Real Estate Investment In Spain – Financial and Tax Information

In a previous article, we outlined how to structure the purchase of a real estate property in Spain and the steps buyers should take to ensure the purchase is efficient and safe. If you missed it, you can find it here.

In this second part, we will cover financial and tax information along with practical tips related to the buying process. You will also learn about the rules that apply to owning and maintaining the property.

Taxation of individuals and legal entities

Both individuals and legal entities must bear the acquisition costs; the main difference in taxation is that legal entities can deduct VAT and other transaction-related expenses, while individuals generally have fewer tax advantages and a more limited deduction capacity. In any case, there is no clearly more advantageous regime for one type of taxpayer or the other, and the most favorable option will depend on the specific circumstances of each case.

Acquisition costs

Buying a home in Spain involves paying various additional costs on top of the purchase price, which vary depending on the autonomous community, the property’s value, and the buyer’s personal circumstances. These costs can amount to between 8% and 14% of the property’s purchase price and are discussed in sections 3 and 4 below.

Property Tax/VAT/ITPJAD

If it is a new home, Value Added Tax (VAT) must be paid, which is generally 10%, and Stamp Duty (AJD- Actos juridicos documentados) which is between 0.50% and 1.5% of the value of the home, depending on the Autonomous Community and the circumstances of the buyer.

If it is a second-hand home, you will have to pay Property Transfer Tax (ITP — Impuesto transmisiones patrimoniales), which will be 5%-10% of the value of the home, depending on the Autonomous Community and the buyer’s circumstances.

As for the IBI, it is mentioned in section IV, as it is not an acquisition cost as such.

Other expenses

Basically, they will be as follows:

• Notary fees for the execution of the public deed of sale, which legally correspond to the seller, although it is not uncommon for them to be transferred to the buyer by agreement. For a property worth €300.000,00, they would typically amount to around €2,000; however, they are negotiable.
• Registration fees for registering the sale in the Property Registry, which are payable by the buyer. For a property worth €300,000, these would amount to around €500.                                                                                          

• Administrative fees, if the services of an agency are hired to process the payment of taxes and the registration of the buyer’s title in the property registry (which is essential).

Property In Progress And Tax Obligations

Once you own the property, you will need to take care of the following expenses and obligations:

• If the property is part of a building or development with common areas, the owner must pay the homeowners’ association fees, which vary depending on the services and size of the association.
• Property tax (IBI — Impuesto sobre Bienes Inmuebles), which is levied on the ownership of real estate and whose amount depends on the cadastral value of the property and the tax rate set by each local council.
• Depending on the municipality, there may be an annual garbage collection fee for urban waste collection.
• Private utilities, such as water, electricity, gas, or internet.
• Where applicable, home insurance (mandatory when taking out a mortgage), private maintenance and repairs, or extraordinary works agreed upon by the homeowners’ association.

Joint Ownership Communities, Maintenance, Technical Building Inspection (Inspección Técnica De Edificios)

Joint Ownership Communities

When purchasing property in Spain, you are not only investing in the private space you occupy, you are often also becoming part of a legally regulated community of owners (comunidad de propietarios), which comes with specific financial, administrative, and legal responsibilities. In Spain, most buildings and many houses within residential developments (urbanizaciones) are subject to a legal structure known as a joint ownership community.

Within this framework, all property owners collectively assume responsibility for the maintenance, conservation, and proper use of common elements. The governance of the community is defined by its statutes and internal rules, which are adopted and amended by the owners’ association through resolutions passed at general meetings of co-owners. These rules establish key obligations, such as:

• Contributions to shared expenses, which are generally allocated based on each unit’s surface ownership share (coeficiente de participación), although the internal regulations may establish a different method (e.g. equal shares)
• Permitted uses of communal areas,
• Maintenance responsibilities,
• Approval of extraordinary levies (derramas).

Prospective buyers should carefully review all community documentation before completing a purchase. These internal rules and decisions may significantly affect the intended use of the property, for example, by restricting short-term rentals, limiting certain renovations, or setting usage rules for terraces or shared facilities. Additionally, documentation may reveal unpaid levies, planned renovations, or other financial obligations that could affect the property’s long-term affordability. To avoid unexpected liabilities, it is essential to request a debt certificate from the community, confirming that the current owner is up to date with all community payments.

Maintenance Responsibilities

All owners are obliged to contribute to the shared maintenance costs of the building or development. These include regular expenses such as:

• Cleaning of common areas,
• Minor repairs,
• Utility bills for communal services.

Larger or unplanned expenses may require extraordinary assessments, which are apportioned among the owners based on their respective share (often called a cuota de participación).

In addition to shared obligations, each owner is responsible for the maintenance of their private property. In the case of detached or semi-detached homes, this responsibility is exclusive. Owners can be held liable for any damage caused to third parties due to poor maintenance or structural issues.

It is therefore strongly recommended to obtain comprehensive home insurance. Not only does it offer financial protection, but it is often a mandatory requirement for obtaining a mortgage from Spanish financial institutions. Policies should ideally include coverage for major risks such as fire, flooding, and structural damage.

Technical Building Inspection (Inspección Técnica de Edificios, ITE)

Spanish regulations require buildings over a certain age — typically 45 years, though this varies by region — to undergo a Technical Building Inspection (Inspección Técnica de Edificios, or ITE).

This inspection must be carried out by an independent qualified technician and assesses the overall condition of the building. It identifies any deficiencies and proposes necessary improvements. If serious issues are found, the community of owners is required to carry out repairs within a designated timeframe.

Conclusion

A full understanding of both collective and individual responsibilities is essential for safeguarding the interests of foreign buyers in the Spanish property market. Awareness of the implications of joint ownership, maintenance costs, and regulatory obligations such as the ITE can help ensure a secure and financially sound investment.