Expenses in the sale and purchase of a property: everything you need to know.

The purchase and sale of a property, beyond the price of the property itself, involves a number of additional and miscellaneous outlays. These additional expenses include taxes, notary fees, registration fees and other minor costs, all of which are essential to understanding the full financial scope of a property purchase. Here, we at JJ Properties detail these aspects of the buying and selling process in depth.

Taxes of buying and selling a property

The tax burden of buying and selling a property is significant and depends on several factors, such as the nature of the property (new or used) and the autonomous community in which the property is located. Among the most relevant taxes are

• Impuesto de Transmisiones Patrimoniales (ITP): This tax is applied to the purchase of used properties. The rate varies according to the autonomous community and can range between 6% and 10% of the sale price. Specifically in the Valencian Community it is 10%.

• Value Added Tax (VAT): This tax is applicable to the purchase of new homes. The general rate is 10% for dwellings, although it rises to 21% for commercial premises, garages and storage rooms not linked to a dwelling. State-subsidised housing is subject to a reduced rate of 4%. This 10% VAT rate is one of the lowest in Europe; in other European countries, rates can be significantly higher, such as 15% in Luxembourg, 20% in the UK and France, and up to 25% in Denmark, Finland and Sweden.

• Stamp Duty (Impuesto de Actos Jurídicos Documentados (AJD): This tax is levied on the formalisation of notarial deeds involving financially assessable amounts or things. The rate varies according to the Autonomous Community and the type of document; in the Valencian Community it is 1.5%. Generally, when the sale is subject to VAT, the AJD must also be paid.

• Tax on the Increase in Value of Urban Land (Plusvalía Municipal): This municipal tax is levied on the increase in value of the land during the time that the seller has owned the property. The seller is usually responsible for paying this tax, although the parties may agree on a different distribution of the costs. In the case of inheritance or donation, the acquirer is liable to pay the capital gains tax.

• Real Estate Tax (IBI): Once the property has been acquired, the new owner must pay the annual IBI, a local tax calculated on the cadastral value of the property.

Notary fees

The notary plays a crucial role in the purchase and sale of a property, being responsible for certifying the change of ownership and issuing the public deed of sale. Notary fees are determined according to the value of the property and are regulated by an official tariff set by the government. In addition, the Civil Code stipulates that the costs of granting the public deed of sale are the responsibility of the seller, while the buyer must cover the costs of the first copy of the deed. However, both parties can agree on a different distribution of these costs.

Land Registry

The registration of the sale and purchase at the Land Registry is essential to ensure the legal security of the transaction. This process is accompanied by the registrar's fees, which are also calculated according to the value of the property and are regulated by an official tariff. In general, these fees are the responsibility of the buyer, unless otherwise agreed with the seller.

Other costs

There are other costs associated with the purchase and sale of a property which, although minor in comparison to taxes and professional fees, must be considered:

Change of ownership in the Cadastre: It is necessary to update the cadastral data to reflect the new ownership, which may involve certain administrative costs.

Verification of charges and encumbrances: Before finalising the sale, it is essential to ensure that the property has no outstanding charges, encumbrances or mortgages. This verification may involve the hiring of additional professional services.

Management and processing costs: If you decide to hire an agency to take care of all the administrative and tax formalities, this will also entail an additional cost.

Financial planning

When considering the purchase of a property, it is crucial to take into account all these additional costs in addition to the purchase price of the property. Careful financial planning should include not only the cost of the property, but also taxes, notary fees, registration fees and other administrative costs. If you choose to finance the purchase through a mortgage loan, you should also consider the costs associated with the mortgage, such as appraisal fees, compulsory insurance and bank fees.

Professional advice

Due to the complexity of these procedures and the importance of a correct management of all the legal and fiscal aspects, it is highly recommended to have the advice of a lawyer specialised in real estate law. This professional can guide you through the whole buying and selling process, ensuring that all documents are in order and that all fiscal and legal obligations are met. At JJ Properties we have legal services so that you have nothing to worry about, our legal advisors will be with you, along with us, throughout the whole process.

Ultimately, the purchase and sale of a property involves a number of significant additional costs that need to be carefully considered. If you need more information, please do not hesitate to contact us; we are at your disposal.