When buying a house in Spain it is important to estimate the taxes you will have to pay, not only when you actually purchase your Spanish property, but also local taxes and housing rates which are paid on a yearly basis by all home owners in Spain. Spanish housing yearly rates depend on the value of the house and the area it is in, but here there is a rough guide to all the tax expenses that you will need to take into account when deciding what house you are going to buy or sell.
Taxes payable at the time of the purchase/sale
Re-sale purchase tax: House buyers of re-sale property (as opposed to brand new) are required to pay the Impuesto de Transmisiones Patrimoniales – Transfer Tax -.
New Properties purchase tax: buyers of brand new houses in Spain are liable to paying 10% IVA (VAT) if the house is finished or is being built at the time of the purchase, plus an extra 1.5% stamp duty tax. However, if you buy land in Spain, commercial premises or parking spaces in garages, then the VAT payable rises to 21%.
Increased patrimony tax payable to Spanish Treasury: When a property sale in Spain takes place, a capital gains tax must be paid by the seller. According to Spanish fiscal law, the buyer withholds 3% of the total purchase price to make sure that the seller does not take the money and run. This amount represents part of the capital gains tax on the profit made by the seller at the time of the sale. That is the difference between the current (official) sale price and the price paid by seller when he/she originally purchased the property + the value of any reforms and improvements carried out since then. The capital gains tax is payable to the Spanish Treasury (Tesoro Público) is only the advanced diposit. The estimated amount retained at the moment of the sale is payable once everthing has been presented to the local registry and the new deeds are available. This means that property sellers not living in Spain will have to arrange for their lawyer or gestoría to chack and deliver the necessary paperwork and to formalise the full tax payment a few months after the sale. The final amount could be as much as 21% the profit you make on your sale, so if there is a very big difference between the price you are selling for and the price you originally paid, it might be worth applying for residency before you sell (nationals of EU member states are automatically granted residency, although the paperwork can be a bit tedious) in order to be elegible for the reduced percentage for residentes. Please note also that you need a NIE to pay this tax. Any seller who is over 65 and has been a legal resident in Spain for the last three years does not have to pay this tax. Residents and non-residents who purchased the property they are now selling before December 1986 are also exempt from the capital gains tax.
Plusvalía Tax: The local authorities determine the amount of plusvalía to be paid for each purchase of property in Spain, depending on the area where the property is located. This tax shall be paid by the Seller and represents the increase of the value of the property from the day it was bought to the day it is sold.