Spain Guide


Buying Property in Spain

As a rough guide the total "extras" involved in buying property in Spain add up to around 10% of the purchase price. If you're lucky, you may get away with slightly less but if there are any complications you may face even higher fees.

The costs break down as follows:

  • Lawyer usually around 1% of the sale price for his or her services plus fees for any official documentation obtained on your behalf (e.g. property registration certification, not a simple etc)
  • Notary fee The notary charges according to a scale, fixed by law, depending on the size of the property, its price, whether a mortgage is involved etc. Normally you pay around 1% of the purchase price again (payable at the time of signing the deeds).
  • Property Registration Fee approx. 40 50% of the notary fees depending on the same factors as above.
  • Resale property transfer tax 6% of the declared sale price
  • New property tax 7% VAT (called IVA in Spain) and 0.5% stamp duty. If you buy a new property and intend to have a pool or garage built, try and have it included with the sale of the property, as if you build later, you will attract tax at the higher rate of 16%
  • Plot/Land purchase 16% VAT 0.5% stamp duty.
  • Plus Valia this is like a capital gains tax. It's levied by the local town hall which calculates the increase in the value of the land since its last sale (you or your lawyer should be able to get this information from the town hall in advance of the purchase)

Spanish Mortgages

If you need a mortgage there will be a 1% fee for registering the mortgage with the Spanish authorities (that's 1% of the mortgage rather than the actual purchase price). Your lender will probably charge a valuation fee together with a fee of around 1% of the mortgage value to cover their costs in arranging the loan (it's not enough that they make money from the interest!)

If the seller is not an official Spanish resident you will need to deposit 5% of the sale price with the local Hacienda (tax office). Your lawyer will be able to arrange this deposit which acts as a safeguard against the seller disappearing back to his own country without paying his capital gains and other taxes.

The seller won't receive this money until he has paid any taxes owed to the authorities including 35% capital gains tax on the profit from the sale.

Under declaring the value of a property is a common practice in Spain although the authorities are starting to take steps to clamp down on it. It's often the case that the buyer and seller will agree to understate the true market value of the property as this means the seller can reduce his capital gains tax liability and the buyer can reduce the level of transfer tax he has to pay.

It's important to bear a couple of points in mind before you go down what seems to most foreigners to be a rather shady but quite attractive! avenue.

Firstly, the Spanish tax authorities are keeping a closer eye on this than previously and a completely unrealistic declared value will often no longer be accepted and can incur heavy financial penalties.

Secondly, if the sellers are not liable to capital gains tax because, for example, they're pensioners or the property is owned by a company, they probably won't be interested in doing a deal on the declared value.

Finally, and most importantly, if your declared value is substantially less than the actual value you could be hit with a painful plus valia and capital gains bill yourself when you come to sell the property. By then this practice may have disappeared completely or you may not be able to find a buyer who agrees to it.