Spain continues to be one of the preferred destinations for real estate investment, both for domestic and international buyers, particularly in areas such as Torrox, Málaga, Mijas Costa, Marbella and the Costa del Sol. However, one of the main concerns before completing a purchase is the tax framework applicable to acquiring property in Spain.

The Spanish tax system mainly distinguishes between resale properties and newly built properties, and each case involves different taxes. Understanding these differences before signing the title deed helps avoid unexpected costs and enables proper investment planning.

1. Main taxes when buying property in Spain

When purchasing property in Spain, two different taxes apply depending on the type of property. These taxes are mutually exclusive.

Property Transfer Tax (ITP)

This tax applies when purchasing a resale property.

In Andalusia, the current general rate is 7 % of the property value, calculated on the higher of the declared purchase price or the cadastral reference value, if higher.

As a general rule, the tax must be paid to the relevant autonomous region within approximately 30 working days from the signing of the public deed of sale.

VAT and Stamp Duty (AJD)

When the purchase is made directly from a developer or constructor, that is, in the case of newly built properties, the tax regime is different.

In these cases, the following taxes apply:

  • VAT at 10 % on the purchase price
  • Stamp Duty (AJD), whose general rate in Andalusia is currently 1.2 %

2. Other costs associated with purchasing property

In addition to the above taxes, buying a property in Spain usually involves other administrative costs that should be considered from the outset.

The most common include:

  • Notary fees for the public deed of sale
  • Registration of the property at the Land Registry
  • Legal advisory fees
  • Obtaining the NIE (Foreigner Identification Number) if the buyer does not yet have one

Although these items are not taxes in the strict sense, they form part of the total acquisition cost and should be included in any real estate investment planning.

3. Common mistakes made by foreign buyers

In practice, many international investors make similar mistakes during the purchase process.

The most common include:

  • Failing to correctly distinguish between new and resale properties when calculating taxes
  • Not understanding the impact of the cadastral reference value, which may be used as the minimum taxable base
  • Calculating only purchase taxes without considering the future taxation of the property
  • Not taking into account the relatively short deadlines for paying ITP or AJD after signing the deed

These types of errors may result in tax reassessments, surcharges or administrative penalties.

4. Tax obligations after purchasing the property

The acquisition of property in Spain is not the only moment when tax obligations arise for foreign owners.

After the purchase, the following should be considered:

  • Annual taxation under Non-Resident Income Tax (IRNR), even if the property is not rented out
  • Annual payment of Property Tax (IBI) to the relevant local authority
  • Taxation of rental income, if the property is rented
  • The tax implications of a future sale of the property

For this reason, many investors analyse the purchase within a broader tax planning strategy, covering the full lifecycle of the investment.

Conclusion

The purchase of property in Spain by both domestic and foreign investors is a process that requires proper legal and tax planning.

Correctly identifying the type of property, calculating the applicable taxes and organising documentation from the outset helps reduce risks and provides greater legal certainty to the investment.

How can our firm assist you?

Our firm regularly advises resident and non-resident property owners and investors in Spain on the correct legal and tax planning of their real estate investments, providing a comprehensive service focused on full compliance with applicable fiscal, legal and administrative obligations.

We offer pre-investment and pre-rental advice, preparation of tax returns, representation before the Spanish Tax Authorities through power of attorney, review of previous tax situations and assistance in resolving tax or administrative issues.

If you would like an individual assessment of your situation, you may contact our firm through www.delgado-vila.com or visit our offices in Málaga, Torrox-Costa and Mijas-Costa.