Additional costs when buying and selling property
By Armin Gutschick & Anja Sämann-Gutschick
When you are buying a home, it is often the case that both buyer and seller do not pay enough attention to the additional costs incurred. In this article, we aim to inform you of the main taxes and expenses that are involved in this type of transaction.
When buying a property in Ibiza, the buyer will have to pay Value Added Tax (IVA) if it is a new build, and Property Transfer Tax (ITP) if it is a second-hand property and the seller is a physical person. For a few years now, in Ibiza the following progressive taxes are applicable:
if the price of sale is up to 400,000 €, 8% is applied; for prices between 400,000 and 600,000 €, it is 9%; between 600,000 and 1,000,000 € it is 10%, and for prices above 1,000,000 €, 11% tax is applied.
If the seller is non-resident, the buyer will have to retain 3% of the price of sale and pay it to the tax office in order to cover the Income Tax for Non-Residents, within 30 days after the contract is officially made. This payment is carried out by presenting the document called “modelo 211“, which then allows the non-resident seller to declare the capital gains obtained before the tax office by filling in the document called “modelo 210“. This 210 document must not be confused with the declaration of Income Tax for Non-Residents.
If a foreigner has their fiscal address in Ibiza, s/he must provide as proof a certificate of fiscal residence that is issued by the tax office (Agencia Tributaria), since the notary is obliged to note on the deed both the withholding tax (retención) and the fiscal address of said foreigner.
Generally, VAT is only paid when the seller of the property is a corporate entity. The following tax rates will apply: if the acquisition is of a plot of land, VAT is 21%; if it is a new building, it is 10%. As well as VAT, you must pay the Documented Legal Acts Tax (AJD). It has gone up from 1.2% to 1.5%, this being the only tax novelty relevant to Ibiza for 2020. This tax is accrued when any public deed is inscribed at the registry, such as when a new build is declared, a joint property is dissolved or a mortgage is taken on.There is another tax, on the incremented value of urban land properties, (“Plusvalía Municipal”), which is applied solely to the incremented value of the plot since it was last sold, but not to the properties built on that plot.
This must not be confused with the Capital Gains Tax, which must be covered by the seller. The law establishes that payment of the Plusvalía is also the responsability of the seller. In order to avoid misunderstandings between both parties, it is advisable to specify in the contract who will pay the Plusvalía tax. The amount of this tax will be determined by the municipal bylaws and thus differs from one municipality to another. It is advisable to find out in the corresponding Council about the value of the Plusvalía before signing any contract. If the seller is not a resident, it would be convenient to retain the amount of the Plusvalía, since, if it goes unpaid, it will be the building, and thus the buyer, who will be responsible for it.
Lastly, a practical piece of advice: on their website, the Balearic tax office (ATIB) offers citizens a programme to determine the fiscal value of a property online, which allows you to calculate the Property Transfer Tax. In order to find out the value of the property, all you need to do is type into the online form the basic information about the property (built square metres, cadastral value, etc.). In order to access this tool, follow this link: www.atib.es