Spanish property consultants

Fees & Taxes

Costs of buying property in Spain

A variety of fees are payable when you buy a property in Spain, which usually add a total of around 11 per cent to the purchase price, which is higher than in many other EU countries.

Most fees are based on the ‘declared’ value of the property, which was traditionally much lower than the actual price paid. However, under the ‘law of public fees’ (Ley de Tasas1989), it’s no longer possible to declare a very low figure and there are severe penalties for gross under-valuation. Local authorities maintain tables to calculate the current fiscal value (valor catastral) of properties and it’s this price (or the actual price paid) which should be declared.

However, if you get an absolute bargain, it may be wise to declare the market value rather than the price paid! In any case, the tax authorities (Agencia Tributaria) can still reassess a property’s value for tax purposes. It’s generally recognised that the figure in the sales deed should be around 1.6 times the fiscal value (which should still be well below the actual sales price) and in any case not less than 20 per cent below the sale price.

If the authorities discover that the declared value is lower than their valuation they can levy a surcharge of 6 per cent on the difference, plus administration charges. If the value declared in the deed (escritura) is under-declared by over €12,000 or 20 per cent less than the actual market value, the buyer can be taxed on the difference between the declared value and the authority’s estimated value, as if it were a gift.

If you grossly under-value a property by 50 per cent less than the official valuation, the authorities also have the right to buy it within two years at the under-valued price. Reviews of declared values (hoja de valoración) are common nowadays and it’s risky to make too low a declaration. A revaluation can be made up to four years and six months after the date of purchase. If a property is revalued, the revaluation must name the architect or surveyor who performed the valuation and the reason for the increase. If you disagree with the valuation you can lodge a protest, which must be done within a limited period (usually one month).

The fees payable when buying a property in Spain may include the following:

• Transfer tax (resale properties only).
• Land tax.
• Notary’s fees.
• Legal fees.
• Deed registration fee.
• Utility fees.

Most taxes are paid by the buyer, with the exception of land tax (plus valía) and the selling agent’s fees. However, a contract may state that the buyer is liable for all expenses (todos los gastos), including plus valía. This is legal, provided the buyer agrees, as the law stipulates simply that expenses will be divided when they aren’t set out in the contract and who pays what fees is often a matter of negotiation. Always ensure that you know exactly what the total fees will be before signing a contract.

Transfer Tax

Resale property buyers must pay transfer tax (Impuesto de Transmisiones Patrimoniales/ITP) of a certain percentage. The percentage varies depending on the region where the property is situated, e.g. 6 per cent in the Basque Lands and Navarra, 6.5 per cent in the Canaries and 8 per cent in the remaining regions.

Land Tax in Spain

Land tax (Impuesto Municipal sobre el Incremento del Valor de los Terrenos, usually called plus valía) is a municipal tax on the increase in the value of land (excluding any buildings), since the last change of ownership. Traditionally, it’s paid by the vendor, as he’s the one who has made the profit. The amount of tax due depends on the population of the municipality in which the land is located and the number of years the vendor has owned the land, and bears no relation to the value of any buildings on the land. Plus valía is low on modern properties such as apartments and townhouses in urbanisations, where land values have increased little since the properties were built and little land is involved. It can, however, be high if you buy a large plot or a detached house with a few hectares of prime building land which hasn’t changed hands for decades. As taxes vary so widely, it’s impossible to give a simple guide to the amount you might have to pay.

Spanish notary’s Fees

The fees for the notary (notario) who officiates at a sale are fixed by law and are based on a sliding scale depending on the sale price, except for when the deed doesn’t include one (i.e. when the property is a gift), when there are fixed fees for each document. The fees are usually from €320 to €700. If you’re buying a plot in order to build a house, you must pay fees for two deeds; one for the land and another for the building.

Legal Fees

Legal fees for the conveyancing involved in a sale are usually around 1 to 1.5 per cent of the purchase price for an average property. The actual fee may depend on the work involved, although there’s usually a minimum charge, e.g. 900€, and it may be negotiable on ‘expensive’ properties. Engaging a lawyer and paying legal fees is optional, but it’s highly recommended.

Deed Registration Fee and Land Registry Fee

This is usually between €180 and €500, although the first amount paid is a deposit and is often over-estimated, so you may receive a small refund.

Mortgage Setup

The mortgage setup fee is generally built into any mortgage that is taken for the purchase of a property. Normally the bank lending is 70% of the valuation of a property, or the Compraventa purchase price, whichever is the lesser, although some banks have now reviewed their lending criteria, and will now only offer 60%. Due to the economic climate at the moment, all mortgages are being passed onto the Risk Department at the Banks Central Office, and the timescale on any mortgage is now out of our hands – it is normal at the moment for a mortgage to take 7/8 weeks to be agreed. However, the valuation fee is now only paid when the mortgage has been agreed by Head Office, thus saving the buyer the 300€ fee for a valuation. Unfortunately as a result of these new directives, most banks are now asking for a declaration from the vendor of 80% of the valuation, thus increasing the retention figure considerably.

Utility Fees

In resale properties, you will have to pay for the cost of new contracts, particularly water and electric

Running Costs

In addition to the fees associated with buying a property, you should also take into account the running costs. These include local property taxes (rates); annual wealth tax, income tax on deemed letting income and a fiscal representative or tax consultant’s fees; rubbish tax; community fees for a community property; garden and pool maintenance (for a private villa); building and contents insurance; standing charges for utilities (electricity, gas, telephone, water); plus a caretaker’s or management fees if you leave a home empty or let it. Annual running costs usually average around 2 to 4 per cent of the cost of a property.