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The 3 taxes for buying a home in 2020 in Spain, with or without a mortgage

[vc_row][vc_column][vc_column_text]2 years ago we made an article   where we explained all the taxes you must pay to buy a home in Spain. However, in 2019 a new Mortgage Law was passed which brought some changes that modified the total taxes to be paid.

There are 3 taxes related to the purchase of real estate in Spain: Value Added Tax (VAT), Property Transfer Tax (ITP) and Tax on Documented Legal Acts (IAJD).

If you don’t have time to read the entire article, the most important thing you should know is that currently the IAJD for the formalization of the mortgage is now run by the Bank.

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Below we present the updated data for the year 2020.


  1. The most important tax of all: Property Transfer Tax (ITP) or Value Added Tax (VAT)


If we buy property for use as a new home from a promoter, we will have to pay VAT, which applies throughout the Spanish territory with the exception of the Canary Islands, and the autonomous cities of Ceuta and Melilla.

VAT for the purchase of new homes will generally be 10% and for homes under a special protection regime it will be 4%.

Let us remember that VAT is a type of indirect tax, so we must pay it to the economic agent between us and the Treasury, in most cases it will be to the developer company that manages the sale of the property.

In the event that we buy a second-hand property, it will not be taxed by VAT but through the Property Transfer Tax (ITP).

This tax has been transferred to the Autonomous Communities, so there is no fixed national value. For example, in Madrid it is 6% in general and 4% for large families.

ITP, unlike VAT, is a direct tax, so we must pay it ourselves, at the Treasury Office that corresponds to the place where the property we have purchased is located. The payment of this tax must be made within a period of 30 business days from the day of execution of the public deed of sale.


  1. Documented Legal Acts Tax.


If a new home is purchased, in addition to VAT, the Tax on Documented Legal Acts (IAJD) must be paid, which has also been transferred to the Autonomous Communities and ranges between 0.5% and 1.5% of the price of sale. In the case of Madrid, the IAJD is taxed as follows: exempt for officially protected housing; 0.2% for housing with public protection (VPP) with less than 90m2 useful; 0.4% for VPP of more than 90m2 useful and for free homes with a deeded amount of less than 120,000 euros; 0.5% for deeded amount between 120,000 euros and 180,000 euros; 0.75% for deeded amount greater than 180,000 euros.

The good news is that now if we buy a new home with a mortgage, we will pay the IAJD only once, only for the purchase of the home, calculated on the deeded amount (previously the IAJD was paid twice because another was also paid for the mortgage ).

In summary, as an example in Madrid, in general, we will pay the following taxes (the percentages that appear are of the deeded amount):


Table 1. Taxes to pay for new or second-hand properties, purchase and mortgage. Madrid case year 2020.

cash purchase Mortgage
New 10,00% No apply 0,40% – 0,75% 0%
Second hand No apply 6,00% No compatible 0%



Why do new homes pay VAT plus IAJD and second-hand homes only pay ITP?

The Tax Law on Property Transfers and Documented Legal Acts states that the same act must only pay one of these two taxes (the higher of them), that is, the ITP and the IAJD are incompatible for the same act. While VAT is governed by other regulations that are not incompatible with the IADJ.


We have intentionally left out of this article the other expenses that we must take into account when purchasing a property, such as Notary, Registry and Agency. We do so, since these expenses are not a fixed percentage like the taxes mentioned above, but are direct amounts that are applied according to the price range where our property is located. We deal with these issues in more detail in this other article: The 3 necessary expenses to buy a property in Spain.


We listen to you and respond: if you have any questions about the taxes to pay when buying a home in Spain, or any other issue related to real estate management, you can contact us through the following channels:

Or if you prefer, leave us a comment and we will reply. Thank you very much!

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Do you want help buying a home in Spain? We are experts in the Madrid market and we can find the home you are looking for, but we can also advise you on tax matters throughout the national territory.


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