A purchase price is only the starting point. Whether you are choosing a contemporary villa in Benahavís, a beachfront flat in Estepona or an off-plan residence near Sotogrande, understanding what taxes apply when buying in Spain allows you to assess the real investment from the outset – and proceed with confidence when the right home appears.
For buyers on the Costa del Sol, the principal tax question is straightforward: is the property a resale, or is it being sold for the first time by a developer? The answer determines whether you pay Transfer Tax or VAT and Stamp Duty. The detail matters, particularly where off-plan stage payments, land purchases or a non-resident seller are involved.
What taxes apply when buying property in Spain?
Most residential purchases in Andalusia fall into one of two tax routes. A resale property is normally subject to Impuesto sobre Transmisiones Patrimoniales, known as ITP or Transfer Tax. A new-build home bought directly from its developer is normally subject to IVA, Spain’s VAT, plus Actos Jurídicos Documentados, known as AJD or Stamp Duty.
These are purchase taxes, distinct from professional fees and the ongoing costs of owning a home. As a practical guide, buyers should also allow for the notary, Land Registry, legal due diligence and, where relevant, mortgage and valuation costs. Your final budget should be based on the individual property, its legal status and the structure of the transaction, rather than a single headline percentage.
Resale homes: Andalusian Transfer Tax
When buying a previously owned property from a private seller, ITP is usually the principal tax. In Andalusia, the general rate is currently 7% of the taxable value. This applies across much of the Costa del Sol, including Marbella, Estepona, Casares, Manilva, Benahavís and Sotogrande.
The taxable value is not always simply the agreed price. Spain may use the higher of the declared purchase price and the property’s official cadastral reference value, where one exists. This can be particularly relevant for homes that appear attractively priced, family transfers or properties requiring renovation. Before committing, your lawyer should check the reference value and advise on the tax basis being used.
ITP is generally paid by the buyer after completion through the regional tax process. A properly managed completion will account for this filing and the registration of your title, so there is no uncertainty after the keys are handed over.
New-build and off-plan homes: VAT and AJD
For a newly built residential property sold by a developer, buyers normally pay IVA at 10% of the price, rather than ITP. AJD is then payable in addition. In Andalusia, the standard AJD rate is currently 1.2%.
This is the usual position for the premium new developments that define many of the area’s most compelling opportunities: gated communities, golf-front homes, sea-view penthouses and energy-efficient villas delivered with contemporary specifications. It means a buyer should typically allow 11.2% in purchase taxes on the property price, before professional and registration costs.
VAT is commonly paid progressively on off-plan instalments, not only at completion. The developer should issue the appropriate invoices, and each payment should be clearly reflected in the private purchase contract. AJD is normally dealt with when the public title deed is signed before the notary.
A reduced VAT rate can apply to certain qualifying social housing, but this is not the norm for the luxury and prime second-home market. Likewise, parking spaces, storage rooms and other elements included in a new-build sale may need to be considered within the precise contractual structure. Ask for a full tax breakdown before reserving the property, rather than relying on a marketing price alone.
Special cases that can change the taxes when buying in Spain
The clean distinction between resale and new build covers most purchases, but it is not universal. A plot of land, commercial unit, property held through a company or home with an unusual seller profile can have a different VAT or Transfer Tax treatment. Buildable land sold by a business, for example, may be subject to VAT at a different rate, while other land transactions may fall under ITP.
Properties sold by banks, investment vehicles or developers also deserve a closer review. The fact that a home is not brand new does not automatically make it a standard resale for tax purposes. Your lawyer should establish the seller’s status, the property’s prior occupation and whether any VAT election or exemption is relevant before contracts are exchanged.
For overseas purchasers, nationality does not alter the core purchase tax rates. British, European and other international buyers are taxed under the same broad rules as Spanish residents when acquiring property. Residence becomes more relevant for annual ownership taxes and any future sale, rather than for the basic ITP, VAT and AJD calculation at purchase.
Buying from a non-resident seller
One obligation can surprise buyers of resale property. Where the seller is non-resident in Spain, the buyer is generally required to retain 3% of the agreed price and pay it to the Spanish Tax Agency. This is not an additional tax on the buyer in the ordinary sense. It is a withholding paid on account of the seller’s potential capital gains tax liability.
The retained amount is deducted from the sum sent to the seller at completion. It should be handled precisely by the legal team, with the correct filing and proof of payment retained. It is a good example of why an apparently simple purchase can require detailed professional coordination.
Costs that are not purchase taxes, but still belong in the budget
Taxes command most attention, yet the remaining costs affect the cash required to complete. Notary and Land Registry fees are regulated and generally depend on the deed and transaction. Legal fees vary according to the scope of service, especially where the buyer needs planning checks, an urban-planning review, mortgage coordination or careful off-plan contract advice.
For a cash purchase, a sensible working allowance for all taxes and standard buying costs is often around 10% to 13% for a resale in Andalusia, and around 12% to 14% for a typical new-build home. This is a planning range, not a quote. A high-value villa with a complex title history, a plot requiring specialist due diligence or a financed purchase can sit outside it.
If you take a Spanish mortgage, the lender normally bears the AJD associated with the mortgage deed under the current rules. The buyer may still pay valuation fees, bank arrangement charges where applicable, and their own legal costs. These should be reviewed alongside the loan offer, not assumed to be included in the property purchase budget.
Do not confuse purchase taxes with annual ownership taxes
Once you own a Costa del Sol property, annual charges begin. IBI is the local municipal property tax, calculated from the cadastral value and set by the relevant town hall. There may also be rubbish collection charges and community fees for properties within an urbanisation or managed development.
Non-resident owners can also face Spanish income tax on property use, including an imputed income charge where a home is kept for personal use and has not been let. Rental income and wealth-related taxes require individual advice, particularly for buyers with substantial Spanish assets or ownership held through a company. These are not costs paid on completion, but they should form part of a considered long-term ownership plan.
How to plan your purchase with clarity
Before making an offer, ask for the agreed price to be separated from furnishings, parking, storage and any optional extras. Confirm whether the seller is a private individual or a developer, request the official tax estimate, and have a Spanish property lawyer check the cadastral reference value, title, planning status and community position.
For off-plan, examine the payment calendar as carefully as the floor plan. Your reservation and stage payments should be contractually protected, backed by the required guarantees and fully invoiced for VAT purposes. The attraction of a newly delivered Mediterranean home is clear, but the financial timetable must feel equally clear.
At The Property Agent, we believe the best Costa del Sol purchases combine lifestyle confidence with disciplined preparation. Once the tax route, completion costs and ongoing obligations are understood, you are free to focus on the details that make a property truly worth owning: the morning light, the view across the fairway, the privacy of the setting and the quality of the life it can offer.
