As a buyer of a property in Marbella (Spain) there are a number of costs and taxes over and above the property price that you will have to pay. Depending upon whether you are buying a new property from a developer, or a resale property from a private individual, you will either have to pay VAT & Stamp Duty, or a transfer tax.
VAT & Stamp Duty (IVA & Actos Jurídicos Documentados – AJD)
These taxes apply if the property is being sold for the first time, and the seller is a property developer. The VAT (known as IVA in Spain) is 10% on the price of the purchase in the case of built residential property (villa, apartment, etc), 18% in the case of plots of land (without built property), commercial premises and garages not anexed to a home. The Stamp duty (known as AJD) is 1,5% of the price of the purchase. Both VAT and Stamp Duty are paid by the buyer, and if any deposit is paid before completion of the sale, such deposit will be subject to VAT at the moment of payment of this deposit. In this scenario there is no transfer tax to pay.
Transfer Tax (Impuesto sobre Transmisiones Patrimoniales – ITP)
This tax applies if the property is deemed to be a second or posterior transfer (i.e. not the first time a newly built home is bought), and is paid by the buyer. If any deposit is paid before completion of the sale it is not subject to ITP pro rata. However the full amount of ITP still has to be paid upon completion. In this scenario there is no VAT or stamp duty to pay. The Transfer Tax rate is 8% on properties below 400.000 € and as from said amount up to 700,000 € the tax is at 9%; the rate rises to 10% on properties above this value.
You are strongly advised to hire a lawyer to help you during the buying process. Your lawyer drafts and reviews contracts on your behalf and can explain all the legal and administrative issues you face. Your lawyer should also carry out any necessary due diligence (checking ownership claim of the seller, charges on the property, permits, etc.) and arrange all the required documents to complete the process (property registration, tax payments, etc.). A lawyer – Abogado in Spanish – will charge you according to the service you require. This will vary according to the complexity of the purchase. They normally charge 1% of the purchase price in legal fees.
If you choose to buy with a mortgage then this will incur several additional costs. First there will be the property valuation that the mortgage provider will require before granting the mortgage. This is paid for by the buyer and can cost around 500 Euros. Then there will be the costs of the mortgage itself. This varies according to the provider, and even according to the particular branch. However there is usually some kind of opening fee of around 1% of the value of the mortgage.
Notary expenses are always paid by the buyer and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate Notary fees as being between 0.1% and 0.2% of the purchase price declared in the deeds of sale.
Property Registry Inscription fees
Expenses related to inscribing the sale with the land registry are also paid by the buyer, and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate between 0.1% and 0.2% of the purchase price declared in the deeds, though once again it depends upon the property and the area, and the fee could be considerably lower.
Property Ownership Tax (IBI Tax)
A local tax on the ownership of property in Spain, irrespective of whether the owner is a resident or not. Calculated on the basis of the valor catastral (an administrative value that is usually lower than the market value, sometimes considerably so) set by the town hall the tax rate goes from 0.4% – 1.1% of the “valor catastral” depending on the Spanish region.
Annual Wealth Tax
An exceptional and temporary tax is being levied on properties at a rate varying between 0.2% and 2.5% of the net asset value. Both residents and non-residents alike are exempted from paying wealth tax over the first €700,000 of their property’s net value.
Personal income Tax (IRNR)
Non-residents who own property in Spain have to pay an annual income tax that varies according to whether the property is rented out or not.
Not rented out
Non-resident property owners who do not rent out their property and who do not have any other source of income in Spain pay income tax based on the value of their property. The tax rate is fixed as 24.75% of 2% of the “valor catastral” of the property.
The tax on a property with a valor catastral of 700,000 Euros would be as follows:
If non-residents rent out their property and receive an income in exchange, they are obliged by law to declare this income and pay taxes on it. The taxable base and the tax rate will be determined by the laws as they apply to each person’s particular circumstances (taking into account the double taxation treaty – if any – between Spain and the country of origin of the non-resident). In many cases non-residents simply pay a flat rate of 24.75% of the gross income they earn from their property in Spain. Residents in Spain will have to pay the income tax based on their income earned during the year. The tax rate depends on the level of income.
Owners of property that is part of any development, building, or complex in which common zones are shared with other owners are by law obliged to be members of the community of owners, known as the “Comunidad de Propietarios”. This will entail paying community fees for the upkeep of the common areas, and any other services that the community vote for. The fees will vary according to the magnitude of the common areas, the costs of maintaining them, and the services that the community vote for. A budget for annual community expenses is approved by majority vote of all owners (or representatives) who are present at the annual general meeting of the “Comunidad de Propietarios”.
In all cases there is also a municipal tax, “plusvalia”, which should not be confused with Capital Gains Tax which the seller is liable for when the property is sold. This “plusvalia” is paid by the seller. It is a municipal tax which varies depending on the “valor catastral” (cadastral value) and the period the property has been owned for.
Capital gain (incremento del patrimonio inmobiliario)
This tax equals to 21% of the net profit, which is the difference between the selling and the buying price.