When buying a property in Spain, the buyer must pay either Value Added Tax (VAT) or Transfer Tax (ITP).
Transactions subject to VAT (21%) Purchase of assets between companies Purchase of land Purchase of premises
Transactions subject to VAT (10%) Newly constructed properties
All subsequent transfers are not subject to VAT, but to transfer tax (ITP). In the Balearic Islands, it is graduated according to the amount of the purchase price.
Transactions subject to ITP: Up to 400.000 € of the purchase price are taxed at 8%. Up to 600.000 € purchase price is taxed at 9%. Purchase price above 600.000,01 € is taxed at 10 %. Purchase prices above € 1.000.000 are taxed at 11 %.
Notary fees are calculated as a percentage of the purchase price:
Stamp duty per notarial purchase contract 1.5%. Lawyer's fees 0.5% - 1% of the purchase price plus VAT. Notary fees approx. 0,3%, Land Registry approx. 0,25%, Gestoría approx. 200 € - 1.000 €.
The annually recurring taxes for the buyer are:
The Real Estate Tax (IBI). This is levied by the municipality on the value of rural and urban properties based on the cadastral value and is paid annually. The amount of property tax varies from municipality to municipality and is usually between 0.3% and 0.4% of the cadastral value.
Income tax: If you are a resident landlord, as a general rule only 50% of the rental income is taxed. The tax rate is progressive and depends on your total personal income. Expenses are deductible.
In the case of a non-resident landlord, the tax rate is a flat 24.75%. However, even in the case of own use by the owner, income tax is due if he does not use the property as his main residence. In this case, a notional annual rent of 1.1% of the cadastral value is attributed to him. If the owner rents out his property, he generally has to pay income tax.