VAT when buying a home in Spain, everything you need to know

9th December 2022 · 4 min. read

When buying a property in Spain, there are many questions that often come to mind: What documentation is necessary, how many expenses will I have to pay, or how much VAT do I have to pay for my home?

In today’s article we will talk about everything related to VAT when buying a property in Spain. We will help you to know what to do and how to manage all the necessary expenses when buying a property. Let’s get started!

Main expenses when buying a house: mortgage, VAT / others

As we all know, when buying a home anywhere in the world there are a series of necessary and obligatory expenses. One of the most common and important is the monthly instalment paid when you have a mortgage loan. This expense is very common for those people who, when buying a home, prefer to ask for a loan from the bank. Either because they want to, or because they cannot pay all the money in a single payment.

Another important expense is VAT, also known as Value Added Tax. This is an indirect tax levied by the state, the government, and can vary according to the country’s economy.

It is also important to know that when you buy a second hand property in Spain, you must take into account the Transfer Tax (Impuesto de Transmisiones Patrimoniales). We are in luck on the coast because, recently, there has been an improvement in this tax in Andalusia. From 2023 there will be no wealth tax payable on the Costa del Sol. This means an improvement of 0.22% saving for the buyer of a property that passes into new hands. It should be clarified that, although the new law comes into force in 2023, the rebate will not be effective until the tax declaration of 2024.

Additional costs: the community fees

Of course, another expense to take into account is that the property has no monthly community fee debts. Here the law protects the buyer and the purchase cannot be executed until the old owner pays off the debt (if any). The new owner must be aware of what fees they will be required to pay in the future. It will vary greatly whether you are buying a community property or a detached villa.

Expenses when buying a house: VAT according to the purchase

When it comes to VAT on a new house, it is important to know what the relevance of this term is.
The concept of “new housing” means that the house is handed over to the owner after the construction of the house has been completed and it has not been used before. The VAT rate for a new home in Spain is 10%. For example, if you buy a house for 500.000 euros, you have to pay 50.000 euros more. If the property we want to buy is a second-hand property, the price of the property is not subject to VAT.

However, there are occasions when the VAT is lower depending on certain conditions such as buying a VPO (Vivienda de Protección Oficial). Likewise, VAT will not be the same in all Spanish autonomous communities. There are areas where it is lower due to their location, infrastructure, supply-demand of houses, etc.

When is VAT paid?

The VAT payable on a new property is paid at the time of the signing of the title deed by the future owner of the property.

If we buy a house, we have to assume a series of obligatory and necessary expenses in order to
successfully and without any kind of inconvenience. For this reason, VAT when buying a new property in Spain must be paid immediately. It is an unavoidable tax obligation, otherwise you could have serious problems with the courts.

We will resolve all financial, economic and legal issues (including taxes) associated with your future home. Of course, for any questions or further information, as well as to find your ideal home, please do not hesitate to contact us.