Costs and Taxes Related to Buying Property Explained
You have chosen your property, contracted as Asesor (legal adviser) or lawyer and are ready to go ahead and contact the seller of the property, but do you really know what all the extra costs and taxes are? Do you really know who is responsible for what?
A fact of life when living in Gran Canaria or Spain, is that every time you need a document or signature that is even remotely official or legal in nature, you have to part with money.
Buying a property in Gran Canaria or Spain, whether it is a resale, or a new development (called off plan) this will be an introduction to this area of your life and connection with the way of life in Gran Canaria or Spain.
The information on this page will detail for you, the costs that you will be expected to pay the process of buying your property, plus details od what the seller is responsible for.
The buyer is usually responsible for:
- Transfer Tax.
- In Gran Canaria and the other Canary Islands, as of 2010, this is currently 6.5% of the property value, and if you are buying from a developer you will pay IGIC of 5% and 0.75% of the property value in stamp duty.
- Property Registration Fees and Notary Public Charges.
- Legal Fees
See Below for a more detailed description of what these charges and fees are.
The Seller is Usually Responsible for:
- Their Own Capital Gains Tax on Any Increase in Escritura Value of the property.
- Plusvalia Tax.
- This is a tax applied by the local Town Hall and is based on any increase in the value of the land from when it was last sold. The Plusvalis Tax is one off payment, and just because the Seller is usually responsible for this don´t assume that it is always the case. There are cases where the seller and buyer agree to share responsibility for this tax 50/50 and other cases where the buyer accepts the responsibility for this payment. To avoid any confusion you should ask your Asesor (legal adviser) or lawyer to make sure that any agreement between you and the seller about this tax, between you and the seller, is written into the Contrato de Compraventa which is a legally binding document witnessed by and signed in the presence of a notary. see also Protect your interests and Property Searches.
- Selling Agents Fees plus 5% IGIC
- as agreed between the seller and the real estate agent advertising and marketing the property on his behalf.
To help you with your budget the break down of the FEES paid by the buyer falls into 3 categories:Fees,Taxes and Mortgage costs. These can vary in amount because they are usually dependent in the purchase price of the property you are buying. We shall begin with an explanation of the Fees.
- Notary Public Fees.
- These vary on a scale descending from 0.4% for a property valued under 100,000 euros to 0.1% for properties valued over 400,000 euros.
- Property Registration Fees. Registro de la propiedad.
- Expect to pay around 40% of the amount you have budgeted for the notary.
- Legal Fees.
- These are agreed between you and the Asesor (legal adviser) or lawyer, whichever you have chosen to assist and guide you through the purchase of the property you have chosen to buy. It is customary for an Asesor (legal adviser) or lawyer to charge 50% of the agreed fee, before the signing of the reservation contract and the other 50% on the singing of the Escritura Publica de Compraventa.
- Mortgage Legal Costs.
- If you are intending to buy the property with a nortgage you should discuss this with your chosen Asesor (legal adviser) or lawyer. If you are taking the mortgage loan at the time of purchase some Asesors (legal advisers) or Laywers will waive their charges for assisting in securing the mortgage. At this point bear in mind that you may be able to secure a mortgage through the real estate agent, and of course you can to the bank direct. If you decide to remortgage the property at a later date expect to pay around 1% if you use the services of a lawyer or an Asesor (legal adviser).
- Transfer Tax.
- This is currently set at 6.5% for resale properties. Interestingly, if the buyer is under 35 years old, and the property is to be their main residence, the amount of tax due decreases.
- Impuesto Actos Juridicos Documentales (Stamp Duty).
- This is applied to the purchase of new properties (off plan) and is around 1%.
- Acoording to Spanish law, this tax is the responsibility of the seller. Please read more about the Plusvalia under the sellers responsibilities above. You must be made aware that this is calculated on an increase in the value of the property since it was last bought. Therefore if the seller has owned the property for some considerable time this could potentially be a large a mount of money. The actual valur of this tax can vary from a few hundred euros to several thousands.
If you are planning on buying the property you have chosen with the use of a mortgage, besides the costs of servicing the borrowing you will have to add into your budget the following costs:
- Bank Valuation Fee.
- This is called a Tasación in Spanish. It is carried out by the bank as part of their risk assessment for the loan amount. It is calculated as a percentage of the property value and typically is in the region of 300 - 600 euros which rises to 1% of the valuation for larger or more expensive properties.
- Bank Arrangement Fee.
- This can vary depending on the bank you have chosen but often is around 1% of the mortgage amount.
- Stamp Duty.
- Based on mortgage liability and typically 1.8% of the loan amount.
- Notary Public Fees.
- The mortgage must be signed in front of and witnessed by the Notary in order for it to be effective. The Notary charges for this service are calculated as a percentage of the mortgage value.
- Property Registration Fees. Registro de la Propiedad.
- This is the entry into the land registry. See the Purchase Completion page. The mortgage needs to be recorded as a charge against the property and the fees due will be based on a percentage of the mortgage liability.
We hope that this information has been useful to you in arriving at your final budget figure, and making clear the costs and taxes involved in buying property in Gran Canaria and Spain. Please note that the processes are the same but that in mainland Spain, the figures and percentages given on this page are not the same. The figures and percentages on this page relate solely to Gran Canaria and the other Canary Islands.