The housing market in Spain has established itself as an attractive sector for both domestic and international buyers. This dynamic is due not only to the diversity and beauty of the properties available, but also to the economic and cultural strength that the country offers. However, as you move further into the process of buying a home, it’s crucial to understand the home purchase taxes when buying housing in Spain to making an informed and efficient investment.
What’s more, it’s important to note that home purchase taxes vary depending on whether the property is newly built or second-hand. These tax differences can significantly influence the purchaser’s decision-making and financial planning. On the other hand, not only initial purchase costs are relevant. Buyers should also be aware of annual taxes for owning a home in Spain, which include recurring tax obligations that are an essential part of the cost of maintaining the property in the long term.
Therefore, we at Quadratia believe it advisable to analyse and explain in detail these taxes and expenses associated with the purchase and ownership of a home in Spain. We’ll focus specifically on newly built ones – since they are our mission – so that you can make well-researched decisions and optimise your real estate investment.
Interested in this topic? Come along with us!
Home purchase taxes when buying a newly built home in Spain for Spanish buyers
Entering the Spanish real estate market can be an exciting and rewarding experience. In Spain, Spanish buyers face a number of tax obligations that can significantly influence the total cost of their new home. For this reason, if this pertains to you, do not miss this part, where we will accurately classify the taxes that you should consider when buying a newly built home.
Value-Added Tax (IVA)
The Value-Added Tax (IVA) is a crucial aspect in the acquisition of a newly built home in Spain. This tax is calculated as a percentage of the property’s sales value. Generally, the VAT applied in these transactions is 10%, so if a home is valued at 200,000 euros, the buyer must pay an additional 20,000 euros in VAT. This figure is significant and should be carefully considered in the financial planning of the home purchase taxes.
It is important to note that the Value-Added Tax is a direct cost that is added to the sale price of the property, directly influencing the total budget necessary for the acquisition of the property. Consequently, advisors recommend that potential buyers consider this home purchase tax when making preliminary calculations about the total cost of acquiring their future newly built home in Spain.
Stamp Duties (AJD)
Likewise, Stamp Duties (AJD) are another of the relevant taxes when buying a newly built home in Spain. These taxes apply specifically to the formalisation of notary documents such as the deed of sale of a home.
The applicable percentage of the Stamp Duties varies depending on the autonomous community in which the transaction is made. Generally, the range of these taxes is between 0.5% and 1.5% of the sale value of the property. Therefore, in the above case of the property with a sale price of 200,000 euros, the cost of the Stamp Duties could be between 1,000 and 3,000 euros, depending on the specific rate applicable in the relevant autonomous community.
Applicable AJD rate according to Autonomous Community
|Community of Valencia
|Castile and Leon
|Community of Madrid
|Region of Murcia
|Autonomous Community of Navarre
As with the Value-Added Tax, buyers must take this tax into account when calculating the total budget for the purchase of a home, since it represents an additional expense that they must cover when formalizing the purchase.
Reduced IVA for young people under 35 and other Incentives
However, for young people under the age of 35 (Spanish citizens or residents of Spain) looking to acquire a newly built home in Spain, there are attractive tax incentives. These incentives are particularly beneficial as they reduce the tax burden when buying a first home. For example:
- Reduced Stamp Duty taxes: Young people can benefit from reductions in Stamp Duty taxes. The autonomous community and the type of dwelling acquired may allow for a reduction of these taxes, which apply to the formalization of notary documents, for people under 35 years old.
- Other assistance and reductions: In addition to tax incentives, young people can access various types of assistance for the purchase of their first home, such as direct grants or preferential conditions in mortgage financing.
It is crucial for young buyers to research and learn about these opportunities in their specific autonomous community, as the requirements and availability of these reductions may vary. However, for non-resident foreign nationals access to these tax incentives may be more limited.
Additional notary and registration expenses when buying a newly built home in Spain
The acquisition of a newly built home in Spain entails several additional expenses, both for Spanish and foreign buyers. Among these essential expenses are those related to the notary, administrative agency and property registration.
So, if we analyse the above, we can draw the following information to take into account in the purchasing process that will ensure the legality and proper formalisation of the transaction.
How much does it cost to register a deed?
The cost of registering a property in the Land Registry in Spain can vary, but there are certain general guidelines that apply to both Spanish and foreign buyers.
The application of the various rates for registering a property in Spain depends on the value of the property and the rates established by the Property Registry. Below is a breakdown of when each rate applies:
- Minimum fee: the minimum registration fee at the Land Registry is 24.04 euros. This fee applies when the value of the property is equal to or less than EUR 6,010.12.
- Staggered rates: For properties with a higher value, rates increase in a staggered manner. For example:
- For properties valued between 6,010.13 and 30,050.61 euros, the fee may be 1.75 euros for each 601.01 euros or fraction thereof. As the property’s value increases, one calculates the fee based on established value tranches, according to a percentage of the property’s value.
- Maximum fee: The maximum fee that can be applied for registration in the Land Registry is 2,181.67 euros. This applies for properties with a very high value.
We recommend knowing the exact value of the property to calculate this cost. A valuation that is too low may be subject to review and adjustment by the tax authorities.
How much are notary and administrative expenses usually?
Notary and administrative agency expenses when buying a newly built home in Spain can vary, but in general, these are some of the associated costs:
- Notary: Notary expenses include the notary’s fees for the deed of sale. These costs depend on the value of the home and the complexity of the transaction. On average, the fees can range from 0.1% to 0.5% of the purchase price of the home.
- Administrative agency: The administrative agency is responsible for carrying out administrative procedures related to the purchase, such as the settlement of taxes and the preparation of documents. Administrative agency costs can vary, but they’re usually around 300-500 euros.
It’s important to note that expenses may be subject to change and vary depending on the location and value of the property. It is also essential to verify these costs with a professional or consult with the specific notary and administrative agency involved in the transaction.
Annual home purchase taxes of newly built housing in Spain
Similarly, the home purchase taxe of a newly built house in Spain entails the obligation to pay certain annual taxes, regardless of whether the buyer is a resident or not. These taxes include Property Tax (IBI) and, in the case of foreign nationals, Non-Resident Income Tax (IRNR).
Home purchase taxes of newly built housing for foreign buyers
New destination, new culture, new life. Are you considering a change of habitual residence? Well, if you are a foreign buyer and you intend to purchase a newly built home, you should know that you will have to incur or deal with the same taxes when buying a home in Spain as Spaniards themselves do, with some caveats (additional requirements related to the purchase of property in Spain by non-residents) but without restrictions.
For example, one of them is to have a Foreigner Identification Number (NIE). A unique number identifies the foreign buyer in Spain and one requires it to carry out any type of important transaction in the country, including purchasing a newly built home.
In addition to this, the foreign buyer will have to pay an annual Non-Resident Income Tax (IRNR) and pay tax on the property should he or she sell it. Let’s take a closer look at this.
Non-Resident Income Tax (IRNR)
Non-resident income tax (IRNR) is a key tax consideration for foreign buyers when purchasing a newly built home in Spain. This tax has several implications:
- Property taxation: Non-Resident Income Tax applies to income obtained in Spain by natural or legal persons who are not tax residents in the country. This includes income generated by the property, such as rental income, and profits earned from the sale of the property (which will correspond to a withholding of 3% of the sale price as an interim payment).
- Non-Resident Income Tax Declaration and Payment: Foreign buyers who own property in Spain must file a Non-Resident Income Tax declaration annually and pay any tax due. This process may vary depending on whether they generate income from the property or not.
- Non-rented dwelling: A non-resident who owns a dwelling that is not rented out must file an annual Non-Resident Income Tax return. For this purpose, they must calculate an imputed income based on a percentage of the property’s cadastral value. They manage this annual tax obligation through Form 210.
- Rented housing: the non-resident owner, if renting out the property, must declare the rental income through the Non-Resident Income Tax. In this scenario, they must make the Non-Resident Income Tax declaration quarterly with Form 210, specifying the income earned each quarter. Additionally, they cannot deduct property-related expenses, a contrast to the allowances for residents.
Tax on Real Property (IBI) in Spain
Property Tax (IBI) is a municipal tax levied on the ownership of any type of real property – whether it be a dwelling, commercial premises or land – to which the resident or non-resident buyer is subject. One calculates it based on the cadastral value of the property, an administrative valuation that does not necessarily correspond to the market value. Property tax is annual, and its amount varies according to the municipality where the property is located, since each municipality establishes its own tax rate.
- Community of Valencia: a 20% reduction in the Property Tax (IBI) is planned. Altogether, more than 400,000 Valencians will pay 70 euros less on average.
- Andalusia: The Property Tax is frozen, and you can consult it with the competent authorities.
- Region of Murcia: The Property Tax bill will increase on average by about 4 euros in per month (48 euros per year), and is one of the lowest taxes in Spain. A new development is that next year’s tax ordinance will have to include the municipal authority’s obligation to apply the state waste and contaminated soil tax rate that the national government has diverted to local authorities.
Are the application of the Real Property Tax and Non-Resident Income Tax complementary?
As we’ve mentioned before, non-residents in Spain must pay Non-Resident Income Tax (IRNR) on income earned in the country, including from the ownership of real property.
This tax is independent of the Property Tax and they coexist. A non-resident owner who owns a home in Spain is subject to the payment of the Property Tax, as well as Non-Resident Income Tax if they obtain income from real property, such as rental income. However, if the house does not generate income, one calculates the Non-Resident Income Tax based on an imputed income, which is a percentage of the property’s cadastral value.
Buy your newly built home in Spain at Quadratia
At Quadratia, with more than 50 years’ experience in the sector, we are a benchmark in the Spanish housing market. We offer both national and international buyers the unique opportunity to acquire newly built homes in some of the best cities to live in in Spain.
Our selection includes properties of all kinds (penthouses, ground floors, apartments, duplexes, etc.) in coastal areas, such as the Costa Blanca, the Costa del Sol and the Costa Cálida. Their natural beauty, lovely weather, and high quality of life make these areas preferred options for anyone looking for a home in Spain.
So, if you are considering purchasing a newly built property in Spain and you have doubts about taxes when buying a home and the purchase process, at Quadratia we are happy to advise you. Our team of experts will guide you every step of the way, ensuring that your investment is safe, well-informed and perfectly aligned with your needs and expectations.
Quadratia is bringing your dream of having a home in Spain increasingly closer to fulfillment. Contact us!
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