These are the taxes you will pay when buying a property in Spain

When buying a property, it is very common to have doubts about what taxes will have to be paid in each situation. Do I have to pay VAT? What taxes are the buyer's responsibility? And most importantly, how much money do I need to cover these expenses?

It is important to know that the acquisition of a property is always subject to the payment of taxes, but the same types of taxes are not paid in all situations. The applicable taxes will be different depending on whether you are buying a new or a second-hand property and the final amount will depend on other factors that we will address in this article. We will start by understanding what each of these taxes consist of and in what situations they will be paid.

What taxes will you pay when you buy a newly constructed property?

In the case of buying a new property you will have to pay two taxes: VAT and Stamp duty (AJD).

Value Added Tax (VAT)

The VAT is a tax that is applied to the purchase of newly constructed properties and its percentage is equivalent to 10% of the value in the deed. For example, if you buy a property for 150,000 euros, the VAT to be paid will be 15,000 euros. The 10% also applies to the annexes of the property, such as garages or storage rooms.

This percentage is common throughout Spain, except in the Canary Islands, where VAT is replaced by the Canary Indirect General Tax (IGIC) with a rate of 6.5%. In addition, in some cases of Officially Protected Properties (VPO), the tax rate is reduced to 4%.

When and to whom is VAT paid?

The payment of this tax is made at the time when the deeds are signed and is paid directly to the seller, who will be responsible for depositing the tax amount to the Tax office. This means that, once the payment has been made, the buyer does not have to do anything else regarding this tax.

Stamp Duty (AJD)

The AJD tax usually generates many doubts in buyers because it is a complex tax that taxes administrative, commercial and notarial documents. This tax is assigned to the autonomous communities and is composed of a fixed fee and a variable fee:

• Fixed fee: With the fixed fee, the stamp-impressed paper on which the copies of the deeds and notarial deeds are issued, must be paid for. This fee is common throughout Spain and is set at 0.30 euros per sheet and 0.15 euros per page. The final price will depend on the length of the document.
• Variable fee: the variable fee is applied to documents that can be registered in the Land Registry. This fee varies according to the deed value of the property and the percentage approved by each autonomous community. The tax rate is fairly regular throughout Spain and ranges between 0.5% and 1.5%. In addition, most communities set reduced rates for certain situations, such as people with disabilities. It is advisable to consult the circumstances in which reduced rates are applied on the official pages of each government, to know if any of them relate to you.

When and where is AJD paid?

The AJD must be paid within 30 working days from the signing of the contract of sale. It is important to consult the regulations of each community to know the different ways of making the payment and the documents that you will need to present. Both the payment and the presentation of documents can be done electronically or in person at the corresponding Tax Agency.

What taxes will you pay when buying a second-hand property?

In the case of acquiring a second-hand property, the applicable taxes will be the Property Transfer tax (ITP) and the fixed fee of the AJD tax.

Property Transfer Tax (ITP)

In the case of second-hand properties, VAT will not be applied, since this tax only affects the first transfer of property. Instead, the ITP must be paid, a tax that is also the responsibility of the autonomous governments. The tax rate varies between 6% and 10% and is applied on the reference value of the Land Registry.

For example, Andalusia applies a 7% tax, while in the Community of Valencia this percentage amounts to 10%. This means that, if you buy a property with a reference value of 150,000 euros in Andalusia, the amount that must be paid will be 10,500 euros. This figure would amount to 15,000 euros if you bought that same property in the Community of Valencia. The difference is noticeable and is a factor to consider when choosing the community where the property will be purchased.

In addition, some autonomous governments apply deductions for certain cases, such as the purchase of a property by a large family or a person under 35 years of age. Therefore, as with the AJD, we recommend that you review the regulations on the website of each territory to calculate the final percentage that you will have to pay for this tax. We leave here the links of some communities where you can find the necessary information for both the ITP and the AJD:

• ITP and AJD in Andalusia
• ITP and AJD in the Community of Valencia
• ITP and AJD in the Region of Murcia
• ITP and AJD in the Balearic Islands

When and where is ITP paid?

The payment of the ITP must be made within 30 working days from the signing of the contract of sale. Like the AJD, it can be processed electronically or in person in the corresponding Tax office.

Fixed Fee of the Stamp Duty Tax (AJD)

The buying and selling operations of a second-hand property are subject to the fixed fee of the AJD explained above, but not to the variable fee. This is because the ITP and the AJD are two incompatible taxes.

What happens if you buy a property through a mortgage loan?

The AJD is also commonly known as the mortgage tax. Until a few years ago, it was the client who had deal with this tax. However, the Mortgage Law of 2019 established that, in the case of mortgage loans, it is the bank that must fully assume the payment of this tax. It is important to differentiate the AJD that taxes the deed of purchase (paid by the buyer) from the AJD that taxes the mortgage loan (paid by the bank). In the latter case, the percentage of the variable fee is not applied on the value of the property but on the amount of the mortgage liability.

All in all, although buying a property can seem complicated, understanding what taxes we must pay according to our situation will help us be more confident when making a decision and preparing the necessary budget.

Keep in mind that owning a property in Spain entails the responsibility of paying other taxes, such as the Real Estate Tax (IBI), which is paid annually. This tax represents approximately between 0.4% and 1.3% of the assessed value of the property, depending on the community and the type of building.