Buying a home is a major decision because of the size of the investment involved. The purchase process includes various formalities and administrative tasks, as well as transaction costs, including the relevant taxes payable when buying a property.
The taxes payable depend on the type of property you are buying and the autonomous community in which it is located.
What taxes do you pay when buying a home?
Value Added Tax (IVA)
This is the tax payable when buying a new home.
For supplies of homes subject to VAT, the general rate is 10%. At the time of this review, the 4% rate applies to VPO housing under the special regime or public-promotion housing, not to all protected housing. VAT has its own territorial scope.
Property transfer tax (ITP)
This is the tax payable when buying a resale home.
In this case, the autonomous community where the property is located matters, as each region applies its own tax rates and reliefs subject to the relevant requirements.
In the Balearic Islands, the general property transfer tax scale is progressive, with bands taxed at 8%, 9%, 10%, 12% and 13%. Reduced rates and reliefs are subject to current conditions and limits, which must be checked for each purchase.
Stamp duty on documented legal acts (AJD)
This tax affects notarial, administrative and commercial documents associated with a property transaction. It therefore applies to deeds of sale and to the formalisation of a mortgage.
The tax consists of two components:
- A fixed component: this is the same throughout Spain and applies to notarial documents, at a cost of €0.30 per sheet and €0.15 per page.
- A variable component: depends on the autonomous community and the transaction. In the Balearic Islands, the general rate is 1.5%; a 2% rate applies to acquisitions of properties valued at €1,000,000 or more. Other special cases and reduced rates are subject to conditions, so check the current rules before calculating the tax.
It is important to note that the taxes payable when buying a home depend on whether it is a new or resale property and whether you take out a mortgage:
- If you buy a new home: VAT is payable at the time of the sale, together with both the fixed and variable components of AJD.
When a loan secured by a mortgage is formalised, the taxpayer for the AJD on the loan deed is the lender, normally the bank. This mortgage tax should not be added as a second variable charge payable by the buyer.
- If you buy a resale home: property transfer tax is payable on the purchase, together with only the fixed component of AJD.
If a mortgage loan is formalised to buy a resale home, the AJD on the loan deed is also payable by the lender. It must be distinguished from the tax on the property purchase itself.
The rule assigning AJD on the mortgage loan deed to the lender applies whether the home purchased is new or a resale property. It does not change who is liable for the taxes on the property purchase itself.
Conclusions
The taxation involved in buying a property can be somewhat complicated without the necessary knowledge and experience. To be sure of your position, it is best to consult a professional who can advise you.
We hope we have clarified the taxes payable when buying a home. At Inmogestión Balear , our professional agents can help you secure the investment you need with every assurance, supporting and advising you on all the formalities associated with the purchase so that you do not have to worry about anything.
To put taxes in the context of your full budget, see How much does it cost to buy a home in Mallorca? and IBI property tax: what buyers and sellers should check.
