When a prospective homebuyer pulls out a calculator and starts crunching the numbers on the cost of this investment, they should pay special attention to taxes. These are always a significant part of the out-of-pocket expenses involved in any transaction of this kind, but they can initially go unnoticed due to a lack of knowledge or failure to plan ahead.

So, to make sure this doesn’t become a last-minute problem for you, we at CULMIA have put together all the information you need to know about the taxes you’ll pay when buying a new home. Keep reading and be fully prepared when the big moment arrives!

How much will I have to pay in taxes?

We’ll take a look shortly at the taxes you’ll pay when buying a home, depending on a number of factors. However, to start with—and just as a general guideline—we can tell you that you’ll need to set aside a significant portion of your money to cover this expense. Specifically, we’re talking about between 4% (in the best-case scenario, for subsidized housing) and 10–12% of the home’s sale price .

What factors determine the taxes you pay when buying a new home?

There are three:

• Property characteristics: The type of tax you’ll have to pay will depend on the type of property you want to buy. In other words, whether it’s a new construction home or a resale home that has already had a previous owner.
• The autonomous community where the home you want to buy is located: housing-related taxes are the responsibility of the autonomous communities, so you need to find out what the law says in the place where the home you want to buy is located.
• If you take out a mortgage to pay for the home: as we will see later, requiring financial assistance to complete the transaction also affects the taxes you must pay.

What taxes are due when buying a new home?

If the home you plan to purchase has not yet been occupied, you will have to pay two different taxes:

VAT (Value-Added Tax)

It applies exclusively to new homes and is included in the sale price. Therefore, the buyer pays it to the developer selling the property at the time of the transaction, and the developer then pays it to the tax authorities when reporting the transaction. The tax is 10% of the amount stated in the deed, unless the property is a subsidized housing unit under a special program or a publicly developed housing unit (in which case the tax rate is 4%).

Also, keep in mind that in the Canary Islands, VAT is replaced by the Canary Islands General Indirect Tax (IGIC), which amounts to 6.5% of the property’s value.

IAJD (Stamp Tax)

This tax is levied on the notarial, commercial, or administrative deed of sale. It is payable by the buyer, and its cost ranges from 0.4% to 1.5% of the declared value of the home, depending on the Autonomous Community where the home is located, provided that the purchase is paid for without a loan. Otherwise, the amount must be calculated based on the mortgage liability (which includes interest, costs, and expenses).

To file a self-assessment, you must complete Form 600 and submit it electronically or at an authorized office of the corresponding Autonomous Community. You have 30 business days from the date the transaction was signed to do so.

The IAJD tax on new home sales consists of two installments:

• Fixed fee: This refers to the amount paid for stamped paper ( €0.30 per sheet / €0.15 per page ) for the originals and copies of notarial deeds, certificates, and records. Simple copies are exempt from this fee, and the cost is the same throughout Spain; therefore, it does not vary by Autonomous Community.
• Variable fee: This is a tax expressed as a percentage that is applied to the first copies of deeds and notarial records. To calculate it, the general rate set by the corresponding Autonomous Community is used, which ranges between the values already mentioned (0.4%–1.5% of the total value of the home). However, each regional government may apply its own exemptions or reductions for individuals, such as those based on age, disability, etc. Thus, the basic rates are as follows:
  • 0.4%: Canary Islands.

If the home is pre-owned, what taxes are due?

If the transaction involves a property that has previously had an owner, two taxes must also be paid.

Property Transfer Tax (ITP)

This tax applies to property transfers; in this case, we are referring to a transfer of property for consideration, since the homeowner sells the property to the buyer.

The buyer has 30 days to pay the fee from the date the purchase agreement is signed. To do so, the buyer must go to the registry office in their autonomous community, as these offices are responsible for processing the transaction.

Its amount depends on the percentage applied to the price listed in the deed, which is predetermined by the Autonomous Community where the home is located. It ranges from 4% to 10%, as shown in the following breakdown:

• 4%: Basque Country.
• 6%: Ceuta, Madrid, Melilla, Navarre.
• 6.5%: Canary Islands.
• 7%: Andalusia, La Rioja.
• 8%: Aragon, Asturias, Castile and León, Extremadura, Galicia, Murcia.
• 9%: Castilla-La Mancha.
• 10%: Cantabria, Catalonia, the Valencian Community.

As is the case with the IAJD, the autonomous communities have established their own conditions for applying reduced ITP rates. This is the case, for example, with publicly subsidized housing (VPO) or for buyers who meet certain criteria, such as age (young people), having a disability, or being part of a large family.

Therefore, it is advisable to find out more before completing the transaction to see if you are eligible for any of these tax deductions.

IAJD (Stamp Tax)

It is the same tax that applies to the sale of new homes. But there are a couple of important nuances in this case:

• On the one hand, in transactions involving the sale of pre-owned homes, only the fixed portion of the IAJD is payable, since its variable portion—which applies to notarial documents—is incompatible with transactions that are already subject to the ITP.
• On the other hand, following the amendment to the Law on Property Transfer Tax and Stamp Duty, except in the Basque Country (if a person purchases a home for non-primary use), when the IAJD tax is levied on the mortgage deed for the purchase of a pre-owned home, it is the lending institution that is required to pay it.

In short, the main difference is that for mortgages taken out to purchase a new home, the buyer is responsible for paying the fixed amount of this tax; whereas for mortgages taken out to purchase a pre-owned property, the bank or financial institution is responsible for paying it.

Property Taxes

Finally, keep in mind that owning a home involves paying other taxes in addition to those due at the time of purchase. These include:

• Property Tax (IBI): This is an annual municipal tax. It is levied on property ownership, so it must be paid regardless of whether the house is occupied or vacant. It is calculated based on the value of the land and the structure.
• Garbage or waste tax: This tax covers the collection, treatment, and disposal of garbage and waste. It is also a municipal tax and is collected annually, although the amount may vary from one place to another. In fact, some cities do not even have this tax, such as Badajoz, Madrid, and Málaga.
• Second-home tax: If you own more than one home, the second home must be included in your annual income tax return, and you must pay a tax based on its assessed value (which can range from 1.1% to 2% of the total).
• Tax on Rental Property: If the property is rented out, you must pay the corresponding taxes on the rental income. This tax is paid when filing your income tax return and allows you to deduct expenses related to the property.

Easily calculate the taxes on the sale of your home

These are the taxes you have to pay when buying a new or pre-owned home, so we hope our article has helped clear up any questions you may have had. And remember, at CULMIA we can help you find the perfect home for you and your family. Contact us and find out everything we can do for you!

We recommend:

• Requirements for Buying a Home: A Complete Guide
• Incentivized Affordable Housing: Requirements and Benefits