Expenses in the purchase of a home in Spain
What are the expenses that I will face if I buy a home in Spain? When answering this question, we must consider two types of expenses: Expenses in the purchase and expenses after the purchase.
Expenses in the purchase
We will see in detail the following expenses: the real estate agency’s fees, the expenses in legal services, the notary’s fees, the taxes levied when buying a home in Spain and the registry expenses.
Real estate agency’s fees
Who pays the real estate agency fees? Usually, and in particular on the Costa del Sol, the real estate agent’s fees are borne by the seller. The commission of the real estate agency corresponds to a percentage of the sale price and may vary depending on the type of property and the place where it is located, since these factors will determine the valuation of the property.
Expenses in legal services
Once you have found the house of your dreams, our real estate legal services will advise you on all legal aspects related to the sale. Among the work done by a real estate legal advisor we mention the following:
- Opening a bank account in a Spanish bank.
- Procedures for obtaining the Foreigners Identification Number (Número de Identificación de Extranjeros, NIE), necessary for any legal action in Spain, including the purchase of a home.
- Procedures for obtaining the residence permit —if necessary— or certificate of non-residence.
- Verification of the legal and economic situation of the home. It is vital to verify that everything is in order before buying a property. The lawyer will do the following:
— Obtain a certificate of the property in question in the Property Registry. The certificate specifies who owns the property and whether there are any charges on it, such as mortgage loans that have not yet been paid.
— Check at the town hall that the home in question has the corresponding building license and habitability certificate.
— Check that the owner(s) have paid for all housing services, such as water and electricity, municipal taxes and community expenses. For this, he/she will obtain the corresponding certificates and/or invoices.
- Preparation of the documents for the sale, including the earnest money contract, the contract of sale and the deed which will then be signed before a notary.
- Payment of the notary’s fee.
- Registration of the property in the Registry, with updated data of the new owner.
- Signing by Power of attorney: in case it is impossible for the buyer to travel to Spain for any specific procedure, he may grant powers to his legal representative to sign it on his behalf.
- Attorney’s Fees: Fees paid to the attorney represent approximately 1% of the purchase price of the property.
The first question we ask when thinking about the notary is: who pays the notary’s expenses when buying a home in Spain? According to the law, the seller is in principle bound to pay the notary for the costs of granting the deed, while the buyer must pay the expenses of the first copy of this deed. However, the law leaves the parties the option to agree and distribute these expenses as they wish. In practice, it is customary for the buyer to take responsibility for all the notary’s expenses. The notary’s fees are applied on the base of a scale established by law.
Taxes levied on the purchase of a home in Spain
What taxes do I have to pay when buying a home in Spain? In general terms, taxes directly related to the purchase of a finished home are about 10% to 12% of the price. In terms of taxation, it is necessary to distinguish between new homes —acquired directly from the developer or builder— and second-hand homes.
— New homes: For the new properties, the buyer pays 10% of the price as Value Added Tax (VAT) plus the so called Tax on Transmissions and Documented Legal Acts (Impuesto de Transmisiones y Actos Jurídicos Documentados), in this case under the modality called simply Tax on Documented Legal Acts (a tax imposed on the signature of all notarial documents). If we talk about commercial premises, a parcel bought directly from a developer or a garage that is not attached to a house, VAT is 21%.
What is the amount of the Tax on Documented Legal Acts? In the Autonomous Community of Andalusia, where the Costa del Sol is located, the general rate is 1.5%, which will be applied to the first copies of notarial deeds. There are two exceptions: In the case of the purchase of homes with a mortgage loan under 35 years old and a real value of the home less than 130,000€, the tax will be 0.3%. For the purchase of homes by persons with a degree of disability equal or superior to 33% and with a value less than 180,000 €, the amount of this tax will be 0.1%.
In summary, when buying a new home in Marbella or another place in Andalusia, the buyer pays the following taxes:
- Value Added Tax (VAT): 10%.
- Tax on Documented Legal Acts: 1.5% (except in the case of the two bonuses set out in the previous paragraph).
- TOTAL: 11,5%
— Second hand homes. In the case of second-hand homes, the buyer pays the Tax on Patrimonial Transmissions and Documented Legal Acts (“Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados”), in this case under the modality called Tax on Onerous Patrimonial Transmissions (“Impuesto sobre Transmisiones Patrimoniales Onerosas”). For its part, the seller will pay the Tax on the Increase of Value of Urban Land (“Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana”), or “municipal surplus” —a tax paid to the city council which taxes the increase in the price of the land— and the Patrimonial Gains Tax (“Impuesto sobre Ganancias Patrimoniales”), commonly known as “state surplus”, or simply “surplus”, which taxes the difference between the original purchase value and the sale value (put links to expenses of the sale of a home).
We see below the amount of the Tax on Onerous Patrimonial Transmissions, paid by the buyer in Andalusia (where the Costa del Sol is located):
Tax on Onerous Patrimonial Transactions
Purchase value Tax rate
Up to € 400,000 8%
400,001€ – 700,000€ 9%
From 700,000€ 10%
There are some exceptions to this rule, for properties of lower values and some sections of ages. Consult us by phone or email for more details.
Who pays registration fees when buying a home in Spain? The registration costs are exclusively for the buyer and are stipulated by law and according to a scale that depends on the value of the property. It is important to remember that contracts signed between the two parties, buyer and seller, have legal effects between them, but for them to be valid before third parties, they must be registered in the Property Registry.
Expenses after the purchase
Having already seen the expenses that we face when making the purchase, we ask ourselves now: what are the expenses that I have after buying a home in Spain? In this respect we distinguish between annual expenses and monthly expenses.
- Real Estate Tax (Impuesto de Bienes Inmuebles, IBI). It is a tax on real estate property imposed by the town hall. It corresponds to a percentage of the cadastral value of the property and may vary according to the municipality where the property is located. Since 2017 in Marbella it is 0.76%. An important detail: before formalizing the purchase of a property, the seller must provide a copy of the last IBI receipt paid.
- Non-Resident Income Tax (“Impuesto Sobre la Renta de No Residentes, IRNR”). Foreigners who own property in Spain and do not reside in the country are required to pay an annual tax, which must be paid from the year following the purchase of the property. The Spanish State Tax Agency considers that non-resident owners obtain economic benefits from their property and therefore allocate to each property an annual income of 1.1% or 2% of the cadastral value, depending on when it has been updated. This is the taxable base. If the cadastral value of the property has been updated in the last 10 years, the corresponding income is 1.1%. If the cadastral value was updated more than 10 years ago, the allocated income is 2% of the cadastral value. What percentage of this taxable base must be paid to the Spanish Treasury? Owners who reside in a EU member state, Norway or Iceland pay 19% of the taxable amount. This is a reduced rate applied in 2016. Owners who are resident in countries outside the European Union and that are neither Norway nor Iceland pay 24% of that taxable base.
- Patrimony Tax in Andalusia. This tax affects all owners, residents and nonresidents, whose net patrimony exceeds 700,000€, as holders of assets equal to or less than this amount are exempt from payment. In 2008, the government of the Autonomous Community (Junta de Andalucía) suppressed the payment of this tax, but in 2011 it was temporarily reestablished —for two years— and it has been successively extending the obligation to pay it. The taxable base is the net value of the patrimony. In order to calculate the net value of a property, the highest of the following is taken: the cadastral value, the purchase price or the value established by the Administration for the purposes of other taxes. In the calculation we also take into account the mortgage loans that weigh on the home or homes. Residents in Spain may benefit from additional benefits, depending on their personal circumstances. The amount of the Patrimony Tax in Andalusia varies between 0.24% and 3.03% of the tax base, according to a progressive scale.
- Garbage collection tax: It is an annual tax that municipalities charge for the mentioned service. In the case of Marbella, within the urban area, the properties located in the first category streets pay € 86,88 per year and villas € 125,11. Outside the town, the flats pay € 185.35 and the villas € 278.05.
- Ownership of a non-resident company: When a property belongs to a corporate entity located in a jurisdiction classified by Spain as a “tax haven”, an annual tax of 3% of the cadastral value must be paid.
- Communal Expenses: These are the fees paid to the Community of Owners for the services and maintenance of the common areas when the property is in an urbanization or condominium. At the time of signing the deed of purchase and sale in notary, these fees must be currently paid and the owner must provide a certificate issued by the community of owners, stamped and signed by the administrator. The cost of this certificate will be borne by the owner (seller).
And if I rent my home? What are the taxes I have to pay?
What are the income taxes I have to pay when I rent my house (seasonally or long term) and I am not a tax resident in Spain? The answer is the Rental Income Tax and, in terms of the calculation of the amount, it strongly reminds that of the Non-Resident Income Tax (IRNR, see above). Since 2016, owners residing in a EU member country, Norway or Iceland will pay 19% of the rental income. On the other hand, owners residing in countries outside the European Union and which are neither Norway nor Iceland will pay 24% of the income. Certain expenses, such as the payment of community bills, the Annual Property Tax (IBI) or part of the home insurance, will be deductible from the base of this tax. Similarly, any investment directly related to the property, such as repairs, installation of air conditioning or the fees charged by the real estate agency for finding the tenant.
Important note: If I rent my property (for example, for 3 weeks in a year) and pay the Rental Income Tax, this period will not be taken into account for the IRNR declaration. This tax is paid on an annual basis and, for your convenience, we can put you in touch with a fiscal adviser’s office that will be in charge of all procedures. The cost of these does not usually exceed 100 €.
Important notice about the costs of buying a home in Marbella or anywhere else in Spain: All laws and regulations are subject to change. The information contained in this section has been collected as a guideline for potential buyers of property in Spain, without implying any contractual obligation.