Real Expectations

We appreciate there are many concerns and questions to be answered when embarking on your move abroad, and hopefully we can assist in providing some answers to put your mind at rest.

What costs are involved in purchasing a new property?
There are of course taxes and costs to be paid when purchasing any new property, so it is important to understand and take them into account when considering your overall budget.

Taxes and costs are dependant on a number of things, such as size, type and location of property, original purchase price and legal fees. It is always worthwhile asking for an estimate of legal fees and costs before employing the services of a solicitor, but you'll find that most of the costs are based on State set amounts, proportional to your property value.

For a new property the largest single cost, besides the purchase price itself, is the VAT (or IVA in Spain). IVA is levied at 7%. There is also Stamp Duty to be paid on new properties at 0.5% - 1% (depending on region).

However, both the above taxes are applied to what is called the Cadastral Value of the property. The Cadastral Value (or valor catastral) is the rateable value of a property as determined by the municipal government, usually initially declared by your solicitor, and is the figure that all future local taxes will be based on. This value is normally declared at anything from 70-90% of the original purchase price. Your €200,000 property could therefore have a Cadastral value of €140,000 (70%) with IVA Tax (7%) payable of €9800, and a stamp duty requirement (1%) of €1400.

Other costs that your solicitor may arrange, pay and detail in the final bill, are the Plus Valia, which is a property/land value calculation, Notary & Land Registry fees, Water & Electricity connection charges, and of course the Solicitor's Fees.

So typical legal fees for a €200,000 new property might look like this...

Purchase Price              200,000
Cadastral Value (70%)       140,000
IVA (7%)                      9,800

Stamp Duty (1%)                        1,400
Plus Valia                               300
Notary                                   800
Land Registry                            600
Water & Electricity Connection           300
Solicitors Fees                          800

Total Fees                             4,200

The above figures are shown for illustration only, and actual values can vary considerably,
particularly declared Cadastral value.

As a rule of thumb though, the IVA Tax plus Legal Fees usually comes to ~10% of the Cadastral Value for the property.

NOTE - If you are considering adding a swimming pool, or extending the property, it is more tax efficient to have the work done as part of the original build. Additional work completed later will be taxed at the higher rate of IVA (16%).

What about resale properties?
There is no VAT (IVA) charged on resale properties, but there is however a Transfer Tax levied at 5.5% - 7%, depending on region. There is no Stamp Duty charged on resale properties.

All other legal costs and fees will be similar to that of purchasing a new property.

It is recommended however, on older properties, to have a survey carried out, costing from approximately €450 for a Homebuyers Report, to €600 for a full Structural Survey.

There are many other sources of data and information on the web, the most useful and friendly being forums, where locals, ex-pat residents and newcomers exchange info, contacts and local knowledge. Two forums we can recommend are Viva Almeria and Arboleas.