Cost and Taxes
If you’re looking to buy a property in Spain, there are many questions you need to be answered. What is the cost of buying a house in the Costa del Sol? What do I have to expect in fixed expenses? What does it cost to sell?
The Spanish state will request income taxes from the seller as they have usually made profit. The seller will be required to pay these taxes at the current rate. The seller will also be liable for income tax, from 15-45% of the profit made.
City councils earn twice when a house is bought. The local authorities will receive the local property tax (IBI) and a taxpayment for the increase in value (Plusvalia municipal). Current payments of the property tax are determined by the cities, based on the cadastre value of the property, which is determined by the tax office. The property tax lies between 0.6% and 1.3% of the cadastre value per year.
The Plusvalia municipal is tax that refers to the ground the building is on, rather than the building itself. This is a form of tax that is often called into question as consumers are unaware of how it is calculated by the councils. The Plusvalia can often be an unpleasant surprise when costs of purchasing a property in Spain are totalled up.
The state government profits from your property through the tax “Impuesto de Transmisiones”, which is similar to the conveyance tax. It is paid by the purchaser of the property and amounts to 8% (Andalusia) of the given property price. The conveyance tax varies between the different municipalities in Spain. Whoever is a resident under tax law can also pay VAT instead of the Transmisiones tax, which may compensate expenses with takings. Although the VAT rate is currently 21%, this concept can be interesting if you take in enough VAT, for a total of 4 years after property purchase. Real estate buyers who purchase property in Spain but live in the UK have to pay one more tax-related payment, which is called “non-resident tax” (not to be confused with the IBI). This tax is paid each year on the 31st of December at the latest and about a third of the IBI.
In Spain, there is one important aspect of the cost of buying a house you should never forget: taxes are so-called “Bringschulden”: this German term describes a payment you won’t necessarily be asked to pay, but you still have to arrange to pay on time yourself. If you don’t, your property might be used to guarantee payment (=embargo), with additional charges.
Here a short summary of the cost of buying a house:
IRPF = income tax, on the sheer profit, calculated between purchase price and sale price. To be paid by the real estate seller.
Transmisiones: conveyance tax, 8% of the purchase price, to be paid by the real estate buyer.
Plusvalía municipal: non-transparent calculation method. To be paid by the real estate seller.
IBI = property tax, annual payment, to be paid by the property owner.
All other expenses are maintenance costs and community.
Impuesto de no residentes: 24% of the IBI, always to be paid on the 31st of December each year. Only for non-residents (people who live in Spain less than half a year).