Buying a property in Madrid: all the costs you need to know
· 4 min. read · by Christie's International Real Estate Madrid
Buying a property in Madrid is one of the most important decisions a person makes. And like any important decision, it deserves careful preparation. Part of that preparation involves the price of the property itself. Another part, equally relevant, involves everything that comes with it: taxes, notary fees, registration costs. The costs that do not appear in the listing but that form part of the transaction from the very beginning.
New build or second-hand: a distinction that changes everything
The first factor that determines the tax treatment of a property purchase in Madrid is the type of property. New build and second-hand properties are subject to completely different tax regimes, and confusing them can lead to very significant surprises in the final budget.
Second-hand properties are subject to Property Transfer Tax, known in Spain as ITP, which in the Community of Madrid currently stands at 6% of the purchase price. New build properties, on the other hand, do not pay ITP but instead are subject to VAT at a rate of 10%, plus Stamp Duty, known as AJD, which in Madrid stands at 0.75% of the purchase price.
The difference between the two regimes is significant and should be factored in from the very first moment of any analysis.
The cost breakdown: a clear view of what to budget for
| Cost as % of purchase price | Second-hand | New build |
|---|---|---|
| ITP | 6% | — |
| VAT | — | 10% |
| Stamp Duty (AJD) | — | 0.75% |
| Notary and Land Registry | ~0.3–0.6% | ~0.3–0.6% |
| Administration fees | ~0–0.2% | ~0–0.2% |
| Valuation (if mortgage) | ~0.1% | ~0.1% |
| Estimated total | ~6.5–7.0% | ~11.2–11.7% |
| Prudent budget | 7–8% | 12–13% |
What each cost covers
ITP: the second-hand property tax
Property Transfer Tax is the main tax cost when buying a second-hand property. In the Community of Madrid, the applicable rate is 6% of the declared purchase price. It is a regional tax, which means the rate varies depending on the autonomous community where the property is located.
VAT and Stamp Duty: the new build taxes
When buying a new build, VAT replaces ITP. The standard rate for residential property is 10%, applicable on the purchase price. Stamp Duty is added on top of this, at 0.75% in Madrid. Both taxes are paid at the time of signing before a notary.
Notary and Land Registry
Notary and Land Registry fees are mandatory in every property purchase in Spain. The amount varies depending on the transaction price and the complexity of the deed, but as a general reference they fall between 0.3% and 0.6% of the purchase price. For higher-value transactions, this percentage tends to decrease in relative terms.
Administration fees
The gestoría handles the processing of taxes and the registration of the deed. Its fee is variable and in many cases set freely by the professional engaged. As a general reference, it usually falls between 0% and 0.2% of the purchase price, though for more complex transactions it may be higher.
Valuation
If the purchase is financed through a mortgage, the lender will require an official valuation of the property. The cost of the valuation varies depending on the type and value of the property, but as a general reference it is approximately 0.1% of the assessed value.
What to keep in mind before signing
Beyond the percentages, there are two principles that are always worth bearing in mind when budgeting for a property purchase in Madrid.
The first is to always work with the prudent budget, not the minimum estimate. Notary, registry and administration fees have a variable component that can place them at the upper end of the range, and it is better to plan with margin than to face a shortfall at the last moment.
The second is that these costs are generally not financeable. Lenders typically finance the purchase price of the property but not the associated taxes and fees, which need to be available in cash at the time of signing.
A note on applicable rates
The tax rates set out in this guide correspond to the general regime in force in the Community of Madrid. Reduced rates may apply for certain buyer profiles, including those under 35, large families, or buyers with a disability. It is always advisable to consult a tax advisor before formalising any transaction.
Madrid: a market where planning makes the difference
In the high-end property market in Madrid, where transactions are complex and the amounts involved are significant, rigorous financial planning is a fundamental part of any well-executed purchase. Knowing the full tax and cost implications of a transaction in advance allows buyers to make decisions with greater clarity and avoid surprises that could condition the final outcome.
At Christie's International Real Estate Madrid we accompany our clients through every stage of the buying process, including the prior analysis of the costs associated with each transaction. If you are considering a purchase in Madrid and would like a comprehensive view of what it involves, our team would be delighted to guide you.
