Few things confuse buyers — especially international ones — more than purchase taxation. The good news: in Madrid it is simpler and cheaper than in almost any other major Spanish region. Let us go step by step, with a real example at the end.
Resale: the 6% ITP
Most of Madrid's luxury housing — flats in restored classic buildings — is taxed as resale through the transfer tax (ITP). In the Madrid region the general rate is 6%, one of the lowest in Spain — compare with 10-11% in Catalonia or 10% in the Valencia region. On a €2 million home, that regional difference means €80,000-100,000 in savings. The tax is settled within 30 working days of the deed.
New builds: VAT + stamp duty
New homes (first transfer) are taxed differently: 10% VAT plus stamp duty (AJD), 0.75% in Madrid. In total, 10.75% versus 6% for resale: almost five points of difference. It is one of the reasons — along with land scarcity — why new builds are losing share of transactions, as idealista/news reports, and why the full restoration of classic buildings has become the natural route of Madrid luxury: a like-new product, taxed as resale.
The other costs: notary, registry, gestoría
These are the small items, and most are set by regulated tariffs. For a home in the upper segment: notary between €600 and €1,500, Land Registry between €400 and €800, and gestoría (optional without a mortgage) around €300-500. With financing, add the valuation (€300-600); mortgage arrangement costs have been borne by the bank since 2019.
After buying: IBI and annual taxation
As an owner you will pay the annual IBI property tax, levied by Madrid City Council at 0.4% of the cadastral value — significantly below market value; for a prime flat in Barrio de Salamanca it usually comes to between €1,500 and €4,000 a year. Non-residents also file non-resident income tax (imputed income or rental income, depending on use). And on selling, the seller settles the municipal plusvalía and capital gains in their income tax.
Full example: a €2,000,000 home in Barrio de Salamanca
Restored resale: ITP €120,000 (6%) + notary ~€1,200 + registry ~€700 + gestoría ~€400 = ~€122,300, or 6.1% over the price. The same home as a new build: VAT €200,000 + AJD €15,000 + fees = ~€217,000, or 10.9%. The difference — nearly €95,000 — explains why informed buyers in prime Madrid look at full restorations before new developments. The complete purchase process, step by step, is in this guide.
This information is for guidance only and does not constitute tax advice. Rates and allowances may change: always verify current rules with a qualified tax adviser.
