Taxes for a property purchase in Spain.

Another important consideration is the taxes applicable in the case of a property purchase, as well as the ongoing taxes. Below we will briefly explain which taxes apply and which party – the seller or buyer – is usually responsible.

Stamp duty (“Impuesto sobre Actos Jurídicos Documentados” – or “IAJD” for short) applies to all notarial instruments. It is paid by the buyer and amounts to 2% of the property value as stated in the “Escritura”.

Property tax (“Impuesto sobre Bienes Inmuebles” – or “IBI” for short). The taxable base is the cadastral value. It is paid by the owner once a year.

Property Tax (“Impuesto sobre Bienes Inmuebles” – or “IBI” for short) – is paid on an annual basis. The taxable base is the cadastral value. Property transfer tax (“Impuesto sobre Transmisiones Patrimoniales” – or “ITP” for short).8%. The taxable base is the value of the property as stated in the public deed (“Escritura”).

Value-added tax (“Impuesto del Valor Añadido” – or “IVA” for short) is always charged instead of the property transfer tax when the property is purchased by a company liable to VAT, such as a property developer. Plots of land (with a few exceptions), places of business and garages are also liable to this tax at a rate of 21%.

Capital gains tax on urban land (“Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana” – or “Plusvalía” for short). This tax is levied on the increase in the cadastral value of the land. Buildings are not included in this. The legislator has made it clear who has to pay this tax. The seller, who has owned the property for the past years, is liable for the tax. In practice, responsibility for capital gains tax on urban land has, however, become a point of negotiation. In many places it is considered normal for the buyer to take over the cost – this is, in any case, often requested by the local authorities if the seller has moved to an undisclosed address. The level of tax is determined by two factors: the cadastral value and the length of time the property was in the possession of the seller.

Overall, a property purchaser should expect to pay around 10 to 12% in additional acquisition costs, depending, for example, on whether financing is required for the property.

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