The first thing that you should worry about by expenditure planning is taxes. When buying real estate on the secondary market in Spain, the tax on the transfer of ownership rights is payable. If property is purchased on the primary market, then the value-added tax should be paid.
On the Costa Blanca, the rate is the same in both cases and is 10% of the market value of the property. However, depending on the region, the amount of tax on the transfer of ownership may vary, while the average for Spain is 8%. Let’s learn more on the example the different regions of Spain:
- Andalusia: real estate valued at less than €130.000 – 3.5% and from €130.000 to €400.000 tax is equal to 8%; property of €400.000 – 700.000 – 9%; property valued at more than €700.000 – 10%.
- Balearic Islands: for transactions up to €400.000, this figure is 8%, if the price increases to €600.000, the tax will be 10%.
- Valencia and Catalonia: the tax rate is 10%.
- Canary Islands: the tax rate is 6.6%.
- Madrid: the tax in the Spanish capital is 6%.
- Murcia: the tax rate is 8%.
When buying property from a developer, there is paid additional fee linked with documenting. This amount on the Costa Blanca is 1.5% of the market value of the property. All fees are calculated based on the market value of the property specified in the sales contract.
This fees are paid in the bank immediately after signing the contract, otherwise the registration of the property by the new owner will be impossible. In practice, this is done as follows: real-estate agent or lawyer accompanying the client along the whole transaction chain gives the buyer special forms to fill out. After making the payment at the bank, the documents are stamped and the buyer or his proxy, passes these papers to the lawyer to complete the re-registration procedure.
By purchasing a new construction object on the Costa Blanca, 10% value-added tax is added to the cost of the property, and the full amount is gradually paid in installments. And after the completion of all this process, documenting fees are added.
Charges of the sales processing
In General, the sum of charges and fees by registration of real estate will be 11-13% of its cost.
Checking the status of real estate in the Property Registry (Registro Propiedad)
Extract from the Register – Nota Simple gives a full description of the property and should be paid by the buyer. The approximate cost is €10 – €25.
Notary services (La Notaría)
Notary fees are regulated by the state and are the same in all Spanish Autonomous communities for all corresponding types of notary services.
The cost of signing a sale contract with a notary (la escritura pública de compraventa)
It depends on the price of the property. For example, for housing of €100.000, the notary will charge €850, and for property of €250.000, the notary will charge €1000.
Registration of the rights in the Immovable Property Registry (El Registro de la Propiedad)
Registration of the notarized contract by entering in the Property Registry is also payable. Charges for this are established by the Law and depend directly on the price of the property with the sum of €400-€650.
Bank fees by receiving payment documents required for the transaction
The estimated cost will be €250-300 for each payment document, and their number depends on the number of owners of the purchased property. However, in some banks, it is possible to avoid this commissions simply by arranging home insurance (seguro de hogar) or life insurance (seguro de vida) on the ground. Important: Insurance is mandatory if the property is purchased with mortgage/bank credit, as well as if it is planned to rent out. On average, the cost of insurance varies from €85 (basic coverage) to €300 (comprehensive coverage) per year. The cost is affected by both the class and size of housing, as well as the list of insurance coverage.
Commission to a real estate agency
It is about 2 – 5% from property price. In the primary market, these costs are borne by the developer, and in the secondary market – by the seller. In some cases, the seller does not include fees for the agency in the object cost and in this case it is paid either by both parties in equal shares, or in full by the buyer. This applies mainly to properties that are offered for sale directly by an individual and that the buyer has found independently.
Taxes by purchasing property
Property ownership tax – IBI-El Impuesto sobre Bienes Inmuebles
All property owners in Spain (residents and non-residents) are required to pay property tax annually. Its value is 0,4-1,1% of the cadastral value of property, which is always 10-15 times lower than the market value. It is set by each municipality of Spain independently. For example, on the Costa Blanca in the city of Torrevieja, the property tax is 0.45% of the cadastral value.
Tax on the income of a non-resident individual – IRNR – Impuesto sobre la Renta de No Residentes)
Non-residents who spend no more than 183 days a year in this country, owns real estate in Spain, but does not live there, must pay income tax, since such real estate is considered by the state as an investment generating income. This tax is calculated according to a complex formula, and its value, at the simplest calculation, varies from 0,2% to 0,5% of the cadastral value of the object.
Tax on the income of a resident individual – IRPF – Impuesto sobre la Renta de las Personas Físicas
It is paid when the property is leased. Personal income tax is a progressive tax, depending on the total amount of income received. Since 2016, it is calculated at rates from 19 to 45%.
IRPF- revenue tax base 2019
|IRPF- revenue tax base 2019||Amount %|
|less than €12.450||19|
|€12.450 – 20.200||24|
|€35.200 – 60.000||37|
This tax is payable if the property is rented out. The tax rate is 19% of the income received for EU citizens and 24% for everyone else.
This tax must be paid annually by the owners of real estate (one or more objects) with a total value of more than €600.000. The amount of tax also depends on the country’s municipality and is calculated on a progressive scale. The stakes are rising along with the price of from 0,2% to 2,5%.
Taxes must be paid once a year. At the same time, real estate tax can be paid through automatic debiting from a bank account, but to pay non-resident income tax and income tax, it is needed to submit a tax return. Rental income must be reported once a quarter. The declaration is submitted by the 15th day of the next month in electronic form and by the 20th day of the next month in paper form.
Payment terms and periods vary depending on the region of Spain. For example, in the province of Alicante, real estate tax must be paid from the beginning of September to October 5, income tax for non-residents – from January 1 to December 31 of the year following the reporting year, for example, in 2020 the tax for 2019 will be paid.
Utility supply payments
These payments include water, electricity, gas, comunidad services, Internet, TV, and garbage removal.
Water supply and electricity
In Spain, light and water bills consist of two parts:
- fixed amount that is paid regardless of whether someone lives in property or not;
- estimated amount that is calculated based on the spent cubic meters of water and kilowatts of light.
The subscription fee for connecting to centralized power supply systems is 60 euros per year and is paid approximately 15 euros every three months. Electricity in Spain is paid according to the meter reading at the rate of 0,086 euros per 1 kW. At the same time, much depends on the volume of consumption, so the final payment is calculated taking into account the coefficient 2.0 (the second 15 kW for 2 months) or 3.0 (the third 15 kW for 2 months), etc. The usual principle of operation: who uses more, pays more. Based on this, the actual average price for electricity is approximately 0,24 euros per 1 kW
Payment for water supply is also based on a progressive scale: the higher consumption, the higher the «penalties» for spending over the norm. Everything starts at 0,44 euros per 1 m3, but this is only for the first 15 cubic meters over a two-month period. The second will cost 0,66 euros. The big leap starts with the next 20 «cubes» – immediately 1,78 euros per m3. Then all data are summarized and the total amount is output.
In General, payments for water and light depend on the intensity of resource use. On average, for a family of 2-4 persons living in an apartment in Alicante, the final bill for water will be €25 – €35 per month, for light – €40 – €150. The electricity bill for more than €100 is usually received by owners of large houses.
Energy supply companies offer various tariff plans that can significantly reduce electricity costs. Let’s take a look at a large supplier – the company Iberdrola.
For example, there is a night-time tariff Plan Noche. The cost of this plan is 0,109433 €/kWh at night and 0,169380 €/kWh during the day. There is also a mixed tariff Plan Elige 8 Horas. It can be chosen any eight hours of the day with higher electricity consuming. For example, 4 hours in the morning and 4 hours in the evening, and during these hours the fee will be equal to 0,108384 €/kWh, and the rest of the time – 0,170112 €/kWh. It can be also chosen a permanent tariff – Plan Estable, its cost will be 0,134525 €/kWh.
Fees for comunidad services
The amount of this payment depends on the presence or absence of common zones – swimming pool, tennis court, fitness room, green spaces, playground, parking, etc.
By purchasing a detached house without an adjacent territory and swimming pool, the maintenance cost will be a minimum, about €15-30 per month. In the case of an elite complex with well-developed infrastructure (several pools, jacuzzi, playgrounds, gym, restaurants), the payment amount can increase till €160 per month. For detached villas or bungalows, there may be no maintenance fee in some cases. The external territory is cleaned by urban services, and the internal territory is maintained by the owner deciding for what and how much to spend.
Television and the Internet
Average prices for a good high-speed Internet (100 megabits) are €15-25 per month. But for those who do not live in their Spanish property permanently, it is reasonable to activate a tariff that allows to pay only for the period of using the service. TV package separately costs about €20-30 depending on the number of channels and connection methods (satellite dish or cable). However, some providers offer package services (Internet + TV), which allows decrease of operating expense.
The cost of this service depends on the region and can range from €4 to €6 per month.
The payment amount for gas will depend on the method of its delivery. For example, many newly built houses have a centralized gas supply, which average price is 0,08 euros per kWh. In buildings on the coast and those that belong to older buildings, it is often practiced to deliver gas in cylinders. One gas cylinder is usually enough for 3 months, and it costs 17 euros. The gas cylinder can be also bought by yourself at a gas station, but it is needed to hand over an empty balloon or sign a new contract.
As for receiving of bills, they come monthly for light, once in three months – for water, once in six months – for garbage, once a year – taxes payments.
As a general rule, bills are sent by regular mail, but everyone can form an agreement with some service providers to send invoices by email. If the bill is not received, must be immediately contact this institution and request a duplicate, because the delay will be charged a fine.
In addition to paying taxes and making utility payments, owners of Spanish property must annually submit documents to the Spanish bank that confirm that the source of funds in the account is legal. Although the owner has already purchased a house in Spain, but he/she pays monthly utility bills, and the local authorities are interested in knowing from what income this money is taken.
To confirm the source of funds, can be used an income statement, tax return, profit statement, and so on. These documents must be duly translated into Spanish. It is possible to do this at the Spanish Embassy in own country or in Spain with a sworn translator. The price is calculated based on amount of work. For example, translating a single document can cost €50-120. It all depends on how much information is contained on this official paper.
We hope that this information will allow you better to plan your expenses related to buying and owning property in Spain.