Buying – Costs and Taxes

Costs and taxes related to buying property in Ibiza

There are various costs and taxes over and above the initial property price that buyers in Spain must pay. The general ballpark figure for a purchase on the island of Ibiza is 12% of the property’s purchase price, including taxes and obligatory additional charges. These costs are broken down below as follows:

I. Taxes on property transfers (ITP) – Impuesto sobre Transmisiones Patrimoniales

When buying a property, you pay ITP tax (starting at 8%) or IVA (11%). These are state taxes, however they are also collected by the Autonomous Communities such as the Balearic Islands. It is the buyer who must pay the tax on property transfers, calculated according to the total value of the property being sold.

Impuesto sobre Transmisiones Patrimoniales (ITP) is similar to UK Stamp Duty and only applied to the purchase of second-hand properties while Impuesto sobre el Valor Añadido (IVA) is valued added tax (like VAT) applied to new builds – specifically, when the property is bought directly from the developer.

Tax rates increase progressively from 8% to 11% in the following way:
Up to €400,000 8%
Over €400,000 9%
Over €600,000 10%
Over 1,000,000 11%

II. Local property taxes (IBI) – Impuesto sobre Bienes Inmuebles

This tax is similar to council tax in the UK. Raised by the town hall (Ayuntamiento) in the area of residence, it is calculated on the basis of the rental value (Valor Catastral) of the property. The total amount charged is the rental value multiplied by the tax rate fixed in the locality. This tax is payable by the owner of the property once the property is registered in their name.

The vendor is obliged to present the last receipt for the payment of rates (IBI) to the notary or your lawyer prior to signing the Escritura. Your lawyer should also obtain a certificate from the Local Rates office (Racaudacion Provincial) to confirm all rates have been paid.

Where a second-hand property is bought, and the IBI has proven not been paid by the previous owner, the local town hall may charge unpaid IBI for up to a maximum of five years in arrears, with penalties of up to 20% for late payment.

III. Other costs

Mortgage costs

Buyers opting for a mortgage have additional costs to cover. There are the costs for property valuation (approximately 500€) plus the costs related to the mortgage itself. These vary from lender to lender but are approximately 1%.

Legal fees

Legal fees are usually between 1% and 2% (including VAT) and it is always advisable to use an independent lawyer to conduct requisite checks.

Notary expenses

These expenses are always paid by the buyer and are usually between 0.5% and 1% of the purchase price declared in the deeds of sale.

Property registration
Expenses related to inscribing the sale with the land registry are almost always paid for by the buyer and are calculated in relation to the purchase price declared on the deeds of sale – generally around 1%.

Buyers should note that the law establishes certain time limits for the registration of changes in ownership of property. The limit is two months after the signing of the Escritura. The same time limit applies to the registration of new buildings or renovations from the signing of the Escritura de obra nueva.

Banking costs
To pay for your property in Ibiza, you will usually be required to present a bankers’ cheque. In order to do this, you will need to set up a Spanish bank account and transfer the funds across from your home country bank account. The cost of these transfers can be as much as 0.4%, as can the cost of the bankers’ cheque.

Agency fees
Fees vary between 2% and 6% but standard market practice is 5% of the property’s purchase price (excluding VAT) in Ibiza. These fees are payable by the seller, unless otherwise agreed.