When considering the purchase of a property in Spain, one of the first things that we must consider are the costs associated with it. For practical purposes, we can divide these costs into those that we will incur only once, and those that will occur year after year after having acquired the property.
The costs that customers must face only once are those directly related to the purchase process. As a general rule, between 13.5-14% should be added to the sale price for new construction and 12% for second-hand properties. This percentage is made up mostly of VAT in the case of new construction or ITP (Patrimonial Transfer Tax) when dealing with second-hand properties. We are talking about 10% for VAT and around 8% for ITP. The rest of said amount is destined to the hiring of lawyers who accompany and ensure an effective sale, writing expenses, registration in the Spanish Property Registry, among others. It is important to highlight that in these percentages we contemplate all the costs so that the client gets an idea of the final value.
Once the home is deeded, the rest of the costs are variable, some annual and others more periodic.
The first of these is home insurance. The price of this is annual, and of course it differs according to the property in question, but as an example, for a new construction apartment with 2 bedrooms and 2 bathrooms, worth around 300,000 euros, we can calculate a cost of home insurance of between 200-300 euros per year.
Another annual cost is that of fiscal representation. The client is not required to have a fiscal representative in Spain, but it is highly advisable. This representative will not only oversee calculating the annual taxes that the client must pay, but will also notify the client in case of any inconvenience. Fines, notifications, and documents of this type will be received by the tax representative and dealt with on time if they exist (this is especially important for clients who do not reside in Spain). The average cost of fiscal representation in Spain is 250 euros/year. RO Spain offers this service to its clients for the price of 195 euros per year + VAT.
Associated with this last point, we must consider what are the taxes to be paid. There are three of them: IBI (Real Estate Tax), waste collection and non-resident tax (if you do not reside in Spain). All these taxes are annual and variable. In the case of the IBI, the tax rate set by the city council may not be less than 0.4% nor greater than 1.1% of the cadastral value of the property. The non-resident tax affects the person and not the property, therefore, if we consider a property in the name of two people, the tax will affect each one of them.
As a real example, we consider a client who has purchased a new build property in Orihuela Costa for 200,000 euros (apartment). It consists of 3 bedrooms and 2 bathrooms and an area of 98 m2. It has been acquired by a married couple. Annually they pay: 200 euros of non-resident tax (between the two), 225 of IBI and 100 euros of waste collection.
Finally, we must think about the non-annual variable costs directly associated with the use of the home as community expenses, if they exist, water, electricity, gas, internet, among others.
We hope that this article has served as a reference for those who are considering purchasing a property in Spain. Getting informed and knowing about our responsibilities and obligations is of the utmost importance and constitutes the first successful step in the process.