Cost and taxes
What is the current cost of buying a house at Costa del Sol or elsewhere in Spain? What do I have to expect in fixed expenses? What does it cost to sell?
Real estate is the bottomless source of money of the Spanish state, all the authorities earn from their sale: the state as a whole, the state governments (=as Andalusia, for the Costa del Sol) and the city councils. You shouldn´t forget about the cost of buying a house, as this is what you need to invest as well, a part of the purchase price.
The Spanish state will ask for income taxes: the seller, who has usually made profit, now has to pay the taxes for it at the current rate. Income taxes are called Impuesto de la Renta de Personas Físicas or IRPF in Spanish. In average income conditions, these would consist in 15-25% or up to 45% of the profit made.
City councils even earn twice when buying a house: they get the local property tax (IBI) and a tax for increase in value (Plusvalía municipal). Current payments of the property tax (the rate is determined by the cities, based on cadastre value of the property, which is determined by the tax office). The property tax (IBI = Impuesto de Bienes Inmuebles) lies between 0,6% and 1,3% of the cadastre value per year. The cadastre value – as expressed by the Spanish tax office – should reflect approximately half of the market value. The Plusvalía municipal – a tax that only refers to the ground the building is built on, not on the building itself – is a very controversial tax, as no one knows how exactly it is calculated by the councils. It has even come to lawsuits filed against the Plusvalía municipal, since it violates the principle of tax law which says that a tax can only be paid once. The Plusvalía municipal can be an unpleasant surprise when it comes to the cost of buying a house: in this case for the seller, as it is only due after property is sold.
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, 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).