One of the most common mistakes when buying a house is miscalculating the final price, including the additional costs and taxes. Some of these costs are fixed, whereas others will vary depending on a number of factors.
Regarding the applicable costs, the purchase of a new property is a more complex transaction than the purchase of an existing one. Additional issues must be taken into account when dealing with new or under construction properties. Moreover, particular attention must be paid to planning permission, building regulations consent, structural guarantees, easements and reservations, advance payments securities, compensation for delay and existing mortgages.
- Usually, purchasers are committed to paying a first deposit of 3000 €, this is a preliminary contract. At this point, the property will be taken off the real estate market. This deposit is normally non-returnable once contracts have been exchanged. When the preliminary contract has been signed there is usually a period of 2-3 weeks for the buyers before they sign the main contract. You can read more about the steps involved in the purchase of the house in this section.
- To prepare the property conveyancing, the buyer will need to hire a solicitor. To ask for an estimate of how much it would cost, you can reach out to the Legal & Tax Help through the contact form on this page.
- Since the transfer deed must be signed in presence of the Notary Public, notarial charges will apply upon completion. These charges will depend on the price of the property.
- The transfer of freehold properties will normally attract Transfer Tax at rate of 8% of the purchase price. This is a local Government tax payable by the buyer to the local tax office. In the case of new residential property transactions, there is mandatory VAT to be charged normally at the rate of 10% of the purchase price. In case you are obliged to pay VAT when buying property, the regional Government will levy an additional 1,5% for stamp duty.
- A liability to Capital Gains Tax may also arise on the sale of a property each time the ownership of a property is being transferred. As a result, the seller will be obliged to declare his capital gains or losses to the Spanish tax authority. If the seller is a resident in Spain, the balance will have to be declared through Form 100, whereas non-residents will use Form 210. In case the seller makes a profit on the transaction, he/she will be also subject to IVVTNU (plusvalía) – a tax that is paid locally.
- Real State Tax/Rates (IBI). This is an annual local tax, i.e. levied by the City Hall which is paid by real estate owners.
- Income Tax: Homeowners who don’t have their tax residence in Spain and use their property strictly for private purposes – that means, not renting it out – have to pay the non-resident tax every year. In this case, the tax base will be 1,1% or 2% of the cadastral value, which is specified in the IBI. Whereas 2% is the general applicable percentage, 1,1% is applied if the cadastral value has been revised, modified and enforced during the last ten tax years.
Please note that the Spanish tax year is the same as a calendar year (1st January to 31ST December), unlike the UK which is from 6th April to the following 5TH April. In case you need assistance to understand the applicable rates in your case, feel free to contact Legal & Tax Help.