Buying Real Estate in Spain: Taxes, Expenses, ROI, Property Maintenance, and Obtaining a Residence Permit

Spain is a popular destination for real estate investments thanks to its mild climate, high quality of life, and prospects for obtaining a residence permit (RP).

However, before purchasing, it is important to understand the financial and legal aspects related to taxation, expenses, returns on investment, and property maintenance.

Property Transfer Tax (ITP):

Applies when purchasing second-hand properties.

• The rate varies from 6% to 10% of the property's value, depending on the region.

Value Added Tax (IVA):

Applicable when purchasing new properties from a developer.

• The rate is 10% for residential properties and 21% for commercial properties.

Stamp Duty (AJD):

• Ranges from 0.5% to 1.5%, depending on the region.

Annual Property Tax (IBI):

• Calculated based on the cadastral value of the property.
• Typically ranges from 0.4% to 1.1%.

Additional Costs When Purchasing

• Legal Services: From €1,000 to €2,000. It is recommended to hire a lawyer to review documents and oversee the transaction.
• Notary Fees: Typically €600–€1,000.
• Property Registration: Approximately €400–€700.
• Real Estate Agent Commission: Usually 3–6% of the property's value.

1. Rental Income:

• Annual rental yields range from 3% to 7%, depending on the location.
• In tourist regions such as Barcelona, Malaga, or the Canary Islands, yields can be higher due to short-term rentals.

2. Property Value Growth:

• On average, property values in Spain increase by 2–4% annually.
• Regions with high investment potential include Madrid, Barcelona, Costa del Sol, and Valencia.

Utility Costs:

• Electricity, water, and gas: €100–€200 per month.
• Internet and TV: Around €40–€70 per month.

Community Fees (comunidad):

• If the property is in a residential complex, maintenance fees range from €50–€150 per month.

Insurance:

Approximately €200–€500 per year, depending on the size and type of property.

Ongoing Repairs:

It is recommended to set aside about 1% of the property's value annually for potential repairs.

Golden Visa:

• Available when purchasing property worth at least €500,000.
• Benefits include the right to reside in Spain, the ability to work, and free travel within the Schengen Zone.

IMPORTANT: Spain will abolish the golden visa from April 3, 2025. But investors can still manage to obtain a residence permit in the country. Contact Mercury Group experts for detailed advice.

Investing in real estate in Spain is an attractive way not only to preserve and increase capital, but also to obtain the opportunity to legally reside in one of the most comfortable countries in Europe. It is important to study all aspects of the transaction in advance, including taxes, additional expenses and maintenance of the property, as well as to take into account the long-term prospects for profitability and obtaining a residence permit. Sign up for a free consultation with Mercury Group experts.