How to buy property in Madrid: a step-by-step guide

Buying property in Spain has long gone beyond simply exchanging money for square metres. It is a way of preserving capital, earning an income, establishing residency and integrating into the transparent European legal system. Let’s take a closer look at how the buying process works, what taxes to pay, what to look out for and how to avoid mistakes.

What door does buying a property in Spain open

Every transaction in the country is not just a change of ownership of square metres. It is a pass to a jurisdiction where every metre of housing gives access to residency, taxes, protection and investment. Buying property in Spain is not just a transaction, but a flexible tool: from capital protection to obtaining a “golden visa”.

The market offers about 1.3 million properties in active sale, from studios in Torrevieja to historic villas in Malaga. The average price per square metre is around €1860, but in Barcelona and the Balearics the price tag easily crosses the €4000 per metre barrier.

Legal backing: what you need to know before the transaction

The Spanish legal system is extremely formalised. A mistake in one line of the contract turns the deal into a long-term problem. Purchasing your own home in the country requires understanding that each stage has a strict procedural formalisation.

The procedure for buying property in Spain begins with obtaining a NIE – individual tax number of the foreigner. Without it, you can not carry out any operation. Next – opening an account in a Spanish bank, evaluation of the object and check its legal purity. Practice shows: about 30% of objects have hidden restrictions – mortgages, arrest, violations of urban planning regulations.

Notary does not check the object, he only fixes the will of the parties. The verification is carried out by a lawyer or agent. After signing the sale and purchase agreement, the parties fix the price, the advance payment and the terms of the deal.

What you need to consider in taxes and fees

Buying a property in Spain does not end with paying the cost of the property. The transaction entails a chain of tax obligations:

1. Property purchase tax in Spain (ITP) – from 6% to 10% for secondary housing, depending on the region.
2. IVA (VAT analogue) – 10% of the cost if buying a primary residence from a developer.
3. AJD (documentary deeds tax) – about 1.5% if the property is a new building.
4. Capital Gains Tax (Plusvalía Municipal) – paid by the seller, but in practice often shifted to the buyer.

All payments are processed within 30 days of signing the notarial deed. Late payment – penalty from 50 to 100% of the tax amount.

Buying with a mortgage: nuances

Spanish banks are willing to lend to foreigners, especially in the case of the purchase of liquid housing. The size of the mortgage – up to 70% of the appraised value of the object. Not the market value, but the bank’s internal valuation. Rates – from 3.2% per annum, term – up to 25 years.

Applying for a mortgage requires:

1. Alien Identification Number.
2. Proof of 6-12 months of income.
3. Financial Stability Statements.
4. Bank statements.
5. Preliminary sales contract.

The agreement with the bank shall be notarised. Life and object insurance is a mandatory condition.

Buying property in Spain: rights and obligations

Foreigners have the same rights as residents. The law allows the purchase of property in Spain without restriction – both individuals and legal entities. Ownership rights include registration in the Property Registry, access to mortgage lending, the possibility of renting and income generation.

Along with rights come responsibilities. The owner pays:

• annual property tax (IBI);
• tax on potential rental income (even if there is none) – about 19% for non-EU residents;
• utilities, insurance, tenants’ association fees (in apartment buildings).

The only possibility for a residence permit without work is the “golden visa”

The Law on Support for Entrepreneurship (Ley 14/2013) entitles to a residence permit for investments of €500,000 or more in real estate. The minimum is without a mortgage. The status allows you to legally reside, educate children, travel in Schengen and even get immigration to Spain over time.

The processing procedure is 20 days. First, a national visa is issued for a year, then – residence for 2 years with further extension. No requirements for in-country stay, tax reporting or renunciation of citizenship.

Structure of property purchase in Spain

The process of purchasing a home is strictly formalised and requires adherence to a sequence. Each step – from obtaining the NIE to registering ownership – has legal significance. Without understanding this structure, you can lose not only time, but also money.

Let’s consider the key steps:

1. Obtaining an NIE – foreigner’s tax number from the police or consulate.
2. Opening a bank account is only after NIE, otherwise the bank will refuse.
3. Site selection and cleanliness check – includes legal due diligence.
4. Signing a preliminary contract – fixes the deposit and terms and conditions.
5. Mortgage request (if needed) – submitted after the contract.
6. Registration with a notary – official signing and registration of the deed.
7. Payment of taxes and fees – within one month after the transaction.
8. Registration of ownership – in the Registry, confirmation of possession.

Following this scheme reduces legal and financial risks. A properly executed transaction is capital protection and the first step towards living in the European legal system.

Rent, income and control

The owner may rent the property on both long and short term leases. The latter will require a tourist rental licence (VUT), especially in autonomies with a high tourist load – Catalonia, Valencia, Balearics.

Buying property in Spain turns into a source of stable income:

• average yield – from 3% in large cities to 7% in regions with a shortage of rent;
• tourist rentals in Barcelona can yield up to 12% per annum, but require consideration of local restrictions.

Foreigners are required to file a tax return for rental income even if they are not resident in Spain. The tax rate is 19% for EU residents, 24% for others.

Unobvious risks and how to avoid them

Buying is not always a safe haven. Buying property in Spain requires a critical approach to selecting a property. Common mistakes:

• purchase of an object with debts to public utilities;
• choice of real estate in urbanisations without full-fledged infrastructure;
• failure to register the transaction with the Property Registry.

Checking Nota Simple – an extract from the Registry – will solve the problem. It is also worth requesting a cadastral certificate and a certificate of acceptance of the property, if it is a new building. The agent is not obliged to inform about the risks, only a lawyer works in the buyer’s interests.

Buying property in Spain: conclusions

Buying property in Spain is not just an investment in walls and land. It is access to a system where every brick becomes a brick with rights, taxes, legal protection and possibly EU residency. A clear procedure, transparent tax calculations, proper contract drafting, understanding your responsibilities – all this makes the transaction a manageable investment. The purchase of a home justifies itself if all the steps are carefully followed. Without emotions, but with figures and calculations.

Spain remains a leader in attracting foreign property investment in 2025 due to its warm climate, developed infrastructure and sustainable economy. Tax legislation continues to play a key role in ensuring transparent transactions and favourable investments. Property taxes in Spain affect every stage: from purchase to sale. Competent management of rates allows you to minimise costs, optimise returns and avoid financial risks.

Main types of property taxes in Spain

The main reasons for the popularity of Spanish real estate – favourable tax rates, support for foreign investors at the state level and growing demand in tourist centres. Cities such as Barcelona, Málaga and Alicante offer unique conditions for investing in housing for both personal use and rent.

Property purchase tax in Spain: rates and peculiarities

The Kingdom sets commissions on each sale and purchase transaction – the percentages depend on the type of property, region and its purpose. In 2025, the property transfer tax (ITP) remains mandatory for the secondary market, with rates ranging from 6% to 11%:

1. Madrid and Catalonia: 10% as standard.
2. Andalusia: reduced rate of 8% for properties up to €400,000.
3. Valencia: range 6-10% depending on the purpose of the property.

Value Added Tax (IVA) is levied on primary residences. Its standard rate is 10 per cent and 21 per cent for luxury properties over €1 million. In addition, stamp duty (AJD) is paid – 1-2% of the transaction amount.

Calculation example

When buying a flat in Valencia for 300,000 euros:

1. VAT (IVA): €30,000.
2. Stamp Duty (AJD): EUR 4,500 (1.5 per cent).
3. Final Costs: 34,500 euros.

Buyers must also take into account notary and registration fees, which average 1-2% of the object’s price. As a result, the tax burden on the future owner may amount to up to 15% of the total value of the property.

Property tax: what is important for homeowners to know

Annual property tax (IBI) is payable by owners of residential and commercial property in Spain, including non-residents. Rates vary from 0.4% to 1.1% depending on the region, type of property and its cadastral value.

Examples of rates by region:

1. Madrid: 0,5%.
2. Barcelona: 0.8%.
3. Malaga: 0.7%.

A flat in Alicante with a cadastral value of €200,000 is subject to a levy at a rate of 0.8%. The total annual fee will be 1600.

For commercial properties, the rate reaches 1.1 per cent, which increases the tax burden on owners. Municipalities regulate the percentages annually, which requires property owners to regularly monitor changes.

How are taxes calculated in Spain on the sale of property? Obligations for residents and non-residents

The sale of flats and houses on the peninsula is subject to capital gains tax (CGT). The rate is progressive for residents:

1. 19% on increments up to €50,000.
2. 21% – from EUR 50 001 to EUR 200 000.
3. 23% – over €200,000.

Non-residents pay a flat fee of 24% of all capital gains.

Benefits and tax deductions for foreign investors

Spain provides a wide range of tax benefits for foreigners, which makes property investment even more attractive. One of the key advantages is exemption from double taxation. Thanks to agreements signed with more than 80 countries, foreign investors can avoid paying similar fees both in the Spanish state and at home. This is particularly relevant for non-residents who receive income from renting or selling properties.

Long-term rentals are also accompanied by tax deductions. Owners have the opportunity to reduce the taxable base by 60%, which significantly reduces the financial burden. For example, for the owner of a flat in Barcelona, which is rented out for 1,200 euros per month, the liability can be reduced by several hundred euros per year.

Investors who reinvest the proceeds from the sale of real estate in new housing in Spain have an additional tax benefit. In such cases, the owners are exempt from capital gains tax (CGT), which allows them to save large amounts of money for further investment.

Golden Visa programme: how to reduce property taxes

“Golden Visa” provides investors with the opportunity to obtain a residence permit for the purchase of properties valued at 500,000 euros or more. This status simplifies tax obligations, including reduced rates, and also opens access to participation in reinvestment programmes. Property owners in tourist areas of Spain, such as Málaga or Costa Blanca, receive additional benefits in the form of a 25% reduction in annual property tax if the property is rented out.

For example, the purchase of a flat in Malaga, previously subject to a commission of 1200 euros, allows you to reduce the payment to 900 euros, if you comply with all the conditions of the programme. Such measures encourage foreigners and promote interest in the Spanish property market, providing advantages for long-term financial planning.

How to manage tax expenditure efficiently?

Effective management of tax liabilities is an integral part of any investment strategy. Utilising tax incentives, proper asset allocation and timely payment of all compulsory levies can not only reduce costs, but also avoid penalties.

Understanding what property taxes apply in Spain helps residents and non-residents to minimise risks and maximise returns. Consultation with professional lawyers and tax advisors ensures that all obligations are fully controlled.

Investing in properties on the peninsula in 2025 continues to attract attention due to the stable economy in the country, developed infrastructure and favourable tax conditions. Commission management is not just an obligation for investors, but an opportunity to maximise returns and successfully realise financial goals.