Costs and taxes when buying a home in Madrid: what it really costs

In the Community of Madrid, buying a resale home is subject to Transfer Tax (ITP) at 6%. It is calculated on the higher of the deed price and the reference value set by the Cadastre, so agreeing a price below that value does not reduce the tax. The buyer pays it using form 600, filed within 30 working days of signing; in practice the gestoría handles it.

New homes do not pay ITP. The buyer pays the developer 10% VAT on the price and, in addition, Stamp Duty (AJD), which in Madrid is 0.75%. Together that is 10.75% of the price, versus 6% for resale: keep this difference in mind when comparing new and resale product.

Besides taxes, you pay for the deed before a notary, its registration at the Land Registry, and the gestoría that files the taxes. These are smaller amounts that depend on the price and the complexity of the transaction; as an order of magnitude, between €1,500 and €2,500 on a €500,000 purchase and between €2,500 and €4,000 on a €1,000,000 one. It is worth asking each for a quote beforehand. In practice the buyer bears them.

The tax on the increase in value of urban land is, by law, the seller's responsibility, not the buyer's. Check in the deed that it has been settled or provided for.

In that case the buyer must withhold 3% of the price and pay it to the tax authority using form 211, on account of the tax the non-resident seller owes on their gain. The withholding is not an additional cost to the buyer, but it must be done correctly and on time: it is a detail the gestoría should control to avoid problems.

Since Law 5/2019, the bank bears the costs of formalising the loan: the gestoría, the notary for the mortgage deed, the registry and the stamp duty on the mortgage. The client pays the valuation, any notarial copies they request and the arrangement fee, if any. Even so, the costs of the purchase itself (ITP or VAT, notary and registry) are not usually financed: they are paid from savings.

Resale home at €500,000: €30,000 ITP plus between €1,500 and €2,500 in other costs, i.e. between €31,500 and €32,500 (6.3%–6.5% of the price). At €909,000, the average price of a flat in Salamanca: about €54,500 ITP plus between €2,300 and €3,700 in other costs, between €56,800 and €58,200 (6.25%–6.4%). At €1,000,000: €60,000 ITP plus between €2,500 and €4,000 in other costs, between €62,500 and €64,000 (6.25%–6.4%). At €2,000,000: €120,000 ITP, plus costs that grow with the price. New build at €1,000,000: €100,000 VAT and €7,500 AJD, €107,500 in total, plus notary, registry and gestoría. These are indicative estimates, not a quote.

If you finance, the bank lends a non-resident between 60% and 70% of the valuation, so you must contribute between 30% and 40% of the value plus the purchase costs (6–7%). In total, roughly between 36% and 47% of the price in cash. A cash buyer pays the price plus between 6% and 7% for a resale home.

Every €10,000 you negotiate off the price saves €600 in ITP, but only as long as the agreed price stays above the Cadastre reference value, so it is worth knowing it before making an offer. Declaring a lower-than-real price in the deed is not an option: it brings penalties and leaves the buyer exposed in an inspection and on a future sale.

On top of the above come the fees of the legal advisor and the personal property shopper, agreed separately, and, depending on the case, the valuation, home insurance and renovation. In a personal property shopper's model, fees combine an initial retainer that formalises the mandate and a success fee at closing based on the purchase price. At Lula Select we share the specific figures after an initial private conversation, so the total cost of the transaction is known before you make an offer.