09 Purchase & Transaction Taxes
You need to reckon that in total your costs of buying the property will be up to around 10% of the purchase price. But this can only be a rough guide as some of the costs – such as the IVT (see below) - are not related to the value of the property and so could vary widely.
If you are obtaining a mortgage, you can of course include these costs in the mortgage amount you request, providing this remains within the maximum percentage available against the property value and on your income.
This estimate of 10% includes: Your lawyer’s fees, which are likely to be around 1% of the purchase price for the work he does, plus the fees he has had to pay out, for example, for the Nota Simple, Certificación Registral and the Certificación Catastral.
The notary, registration and handling (gestoría) fees, which should together amount to less than 0.5% of the purchase price. The notary charges according to a fixed scale depending on the size of the property and its price, and is likely to be between £100 and £500.
The fee for the registration will be around half of the notary’s fee, and the handling fees are 90 Euros.`On a property valued at €180,000 (around the notary’s fee would be €300, the registration fee €144, and the handling fee €80 – in this case the three together amount to 0.28% of the property value.
If you were obtaining a mortgage, there would be the same fees to pay for registering the mortgage deed, although the amounts will be less, as the mortgage will be less than the value of the property.
In addition, Stamp Duty is charged on mortgage deeds of 0.9%. There would also be a valuation fee, which is usually around 0.8% of the purchase price, and there is usually a 1% application fee charged by the lender.
The transfer tax, Impuesto sobre Transmisiones Patrimoniales, is 6% of the value declared in the contract. If you purchase from a developer or other company, you will pay VAT (IVA) at 7% because it is treated as a commercial transaction rather than a private one.
You will also pay 7% VAT on a new building. In addition, where VAT is involved, there is an Impuesto sobre Actos Jurídicos Documentados (stamp duty) of 0.5%.
If you buy a garage separately from the house, subject to a separate escritura, this will be regarded as a completely commercial transaction, and will be subject to VAT at the full rate of 16%. This rate also applies if you buy a business.
In some communities the Impuesto de Transmisiones Patrimoniales has been increased from 6% to 7%. There is also the Impuesto sobre el Incremento del Valor de los Terrenos (IVT) - commonly known as plusvalía after its original name the arbitrio municipal de plusvalía - a municipal value-added tax, which should be paid by the vendor.
But as mentioned above, the contract may often specify that this tax should be paid by the buyer. The plusvalía is based on the valor catastral of the land (i.e. not on the value of the building), and is levied on the increase in this value since the last sale.
The tax is levied at a rate between 10% and 40% depending on the area and the length of time since the last sale. So an apartment in a modern urbanization with little ground last sold a couple of years ago will pay far less plus valía than a finca rural with large grounds which was last sold 20 years ago and where the land has just been re-zoned for urban development.
Your lawyer will be able to find out exactly how much the plus valía will be from the local municipal tax office, which keeps records of land values. (This should not be confused with the capital gains tax which is payable by the vendor and from 2000 is either 20% for residents (exempt if over 65) or 35% for non-residents (more on capital gains tax in chapter 10).