IVA (Impuesto sobre el Valor Añadido)

This is how Value Added Tax – VAT – is shortened in Spain. VAT on the purchase of a new build is currently 10 percent across Spain’s regions, with one exception.

The Canary Islands have their own VAT system called IGIC (Impuesto General Indirecto Canario), which is lower than for the rest of Spain and currently is 6.5 percent on the value of the property.

ITP (Impuesto sobre Transmisiones Patrimoniales)

ITP is the acronym used to describe the tax that applies to the transfer of ownership of a second-hand property in Spain. It varies across Spain’s regions, ranging from 4 percent to 10 percent currently.

AJD (Actos Jurídicos Documentados)

Often referred to as IAJD (the I stands for impuesto – tax), this tax usually goes hand in hand with ITP, and corresponds to all the administrative and notarial processes that come with getting a mortgage in Spain. 

The cost varies between autonomous communities but is usually 0.5 to 2 percent of the total mortgage payment, with some regions offering price reductions.

Who pays the IAJD, you may wonder? Well, this tax applied was debated in Spain’s Supreme Court in 2018, with judges ruling that for mortgages signed after November 10th 2018 onwards, it’s the banks that should foot the bill. 

READ ALSO: The real cost of buying a house in Spain as a foreigner

IRPF (Impuesto sobre la renta de las personas físicas)

IRPF is how people in Spain refer to personal income tax, and those who sell their Spanish property and make a profit will also have to pay this capital gains tax and declare it in their annual income tax declaration, referred to as la declaración de la renta. 

In 2020 this capital gains tax stood at 19 percent for a profit of up to €6,000, 21 percent for a profit of €6,000 to €50,000, and 23 percent for more than €50,000, with a few exceptions.  

IRNR (Impuesto sobre la Renta de no Residentes)

This acronym refers to non-residents income tax, which foreigners who do not officially live in Spain (spend fewer than 183 days per year in Spain) but own property in the country need to pay if they make a profit from it by renting it out. 

For EU/EEA residents the taxation on earnings is set at 19 percent whereas for non-EU/EEA it’s 24 percent.

VPO (Vivienda de Protección Oficial)

This acronym refers to official public housing in Spain, properties that are sold at a lower market price for low-income people and families. 

That means that if you see a property advertised as VPO, you won’t necessarily be able to make an offer for it unless you meet certain criteria.

Again, the conditions to be able to apply vary between regions in Spain but it usually entails not owning another property and not being able to sell the social housing unit for the first ten years of ownership, among other requirements.  

READ ALSO:

• Spanish mortgages: Ten things foreigners should know before getting one
• The best tips for buying a property in Spain without an estate agent

TIN (Tipo de Interés Nominal)

If you’re going to apply for a mortgage in Spain, you’ll definitely come across this acronym. 

TIN refers to the Nominal Interest Rate, a fixed percentage that is agreed upon as payment for borrowing money from the bank. In other words, the interest on your loan.

TAE (Tasa Anual Equivalente)

TAE is the equivalent of the annual percentage rate (APR) term used in English. 

It’s a more accurate and clear way of knowing how much a person will pay in interest for their mortgage, as it includes all other expenses and commissions added, whilst the TIN doesn’t. 

Therefore, the TAE is the best way to know whether a bank is offering you good mortgage conditions or not and to compare offers.

The percentage difference between the APR and the TIN is usually greater in personal loans than in mortgage loans. Currently, it is possible to find Spanish banks that offer fixed annual TAE interest rates below 2 percent, and financial entities are open to negotiating a rate below that figure as well. 

IBI (Impuesto sobre Bienes Inmuebles)

IBI is a tax on property goods, and it also goes by the name SUMA.

It’s a local tax that has to be paid once a year by all property owners in Spain, and it serves as a benchmark to calculate all other Spanish property-related taxes.

As the IBI amount is decided by the town hall in which your property is located, there can be big differences between municipalities.

For example, in Málaga province, there’s currently a difference of roughly €400 between what homeowners in the municipalities of Torremolinos, Cártama and Rincón have to cough up on average in IBI tax and what those who are based in Málaga city have to pay (based on a property worth €76,000).

Before buying a property, make sure to check the IBI in the municipality in order to avoid any nasty surprises. 

READ ALSO – How to make money from your Spanish property during low season

IIVTNU (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana) 

This long-winded acronym is usually referred to as plusvalía in Spain, a municipal tax charged by town halls on property sales, based on the increase in value of the land on which the property lies from when it was sold.

In late October 2021, Spain’s Constitutional Court ruled that the country’s plusvalía property tax is unconstitutional, meaning it’s theoretically no longer applicable.

It has been reported, however, that Spanish tax authority Hacienda are thinking up new ways to recoup some of the increases in land value, as town halls across Spain worry about how much the constitutional ruling will affect their public coffers.