Which taxes are paid when buying a house?
Buying a house is one of the most important moments and investments of our lives. An exciting time that begins a new phase, in a new place that will soon become our home.
But before we start enjoying that home, we will have to take care of some procedures such as the tax payments related to the purchase of a house. Often, this procedure is associated with a single expense, the mortgage. However, there are various expenses and taxes that we will have to face to become owners of a property.
We want this big step to be as easy as possible for you, so at Prime Invest we want to provide you with all the information about the payment of housing taxes, as well as acronyms such as IAJD, VAT or the ITP, that will no longer be a mystery to you. Let's get started!
Which taxes do I have to pay when buying a house?
When you are going to buy a house you should know that you will have to pay taxes, some of these have the same rate nationwide (except for the Canary Islands) while others are regulated by the tax rate of the autonomous community in which the property to be purchased is located.
But the most important thing, depending on the status of your home, new or second-hand, some taxes or others will be applied. Which ones? Let’s see them.
1. New Home Taxes
When buying a new construction house, you will have to pay two types of taxes, the Value Added Tax, that is, the VAT (IVA), and the Tax on Documented Legal Acts, the IAJD.
- VAT (IVA): a rate of 10% on the value of the home. In the case of officially protected housing, the applicable VAT is 4%.
- IAJD: this tax is marked by each autonomous community. Currently, it has a rate between 0.5% and 1.5%, these are the general tax rate of IAJD of each community:
- Andalusia 1.2%
- Aragón 1.5%
- Asturias 1.2%
- Baleares 1.5%
- Canary Islands 1%
- Cantabria 1.5%
- Castilla y Leon 1.5%
- Castilla la Mancha 1.5%
- Catalonia 1.5%
- Valencian Community 1.5%
- Extremadura 1.5%
- Galicia 1.5%
- Madrid 0,75%
- Murcia 1.5%
- Navarre 0.5%
- Basque Country 0.5%
- La Rioja 1%
- Ceuta 0.5%
- Melilla 0.5%
2. Taxes on a second-hand home
The purchase of second-hand homes gets rid of the payment of VAT or IAJD. In this case, you will only have to pay the tax on onerous property transfers, which, as well as the IAJD, the tax rate differs in each autonomous community:
- Andalusia 7%
- Aragón 8%
- Asturias 8%
- Baleares 8%
- Canary Islands 6.5%
- Cantabria 10%
- Castilla y Leon 8%
- Castilla la Mancha 9%
- Catalonia 1.5%
- Valencian Community 10%
- Extremadura 8%
- Galicia 9%
- Madrid 6%
- Murcia 8%
- Navarra 6%
- Basque Country 4%
- La Rioja 7%
- Ceuta 6%
- Melilla 6%
How are taxes paid on the purchase of a property?
1. Payment of housing taxes by an agency
Like many other procedures, the management of the purchase of a property can be carried out by an agency. You would only have to contact an agent who will be in charge of proceeding with the payment of everything. In these cases, the money is usually deposited in a bank account, and from there, the agency will use that provision of funds to pay taxes and other expenses generated from the sale. And if you have made an income of an amount greater than what has been necessary? Don't worry! The agency will return all the rest once the procedures are completed.
2. Payment of home taxes by the buyer
However, if you like to handle the procedures on your own, you will have to pay each tax as follows:
The proportional part of VAT on the purchase of a home is always delivered along with the amount of the house payment. That is, if the sale price is €500.000, the seller will be responsible for paying the proportional part of VAT directly to the Treasury (€5.000).
Now, the tax on onerous property transfers (ITP) and the tax on documented legal acts (IAJD), must be paid directly to the Tax Administration of the autonomous community in which the property you have purchased is located. In other words, if you have purchased a home in Andalusia, you must pay the type of tax established by this autonomous community, in this case, 1.2% IAJD and 7% in the case of ITP.
This payment can be made either face-to-face or telematically. To opt for this last option, you must have an electronic ID or a digital certificate that guarantees your identity. We suggest you check the payment term, since this may vary depending on the autonomous community in which you are.
How do I pay taxes on my new house if I have applied for a mortgage?
The purchase of a home usually involves a large monetary investment, so it is common to rely on a mortgage loan to acquire the property. If this is your case, you should know that all taxes must be paid through an agency.
How to Calculate Taxes Related to Buying a Home
1. Calculate VAT on the purchase of my home
To obtain the VAT that you must pay for the purchase of your new home, you will simply have to apply the corresponding percentage, 10%, on the home you buy. For example, if you buy a house for €100.000, you must pay an amount of 10% VAT, which corresponds to €10.000.
2. Calculate the IAJD and the ITP of the purchase of my home
These taxes are a bit more complicated to calculate. To find out how much you would have to pay in taxes on onerous property transfers (ITP) if it is a second-hand home, or in taxes on documented legal acts (IAJD), if it is a new building, you must rely on the reference value.
Reference value is the value that the General Directorate of the Cadastre has awarded to the dwelling that you buy, according to the calculations of this organism. To consult this value, you can access the electronic headquarters of the Cadastre.
There are many occasions in which the value of the property is greater than its reference price. In these cases, the law has established that both the ITP and the IAJD must be calculated over the highest amount. That said if the cadastral value of the property that you are going to acquire is established by the Cadastre at €100.000, but the sale price is €140.000, you will have to calculate the ITP or the IAJD based on the latter.
Do you have questions about the documentation and procedures to acquire a home? With our vast experience in the real estate sector, our team has realized that different aspects can raise doubts, therefore, we have different articles on our blog that will help you, such as “Buying a home in Spain if you are a foreigner” or our “housing handover manual”. Data and steps that will help you to be more informed about your new property.