It is suggest that you budget approximately 10% of the purchase price of the property to cover all expenses and taxes involved. As you can see below, 7% is paid to Spanish Tax authority and the remaining 3% will cover the cost of the Lawyer and Notary.
Transfer Tax or IVA (VAT)
All re-sale property bears a charge of 7% transfer tax and is exempt from VAT. All new property bears a charge of 7% VAT and exempt from transfer tax. In both cases the tax is paid to the Notary who receives these funds on behalf of the Hacienda.
Capital Gains Tax:
Although this is not a tax that you need to make at the moment of purchase, it is nevertheless something that you should be aware of.
When the Vendor is a non-resident, the purchaser is obliged to retain currently 5% of the registered purchase price and lodge the amount with the notary who will pay the Hacienda on account of the vendor’s Capital Gains Tax.
The amount of tax payable will be calculated and the Vendor will either have to make up or claim the difference from the 5% deposited. If overpayment has been made, the Hacienda is obliged to return the difference to the Vendor within 2 months.
The rate of tax varies according to whether you are resident or non-resident and is dependant on when the property was bought. A Spanish Lawyer/Fiscal Representative will be able to provide accurate and up-to-date information on Capital Gains Tax.
Annual Property Taxes
Non-resident British property owners are advised to nominate a legally recognised Fiscal Representative to prepare the property tax forms on your behalf. Apart from the Local Authority rates there are two annual property taxes.
Patrimonio or Wealth Tax
If you are a permanent resident in Spain there is nothing to pay if your property has a declared value of less than €103,000. Above this amount the tax payable is 0.2% per annum of the value declared in the Escritura (Title Deeds).
For non-residents (holiday owners for example) 0.2% tax is payable whatever the value of the property.
I.R.P.F. (Notionall rental tax) If you are a permanent resident in Spain and only own one property, this tax does not apply.
For non-residents, this tax is 0.5% of the rateable value of the property. (In Spain the rateable values are considerably less than the real value of the property).
This is the like the English rates system, and is based on the declared value of your property. The average price paid is around £80.00 per annum.
These are payable annually for the community services, police, street lighting and cleaning, refuse collection etc, and the average price is around £150.00 per annum.