If you’ve always rented your home, and you are considering buying one for the first time, you may not know the associated expenses beyond the mortgage, including the taxes that are derived from using the house. Calculating the monthly expenses that a house will entail is very important when making the decision to buy it. If you have questions about the taxes and fees that must be paid when you own a property, we’ll probably answer them in this post.
Careful! This post is meant for people who reside in Spain. If you own a house in Spain, but live in another country, taxes affect you differently. Read more about it in this post.
When you buy a second-hand home
The first tax that must be faced when buying the house depends on whether the house is second hand or new construction.
If the property is second hand, the tax that must be paid is the Property Transfer Tax ( Impuesto de Transmisiones Patrimoniales or ITP in Spanish), which must be paid within 30 days after the notification of the tax, if you don’t want to be sanctioned.
It’s calculated by multiplying the cadastral value of the home by a coefficient that varies according to the autonomous community. In the case of the Valencian Community, this rate amounts to 10%, although in certain cases it can fall to 8% (for example, for buyers under 35 years) or even to 4%.
In almost every situation, the formula to calculate the ITP in the Valencian Community, and therefore Torrevieja, would be the following:
[Cadastral Value] x 10 / 100
Therefore, if the cadastral value of the house you are going to buy in Torrevieja was € 100,000, the ITP that you should pay would be:
100,000 x 10 / 100 = € 10,000
To this we must add the expenses of notary (including the AJD, which we discussed in the next point), and those of the lawyer if one were needed. At Inmokea we have a law firm associated to our company, who will guide you throughout the entire buying process.
When you buy a new construction home
When buying a new construction home, the ITP does not apply; the tax that must be paid is the VAT, or IVA in Spanish, which we all know well, and which varies according to the type of home purchased.
In most cases, the so-called reduced VAT is applied, which consists of 10% of the registered amount. However, if the property of Official Protection (VPO), VAT becomes 4%.
On the other hand, the AJD must also be paid, that is, the tax on Documented Legal Acts (impuesto sobre Actos Jurídicos Documentados in Spanish). The AJD consists of a fixed fee and a variable one. The fixed fee is due to the stamped paper in which the notarial documents are extended, and costs 0.30 euros per double sheet and 0.15 euros per sheet. This must be paid in all sorts of home purchase, be it second hand or new construction. The variable fee, on the other hand, is what is paid to register the house in the Property Registry, and only applies to new construction homes.
The variable fee varies depending on the autonomous community; in the case of the Valencian Community, this amounts to 1.5%.
While you have the property
In Torrevieja there are three taxes that must be paid periodically; the Tax on Real Estate, or IBI (Impuesto sobre Bienes Inmuebles in Spanish), the garbage tax and the water tax.
The IBI is considered a municipal tax, applies to housing property, is paid annually, and its management depends on the municipality. It is calculated by multiplying the cadastral value on a coefficient that changes according to the municipality.
In the case of Torrevieja, in 2019, this type is 0.4105% for Urban Real Estate, that is, the majority of houses. Therefore, to calculate the IBI in Torrevieja we would need the following formula:
[Cadastral Value] x 0.4105 / 100
Returning to our property whose cadastral value is 100,000, the IBI would be:
100,000 x 0.4105 / 100 = 410.5
This calculation is not written in stone; on certain occasions you can apply bonuses that reduce the amount of the IBI when requested.
The next tax that we should worry about would be the garbage tax, which is also regulated by the municipality and finances the cost of waste collection in the city. In Torrevieja, SUMA manages the tax payments, it’s paid semiannually, and amounts to an amount of approximately 21.36 euros every six months for the houses.
Finally, in Torrevieja the water tax is also paid, since water is a precious and scarce commodity in our municipality. This tax is paid to guarantee access to drinking water, and is especially common in developments created for vacation enjoyment.
What happens if the house is empty?
If the house is empty, in addition to paying all the taxes mentioned in the previous point, the IRPF must be paid as long as you’re a taxpayer in Spain.
This is because Hacienda assumes that any empty property can be a property from which you can obtain benefits, regardless of whether the owner is taking advantage of it or not.
This tax does not apply if the home is under construction. In the case that the house is rented, the profits are taxed as real estate capital yields, so the IRPF for having an empty house doesn’t apply.
Once again, the amount of this tax depends on the cadastral value, with a rate of 2% unless the cadastral value has been revised in 2018 or the previous 10 years.
Taxes when renting your home
Even if you rent your home to another person, in principle the duty to pay taxes continues to fall on you, as the owner. All the taxes of which we have spoken in the third point would be applied, plus whatever is necessary to be taxed in the yearly income statement.
On the other hand, you can deduct many of the costs of putting a house for rent from that statement, so it’s all a matter of calculating everything carefully.