Buying a house is one of the most significant milestones in a person’s life. However, beyond the property search and financing process, it is essential to understand what taxes to pay when buying a house. There are different categories of taxes on the sale of a house, but all of them are divided into two parts: simultaneous, which are those that must be paid at the time of the purchase of the property, and subsequent, which, as their name indicates, are paid once the property has been purchased.
TAXES TO PAY WHEN BUYING A HOUSE
Apart from the price of the house itself, there are several taxes to be paid when buying a house. These are as follows:
- Transfer Tax (ITP): this is one of the most relevant taxes when buying a house. This tax is levied on real estate transactions and varies according to the autonomous community in which the property is located. Generally, the ITP ranges between 6% and 11% of the purchase value of the house. In addition, this tax is applied to second-hand properties.
- Value Added Tax (VAT): in the case of newly built homes. VAT is established at national level, so it will be the same wherever the house is located. Currently, it is 10% of the value of the property and 4% for subsidised housing (VPO).
- Tax on Documented Legal Acts (ADJ): this tax is applied exclusively to the notarial documents necessary to formalise the purchase of a house. The percentage varies according to the autonomous community and can range from 0.5% to 2% of the value of the property.
TAXES TO BE PAID AFTER THE PURCHASE OF A HOUSE
Once the purchase of the house has been made, both the buyer and the seller will have to pay some taxes:
- Personal Income Tax (IRPF): this type of tax is payable by the seller of the property, who must declare the sale of the property in the annual IRPF tax return if he has obtained a capital gain, in the event that the sale price has been higher than the price at which he bought it. You should also include it if you make a loss, as you will be able to obtain compensation in addition to the gain you have made.
- Real Estate Tax (IBI): Property owners must pay IBI annually. As with other taxes, this will vary depending on the autonomous community in which the house is located. However, it will also depend on the cadastral value of the property, taking as a reference different variables such as location, age, building work costs, state of conservation, etc. This can be calculated on the Cadastre website.
- Rubbish and sanitation tax: this tax is established to cover the costs of domestic waste collection and water purification for domestic use. It is payable by those who are listed as owners of a property and varies according to the municipality in which the property is located.
- Municipal capital gains tax: when selling a house, the seller must pay this tax if he has made a profit on the transaction, and it also changes depending on where the property is located.
In conclusion, when buying a house, it is important to consider, in addition to the price of the house, what taxes are payable, both at the time of purchase and after acquiring the property, which is essential to take into account the additional costs associated with the real estate transaction.