This is a commonly asked – and very sensible – question by people thinking of buying a holiday home, retirement or relocation property or simply an investment opportunity in Spain. Not only is it sensible, it’s also wise to ask it before you even start looking at what properties may suit your  requirements. Only that way can you establish a realistic and accurate budget for your Spanish property purchase.

There are differences between buying a new property and a resale. With new homes, there are still many for sale that were built some considerable time ago, so you may wonder if those are still classed as new. As long as they have never previously been sold, they will be. However, it would be sensible to find out why a property built some years ago is still for sale and to check the condition of the structure and services.

New homes are subject to Spanish VAT, or IVA. Currently, this is fixed at 10% of the purchase price, except in the Canaries, where it is only 4.5%.

The other tax on new homes is Stamp Duty, or AJD. The usual rate is 1% of the purchase price, but this can vary from region to region, so you should check with us early on to make sure that your calculations are accurate.

If you are thinking of buying a plot of land on which to have your own villa built, you should be aware that IVA is fixed at 21% of the purchase price. The same figure applies to commercial properties.

Resale properties are not subject to IVA. Instead, you will pay the Transfer Tax, or ITP. Again, the rate of tax varies according to the region in which you are thinking of buying. Although the ‘national’ figure is 7%, many regions charge more, with percentages rising in increments of the purchase price to as much as 10%, which is the current figure in Catalonia, whatever the price of the property.

There is one important item to be aware of if the seller of the property is not a resident of Spain. In such cases, the buyer must withhold 3% of the purchase price and pay that to the Spanish tax authorities. This is the government’s way of ensuring that any capital gains tax payable by the seller may be covered in advance, at least to a degree.

Other costs, whether buying a new home or a resale, relate to your lawyer’s charges. As a rule, a Spanish lawyer or Abogado, may quote a fee of 1% of the purchase price. Anything above that is considered excessive and you may find that, by asking for a quotation for an hourly rate, you can make a worthwhile saving from 1%. We always recommend using a lawyer who is independent of the seller’s or developer’s lawyer.

Finally, you must remember notary costs and land registry charges or inscription fees, both being paid by the buyer as a rule. In each case, it is best to allow 1% of the purchase price, although the final figures often work out to be less.

The above apply to cash purchases, but there are additional costs that apply if you are taking out a mortgage. These will vary according to the lender and it is advisable to find out exactly what fees and charges are involved at the outset.