Property transfer tax when buying a property in Spain: what buyers need to know

Buying a property in Spain is a dream for many Germans – whether for personal use, as a holiday home or as an investment.

However, in addition to the location, amenities and condition of the property, buyers should pay particular attention to one issue: the property transfer tax (Impuesto de Transmisiones Patrimoniales, or ITP for short). In this article, we explain how much ITP is, when a reduction to 4% or even 2% is possible – and what buyers should pay particular attention to.

General tax rate: 8%

When purchasing a second-hand property in Spain, property transfer tax (ITP) is payable.
The general rate is 8% of the purchase price – or the “declared value”, whichever is higher.
This tax is payable once upon purchase and must usually be paid to the notary within 30 days of signing the purchase agreement.

When does a reduced tax rate apply?

Under certain conditions, buyers benefit from a reduced property transfer tax – either 4% or 2%. The decisive factors are:

• Value of the property
• Use as primary residence
• Age and personal situation of the buyer

Reduced ITP rate: 4%

Buyers only pay 4% property transfer tax if all of the following conditions are met:

• The property value is less than €270,151.20 (the higher value between the purchase price and market value applies)
• The property is used as a primary residence (not as a holiday home or capital investment)
• At least 50% of the property is being purchased
• The buyer does not own any other residential property in Spain (at least 50%)

Heavily reduced ITP rate: 2%

An even greater tax saving is available under special conditions. The 2% rate applies if, in addition to the above points, one of the following cases applies:

• The buyer is under 36 years of age and this is their first property purchase
• The buyer or close relatives (e.g. children or parents) have a recognised disability
• The property will be the main residence of a family with several children or a single parent
• Maximum value: generally €350,000, €270,151.20 for single parents

Caution: Retroactive back tax may be payable

A particularly important point:
In order for the tax reduction to be recognised, it must be proven that the property is actually used as the main residence – at the time of purchase.
Important for buyers residing in the United Kingdom:
If you are not registered in Spain at the time of purchase, you will usually not be able to provide this proof. If the reduction is nevertheless applied for, you may be liable for 8% back tax – plus interest.

Conclusion: Tax savings possible – but only with clear planning
The ITP reduction offers enormous savings potential – up to several thousand euros. If you are young, planning to make Mallorca your main residence or have special family status, you can benefit from only 2–4% property transfer tax.
But: The requirements must be fully met and clearly documented. We therefore recommend that you consult a tax advisor or notary in Mallorca before purchasing.

Tip:

Are you under 35 and want to buy a house in Mallorca for less than €270,000? Then get in touch with us – we will advise you transparently on the current ITP rules and find suitable properties.