Paying taxes

Before you buy, it is important to remember that any purchase agreement you make will involve taxes, so it is a good idea to find out before how much you will have to pay. The price appearing in the purchase agreement will be the base on which taxes are calculated. But if the price is lower than the property’s real value, the tax authorities will make out a complementary assessment to cover the difference.

 

The taxes you have to pay will depend on whether you are buying a new home straight from the promoter or a second-hand home.




BUYING A NEW HOME

As a buyer, you must pay value added tax (VAT) to the seller, and if the home is in the Canary Islands, you must pay the indirect tax for the Canary Islands. This tax you pay to the seller, together with the price of the home. As the buyer, you also have to pay stamp duty to your autonomous community (region), which is between 0.3 (only for special legally protected cases) and 2% of the selling price appearing in the deed. To pay this tax, you have to fill out an official self-assessment form and deposit the tax into the Exchequer’s account at a participating financial institution.

BUYING A SECOND-HAND HOME

When you are buying a second-hand home from its owner, you do not pay value added tax (VAT), but you do pay transfer tax to the autonomous community where the home is located. You just need to fill out the official self-assessment form and deposit the tax into the Exchequer’s account at a participating financial institution. This amount will be a percentage of the price, set by the autonomous community, and will range between 6 and 7%.


THE MORTAGE LOAN DEED

  This will be subject to stamp duties, which will range between 0.5 and 1%, depending on the autonomous community in question, of the total amount of the mortgage liability, that is, not the sum actually loaned to you, but the sum secured for the return of the principal, interest and foreclosure costs. Deeds of novation, subrogation and cancellation of mortgage loans are exempt from taxes. Lastly, bear in mind that if you buy low-income housing (viviendas de protección oficial, or VPO), the tax rates will generally be lower.


Who handles the payment of taxes?

The payment of taxes implies filling in the self-assessmentforms, calculating the payment due, depositing the sum at the proper institution and turning in the form with the completed payment receipt at the tax office. This task can be done by the buyer, an agent, or the notarial office where the deed was carried out as sometimes the notary offers these services as well. The buyer is the one who chooses the system and as a buyer, you ought to know:

 

The place where the self-assessment form for transfer tax (in the case of a secondhand home) or stamp duties (in the case of a new home) has to be handed in is as follows:

 

  • If the home is located in a provincial capital, hand in the form in at the tax bureau (delegación de Hacienda) for the autonomous community in question.

 

  • If the home is located in a town that is not a provincial capital, turn the form in at the district settlement office (oficina liquidadora de distrito), which shares quarters with the Property Registry.

 

  • Transfer tax and stamp duty must be paid within 30 working days of the date when the deed was signed. Any delays will mean surcharges.

 

  • You have to pay these taxes before you can have your right to the home or property registered in the Property Registry.