Taxes, taxes and taxes!

No different from the UK, owning, selling and/or purchasing properties in Spain, comes with paying taxes, whether we like it or not. On this page you will find a brief overview of those extra costs.

In the old days, when buying or selling a house, it could make a big difference whether you were a resident or not. Those discriminative days are behind us, and since January 1, 2007, everybody has to pay equal taxes!

When selling a property, please take into account the following:

1) In most cases, you will have to pay 18% Capital Gains Tax (Impuesto sobre Incremento de Patrimonio de la Venta de un Bien Inmeuble), which is payable on the profit you make on the sale.

Are you a resident however and over 65, you will be exempt from CGT. Also, residents below the age of 65 are exempt from CGT, as long as the property sold is their principal residence, they have lived there for at least three years and they plan to buy another Spanish home within the next three years.

If you are eligible for the CGT, the buyer of your property has to retain 3% of the declared selling price to be paid directly into the Spanish tax office (Hacienda) on your behalf. In most cases, the notary or a lawyer will take care of this.

If you made no profit whatsoever, you will still have to pay the taxman (duh!), but should get your money back within 12 months. Ask your lawyer!

2) Plus Valia: You will also have to pay a tax based on the incremental value of the land which the property occupies over the number of years of ownership. Depending on the property this can vary from 50 Euros per year up to a few hundred euros (or more) per year of ownership.

3) IBI & Utilities: similar to council tax or rates in the UK, ensure you are up to date on this subject. Without the original proof of payment, the notary won’t sign the new escritura. And of course, you will have to bring all the documents that show you’ve paid your water bills, electricity etc. Don’t forget nothing, or the notary will ask you friendly not to come back until you’ve properly done your homework.

4) If applicable: Community Fees: Make sure your Community Fees have been paid. At the notary you will have to present the Certificado de Comunidad or you could run into some serious problems.

5) If applicable: Mortgage Cancellation Fees - Your bank will probably have anywhere from a 0.5% to 1% cancellation charge on the balance of your outstanding mortgage

6) Mortgage Notary Cancellation & Registration Fees - In addition to point 5), as a seller you will have to ensure your mortgage is cancelled at the Notary and Registry. This may cost anywhere between 600 up to 1000 Euro.

7) Agents Commission: do not forget the people that sold your property. The seller has the obligation to pay the good man or woman, not the buyer.

8) Lawyer: They usually charge around 1% of the sale price, but in return he will do all the paperwork, check if everything is legal and taxes have been paid, he will find out if there are no debts on the property and finally he will handle the inscription in the Registry etc, etc.

We always advise to bring your own lawyer. Don't forget: Lawyers are personally liable for their mistakes.

Taxes payable when purchasing a house in Spain:

1) Transfer tax (IVA of ITP)*

2) Notary and Registry costs, approx 1.5 % of the declared selling price.

*  IVA (VAT) is the New Properties Purchase Tax. Buyers of newly built houses in Spain are liable to paying 7% IVA, plus a 0.5% stamp duty. Strangely enough, if you buy land in Spain or commercial premises, the payable IVA rises to 17%, from july 2010 this goes up to 18%.

*  ITP, Impuesto de Transmisiones Patrimoniales. Resale Purchase Tax. House buyers of resale properties are required to pay a transfer tax  of 7%, starting July 2010, this will be 8%.

3) Lawyer: 1%. See above.

Taxes relating to Property Ownership :

1. IBI: (Impuesto de Bienes Inmuebles). The IBI is the Spanish Property Tax. it's a municipally levied tax and varies from one town to another. Also the type of property is taken into account.

Do you live in a modest house somewhere in the country, you will probably pay no more than a 100 euro per year. But are you one of the guys that own a garage bigger than the average villa, you may end up paying 2000 euro per year. Something to think about, cruising the AP7 in your Bentley.

2. Recogida de Basuras: the Rubbish Collection Tax. It's a modest annual tax payable by property owners to the local town hall.

Of course this is only a very brief summary of the legal and fiscal obligations for both buying and selling parties. Do you have specific questions, do not hesitate to contact us, and we will make an appointment for you with one of our affiliated experts in this field.