Transfer tax and VAT when you buy

Buying in Spain means different taxes from buying at home. The two main ones are transfer tax on a resale and VAT on a new-build. Which one applies has a direct effect on your total costs.

Transfer tax on a resale (ITP) #

Buying an existing property means paying transfer tax, known as ITP. The rate usually falls between 7 and 12 per cent and varies by region.

You pay it on the purchase price, at the point the deed is signed at the notary.

Because the rate is set regionally, the same property at the same price costs a different amount to buy depending on which coast it sits on. Worth checking before you fix a budget.

VAT and stamp duty on a new-build (IVA and AJD) #

Buying new-build means no transfer tax but VAT instead. IVA is usually 10 per cent of the purchase price, plus roughly 1.2 to 1.5 per cent stamp duty (AJD), again varying by region.

Both are on top of the purchase price. So the total tax burden on new-build is often slightly higher than on a resale, even though the headline rates look similar.

Compared with the UK #

The mechanism resembles stamp duty land tax, but the outcome is different.

In England you pay SDLT on a banded scale with a surcharge on additional properties. In Spain there are no bands in the same sense and no separate second-home surcharge, but the base rate is considerably higher.

The type of property is what determines which tax you pay, which is not something UK buyers are used to thinking about.

Practical points #

Always check the rate that applies in the specific region where you are buying. On a new-build, budget for VAT and stamp duty on top of the price.

Ask for a full written cost calculation before you commit.

And note that VAT on a new-build is generally not included in the mortgage. Your bank lends against the property value, not against the tax, so the whole amount comes from your own funds at completion.

In short #

You always pay tax when you buy in Spain. Which tax depends on the type of property and the region. Knowing the number in advance is the difference between a comfortable completion and a scramble.

Rates are set regionally and change. Confirm the current rate for your region with your lawyer before budgeting.