A €600,000 villa and a €600,000 new-build flat can carry very different purchase taxes. That is why asking what taxes do buyers pay should happen before you make an offer, not when completion is already in sight. On the Costa del Sol, the tax treatment depends chiefly on whether the property is a resale or a first transfer from a developer, while the buyer’s ongoing ownership position creates a separate set of considerations.
For most purchasers, a sensible working budget is around 10% to 13% above the agreed price. The precise figure can be lower or higher depending on the type of property, financing, legal structure and whether it is bought in an individual name or through a company. A personalised calculation before you reserve a home gives you a far clearer view of your true investment.
The principal upfront taxes are either Property Transfer Tax – known in Spain as ITP – for a resale property, or VAT and Stamp Duty for a new property. You do not pay both ITP and VAT on the same residential purchase.
If you buy a home from a private owner, such as an established villa in Marbella, a townhouse in Estepona or a resale flat in Benalmádena, the usual buyer tax is ITP. In Andalusia, the general ITP rate is 7% of the declared purchase price.
On a €500,000 resale property, that means €35,000 in ITP alone. It is generally paid shortly after signing the public title deed before the notary, so it needs to be available as part of your completion funds rather than treated as a later expense.
The taxable value is not always simply the figure agreed between buyer and seller. Spanish tax authorities may compare the price with an official reference value or market-based assessment. If the declared price is below the applicable reference value, tax may be assessed on the higher amount. Your independent lawyer should review this early, particularly where a property is being sold at a price that appears unusually attractive.
For a newly built residential property sold by a developer, ITP is normally replaced by VAT, known locally as IVA. The standard VAT rate on a new residential home is 10% of the purchase price. In Andalusia, buyers also generally pay Stamp Duty, known as AJD, at 1.2%.
A €500,000 new-build home would therefore usually attract €50,000 in VAT and €6,000 in AJD, before professional and registration costs. This is why buyers comparing a brand-new development with an older property should compare the all-in acquisition figure, not just the advertised price.
New homes often involve staged payments during construction. VAT may be payable on those instalments as they are made, not only at handover. Buyers should also ensure that every off-plan payment is properly documented and protected by the developer’s legally required guarantees where applicable.
Different rules can apply to commercial premises, building plots, garages bought separately or properties acquired through a company. For example, certain commercial transactions can be subject to 21% VAT rather than the residential 10% rate. This is an area where bespoke tax and legal advice is essential before signing a reservation agreement.
Taxes are the largest additional expense, but they are not the only cost. Notary and Land Registry fees are modest in comparison, yet still form part of the completion statement. Their level varies with the price, deed and transaction complexity.
A buyer should also appoint an independent Spanish property lawyer. Legal fees are commonly calculated as a percentage of the purchase price or agreed as a fixed fee. Good legal representation should include title checks, planning and occupancy documentation, debt searches, contract review, tax administration and registration of your ownership. For overseas buyers, this work is not an optional extra. It is the protection behind the purchase.
If you need a Spanish mortgage, allow for valuation costs and any bank fees that may apply. Banks are responsible for a number of formalisation costs under current mortgage rules, but buyers still need to understand their own quotation, including the valuation and any products tied to the loan.
For a typical purchase, it is prudent to retain a separate contingency for practical first-year costs: insurance, utility connections, furniture, minor works and, where appropriate, renovation. A beautifully located home may be move-in ready, while another may benefit from a considered upgrade that improves both enjoyment and long-term value.
One recurring point of confusion is municipal capital gains tax, or plusvalía. This tax relates to the increase in value of the land during the seller’s period of ownership. It is normally the seller’s responsibility, not the buyer’s. Your lawyer should nevertheless confirm that it is correctly dealt with in the deed.
Buyers can also hear about the 3% non-resident retention. Where the seller is non-resident in Spain for tax purposes, the buyer is generally required to withhold 3% of the purchase price and pay it to the Spanish Tax Agency. This is an advance payment towards the seller’s possible capital gains tax liability. It is not an extra tax charged to the buyer, but it affects how the purchase funds are allocated and must be handled correctly.
Annual IBI, Spain’s local property tax, is another item to clarify. The person who owns the property on 1 January is usually liable to the council, although buyer and seller may agree to apportion it in the sale contract. Community fees for flats and urbanisations should also be checked carefully, including whether there are any approved extraordinary charges for lifts, façades, pools or communal works.
The taxes due at purchase are only one part of owning a Costa del Sol property. Non-resident owners may have an annual Spanish income tax obligation even if their home is not rented out. If it is rented, Spanish tax is generally declared on the rental income, with the treatment of allowable expenses depending on your country of residence and the applicable rules.
Higher-value property holdings may also bring wealth tax considerations. Spain has national rules alongside regional provisions, and the position can change with residency, ownership structure, worldwide assets and the property’s value. Couples buying jointly should take advice before choosing how to hold the title, as the decision may affect succession planning, tax allowances and future administration.
These are not reasons to avoid a purchase. They are reasons to structure it well from the beginning. The right home, bought with a clear budget and a properly coordinated legal team, is a very different proposition from a property chosen on price alone.
Start with the agreed property price, then establish whether the sale is a resale or a new development. Add either 7% ITP, or 10% VAT plus 1.2% AJD for a standard residential new build in Andalusia. Then allow for legal fees, notary and registry charges, and mortgage-related costs if you are financing the acquisition.
It is also worth asking for a full written estimate before transferring a reservation deposit. The estimate should separate taxes, professional costs and any developer charges, and it should state clearly whether VAT is included in the quoted price. This avoids the uncomfortable situation of falling in love with a home only to find that its purchase costs exceed the funds you had set aside.
For buyers considering several areas, compare like with like. A resale home may have a lower headline tax bill than a new build, but could require refurbishment. A new development may cost more upfront in VAT, yet offer warranties, energy efficiency and lower early maintenance needs. The better choice depends on your plans for holidays, relocation, rental income or capital growth.
A Costa del Sol purchase should feel exciting, not financially opaque. Once the tax position is confirmed before you commit, you can focus on the details that make a property genuinely right for you: the address, the view, the lifestyle and the potential it holds for years ahead.
