA will apply to the overall price and any instalments paid before completion. Therefore, if for example, buyers need to pay 30% before completion, they will need to pay 30% plus IVA and the remaining 70% plus IVA on completion.
In addition to IVA, buyers should be aware that new-built properties are subject to another tax known as “Acto Juridico Documentado” or stamp duty (AJD). The rate of AJD is 1.5% of the purchase price. AJD does not apply to resale properties.
Therefore, the total taxes applicable to purchases of new-built properties are 11.5% of the purchase price.
The taxes applicable when buying a land depends whether the seller is a company or an individual.
If the plot owned by an individual and it is a standard resale transaction the regional tax of ITP. The applicable rates are the same as the ones discussed above for resale properties. No other taxes would apply.
If the plot is owned by a company or is located in a new urbanisation (for example, parcels located next to a new urbanised road), the national tax of IVA (or VAT) will apply. However, the rate of IVA for land is the standard rate of 21%, unlike the discounted rate of 10% applicable to finished properties and constructions).
Therefore, if someone plans to buy a plot to build a family home, he will pay 21% IVA on the land and 10% IVA on construction costs.
4. Other additional costs
Buyers should also contemplate other necessary costs when planning their budget. The main costs are:
(i) Legal fees: Most lawyers in Costa del Sol will charge a fixed fee of 1% of the purchase price in accordance with the recommended rates of the Malaga Bar Association.
(ii) Notary: Notary costs depends on a case-by-case basis but could be anywhere between €500 and €1,500. Unlike other countries in Europe, Spanish notaries do not charge a percentage of the purchase price. The notary fees include final searches on the land registry and notarising the purchase deeds (escritura).
(iii) Land registry: Registry costs also depend on a case-by-case basis but could be anywhere between €300 and €500.
5. How to plan a budget
When planning a budget, one should consider the additional costs in conjunction with the applicable tax.
In practical terms, this means the following:
(i) Resale purchases up to €400,000 will have overall costs of 10% (8% to cover land transfer tax and the remaining 2% to cover legal fees, notary and land registry). The values need to be adjusted for properties with a higher amount.
(ii) New-built properties of any value will have overall costs of 13.5% (10% IVA, 1.5% stamp duty and 2% to cover legal fees, notary and land registry).
Please note that this article is mean as an overall guide of taxes applicable on purchases in Costa del Sol. There are special tax allowances and rates that apply to developers or first-time-home buyers, so readers are advised to contact us or to consult with their lawyer before any purchase.
6. What if I buy with a mortgage?
Spain recently passed a mortgage law in 2019 to protect buyers and reduce costs. Prior to the reform, buyers had to pay AJD of 1.5% on the amount of the mortgage, as well as other costs.
Now AJD is paid by the bank. However, buyers should be aware of other costs, such as life insurances and charges from the bank´s filing agency.
Warning: Please note that this article is a general guide on
costs and taxes. If you require specialist advice or require clarifications,
please feel free to contact us or your relevant accountant or lawyer.