Property Purchase Process | Property Purchase Costs | Mortgage Finance

Overview

In Spain, investors must bear the following costs when buying property:

Taxes

Transfer tax (ITP): For resale properties
VAT (IVA): For new-build properties
Stamp duty
Withholding tax: Applies when buying from non-residents

Legal fees

Property registration fees
Notary fees
Lawyer's fees (both for conveyancing and for any tax advice)

Bank charges

Mortgage arrangement fee
Currency transfer costs

Moving costs

Cost of moving (e.g. removals, transport, etc.)
Expenses relating to changing the names in utility contracts
Contents and building insurance

Other costs

Real estate agency fees (only paid by buyer in exceptional circumstance; refer to "Selling Costs" section for details)
Surveyor report (if required)

Exact costs will vary by region and by type of property. However, as a general rule you should allow 10-12% on top of the purchase price to cover additional buying costs.

Taxes:

Transfer tax (ITP):
When you buy a resale property in Spain you must pay transfer tax (impuesto sobre transmisiones Patrimoniales, ITP). Transfer tax is charged at 7% (including stamp duty). Transfer tax must be paid within 30 working days of the authentication of the deed or the real estate cannot be entered in the ownership registry.
VAT (IVA):
When purchasing new-build property in Spain, you must pay VAT (impuesto sobre el valor anadido, IVA). VAT on new-build properties in Spain is levied at 7% of the purchase price not including stamp duty. If the new-build property is located in the Canary Islands a regional tax (IGIG) is applicable instead of VAT.
Stamp duty:
Stamp duty (actos juridicos documentados, AJD) is generally charged at 1% on the value of the property when issuing public documents. The purchaser or the person applying for these documents will be responsible for paying the tax.
Withholding tax:
If you are purchasing a Spanish property from a non-resident, you must withhold 5% of the purchase price and pay this to the Spanish tax office. This is known as the “retencion” or withholding tax. The withholding tax is designed as an incentive for non-resident vendors to promptly return their tax return to the authorites. There are various situations in which this tax is refunded or exempted entirely; you should seek professional legal advice.

Legal fees:

Lawyers' fees:
Lawyers (both Spanish, “abogados”, and British) will be involved in the conveyancing process (including searches and transfer of title) and may advise on tax issues where relevant. Legal fees for conveyancing usually amount to 1-1.5% of the value of the property (although if there are complications the fee may be higher). Tax advisory fees will also depend on the complication of the transaction.
Notary fees:
By law, a notary (notario) must be present to witness the signing of the public deed (escritura) and authenticate the deed. The notary will also organise for the payment of taxes and for funds to be transferred from purchaser to the vendor. Statutory fee scales exist for notaries in Spain. The notary fees are usually paid in full by the buyer and amount to around 0.5% of the final purchase price.
Land registration:
After the public deed (escritura) has been signed by the purchaser and authenticated by the notary on completion of the sale, the deed must be registered at the land registry (Registro de la Propiedad). The cost of registering the sale combined with the notary fees usually comes to around 3% of the purchase price stated in the deed.

Bank charges:

Bank charges:
Bank charges met by the purchaser will include both the cost of setting up a Spanish mortgage (if you go for this option) and the cost of transferring funds across to pay for the purchase. Set up costs for Euro mortgages are higher than sterling mortgages. The purchaser will pay the bank charges involved in the transaction up until the monies reach the vendor's account.

Special situations and exceptions:

If you are planning to purchase land rather than a completed residential property, VAT is levied at 16%. If you then proceed to construct your own property you will have to pay construction tax.

Normally, capital gains tax will be paid by the vendor. However, if the vendor is non-resident and fails to pay this, it will fall to the new buyer to cover this cost.