Hi everyone! I’ve noticed many people on the forums discussing settling down and buying property in Spain, and it seems a lot of you are confused about what taxes you need to pay and how much they are. I’ve just gone through the entire home-buying process, learned things the hard way, and done plenty of research. Today, I’m here to break it all down for you, hoping to help those who come after me. Remember, you absolutely must include taxes in your budget, or you’ll find yourself in a tight spot!
New vs. Resale Properties: The Taxes Are Completely Different!
When buying a property in Spain, the most crucial distinction to make is whether you are buying a new build or a resale property, as the types of taxes you pay are completely different for each. Getting this wrong could throw your budget off by tens of thousands of euros.
New Builds: VAT (IVA) + Stamp Duty (AJD)
If you’re buying a brand-new home directly from a developer, you’ll be paying Value Added Tax (VAT), known as IVA in Spain. The current IVA rate for standard residential properties is 10%. In addition, there’s another tax called Stamp Duty (AJD - Actos Jurídicos Documentados). The rate for this varies by autonomous community, ranging from 0.5% to 1.5%. So, the total tax for a new build is roughly 11.5% of the property price.
Resale Properties: Property Transfer Tax (ITP)
If you’re buying a resale property, you won’t pay IVA. Instead, you’ll pay the Property Transfer Tax (ITP - Impuesto de Transmisiones Patrimoniales). This tax is paid to the regional government of the autonomous community, and each region sets its own rate, typically between 6% and 10%. For example, it’s 6% in Madrid and 10% in Catalonia. ITP is often slightly lower than the combined IVA + AJD, and the good thing is that once you pay ITP, you generally don’t have to pay AJD, which saves you a step.
| Tax Comparison | New Build | Resale Property |
|---|
| Main Tax | Value Added Tax (IVA) | Property Transfer Tax (ITP) |
| Reference Rate | 10% of the property price | 6% - 10% of the property price |
| Additional Tax | Stamp Duty (AJD), approx. 0.5% - 1.5% | Generally no AJD required |
Besides these major taxes, don’t forget about other miscellaneous costs when it comes to paying taxes on property purchases in Spain. These include notary fees, property registration fees, and potential lawyer fees, which all together can add another 1% to 3% of the property price. Therefore, as a rule of thumb, for both new and resale properties, you should budget an additional 10%-15% on top of the property price to cover all taxes and fees.
I hope my sharing has been helpful! What city did you buy your property in? How much ITP did you pay? Feel free to leave a comment below to discuss and provide more references for others!
