Taxes to be paid when buying and selling a home

Taxes to be paid when selling a property

are you thinking of selling your property? Before you start with the formalities, you should know that this process involves the payment of certain taxes. Specifically, and in this situation, reference is made to three essential taxes, namely:

• Personal Income Tax (IRPF) or Impuesto sobre la Renta de las Personas Físicas. This is a tax that is levied on the income obtained by individuals over a certain period of time. It is a progressive tax, i.e. the higher the income obtained, the higher the percentage of tax to be paid. In the case of the sale of a property, the IRPF is applied to the gain acquired from the sale.

• Municipal capital gains tax. This tax is levied on the value of land or real estate property during the time it has been owned by the seller. This tax must be paid in the municipality where the property is located within 30 working days after the sale, while in the case of an inheritance, the deadline is extended to 6 months.

• Real Estate Tax (IBI). This is a municipal tax levied on the ownership of real estate, such as dwellings, premises or land. This tax is levied on the cadastral value of the property and its amount depends on the value of the property and the tax rate established by the corresponding local council. IBI must be paid annually and the amount may vary from one municipality to another. It is important to bear in mind that this tax is payable by the owner of the property, regardless of whether he/she lives in it or rents it. In the case of a purchase-sale, this tax is payable by whoever owns the property on 1 January of the year in which the signing takes place.
  

Taxes to consider when buying a property

If you are thinking of buying a home, you should also take into account the various taxes associated with this type of transaction, in addition to the expenses related to it. In fact, these taxes can vary depending on several factors: the type of property, the autonomous community in which it is located or the surface area of the property.

Below, we will see what expenses are involved in the purchase of a newly-built property, and which are involved in the purchase of a second-hand property.

what happens if the property is newly built?

In the case of the purchase of a new property, the owner will have to pay two taxes: the VAT and the tax on Documented Legal Acts (AJD).

Value Added Tax (VAT)

This tax is levied in most cases on the purchase of new homes. The VAT rate in this type of case is 10% of the value of the property. However, in the case of social housing or public housing, this percentage is reduced to 4%.

In certain autonomous communities, the percentage of Value Added Tax (VAT) may vary for the purchase of new homes. In the Canary Islands, for example, instead of VAT, the Canary Islands General Indirect Tax (IGIC) is payable, which is 7% in most cases. However, in the purchase of ordinary dwellings, the tax rate may be 5% if the taxable base does not exceed 150,000 euros and the buyer does not have a property in ownership or usufruct.

Stamp Duty Tax (AJD)

Stamp duty (AJD) is a tax that is applied to the notarial deed of sale. This tax varies depending on the Autonomous Community in which the property is located and the value declared in the deed, and must be settled with the self-assessment form 600.

what if the property is second-hand?

On this occasion, the buyer does not have to pay the VAT or the AJD tax that we have just mentioned. However, the following do have to be paid Transfer Tax (Impuesto de Transmisiones Patrimoniales, ITP).

This tax is levied on the transfer of ownership of the property and is calculated on the basis of the purchase price. In this case, the tax rate varies depending on the autonomous community in which the property is located, normally ranging between 6% and 10% of the value of the property.

In short, buying or selling a house involves a series of associated taxes that must be added to the value of the property. That is why it is important to carry out this type of transaction through an experienced real estate agency such as Engel & Völkers, as they will advise you throughout the entire procedure, resolving any doubts that may arise.