Wednesday, January 11, 2023
HousinGo Real Estate

What taxes are paid when buying a house?

The price of a The price of a house is not the only figure to take into account when facing such an important operation, there are more expenses when buying a house. Both buyers and sellers must face different taxes, fees and formalities, so it is common that there are doubts about these procedures to buy a house, especially when it comes to buyers coming from other countries.

For that reason it is very important to analyze all the expenses at the time of buying a house, beyond the price of the property and to know who pays the taxes in a sale. The variables are many: tax of legal acts, change of ownership, if the house is second hand, the mortgage loan (if necessary) and a long Etc.

 

To shed some light on this subject, we collect some of the most frequent questions that David de Gea attends in his real estate activity in Housingo:

  

Taxes when buying a house: can I save taxes? 

Buyers must pay the Transfer Tax (ITP). In the case of Madrid, for example, it is 6% of the value of the property. Investors have the opportunity to pay only 2% when their corporate purpose is precisely the purchase and sale or real estate investment. But they must sell the property again in the following 3 years, otherwise the remaining 4% of the tax must be paid.

This is one of the taxes for the sale or purchase of a property that foreign buyers must take into account, since they are not so familiar with the tax changes depending on the autonomous community.

 This is an important point, given the large increase in buyers from Latin American countries, who are often looking for properties worth more than one million euros in areas such as Madrid's Barrio de Salamanca.

Madrid has the lowest reduced ITP in Spain. This tax rate, which is 2%, is applied to companies that apply the rules of adaptation of the General Accounting Plan for the Real Estate Sector (this also happens in Andalusia).

 The reduced ITP is an incentive for investment in real estate. Companies whose real estate activity involves holding the asset in portfolio for a maximum of 3 years (since if the term is longer than 3 years, they have to pay the difference of 4% in the Community of Madrid), so it encourages the real estate investment business and generates a higher volume of sales and purchases.

  

Taxes and expenses when buying a house: Watch out for the capital gains tax

The seller must pay the municipal capital gain or Tax on the Increase in the Value of Land. In this case, the cost can vary considerably, depending on how much the value has changed during the time of ownership.

The seller must also take into account the capital gain obtained in order to be up to date with the tax authorities in the corresponding fiscal year.

 

Extra expenses when buying a house

It should not be forgotten that there are also "management" expenses to be paid. Let us see what they are.

      Notary expenses

Formalization of public deed before a notary: This expense is regulated by law and is between 0.2% and 0.5% of the total value of the property. Their fees are regulated, but it is important to have a trustworthy professional to carry out the transaction. You can also opt for the help of a management company (Gestoría), which in turn charges its fees, and foresee that you will have to pay for the procedure before the land registry.

     Management company (Gestoría) fees

It includes services such as the inscription in the Land Registry. It is not obligatory to hire an agency, since it can be done by the buyer himself. The fees of the agency are free, but it is usual that they charge between 300 and 500 euros depending on the price of the sale.


As for the real estate agencies, it is the sellers who pay between 3 and 5% to the professionals who accompany them in the operation.

 

David de Gea's general recommendation

It is necessary to have a global vision of the operation, to analyze all the details and to add previously everything that really goes together to buy a house: the taxation, the expenses, the mortgage, but also if it is going to need a reform or even to furnish the house.


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