Do you wish to purchase a property in Spain with a mortgage facility? Do you wish to lend funds to a third party with a mortgage guarantee in Spain? WeLex, your multilingual law firm in Marbella, has the pleasure to line out relevant information on the taxes due in Spain.

Tax on mortgages in Spain
Tax on mortgages in Spain

Royal Decree-Law 17/2018 of 8 November amends the Spanish tax duty on Legal Acts, in what the press has come to call the ‘ tax on mortgages in Spain’.

After the decision of the Spanish Supreme Court that the payment of the tax derived from the granting of a mortgage loan should continue to be paid by the borrower, the government of Spain has approved by means of a Royal Decree Law (Royal Decree-Law 17/2018 of 8 November, which modifies the revised text of the Law on Transfer Tax and Stamp Duties, approved by Royal Legislative Decree 1/1993 of September 24) the regulation by which, effective 10 November 2018, this tax must be assumed by the lenders (that is, the banks).

Thus, this Royal Decree Law comes to modify article 29 of the Law on Transfer Tax and Stamp Duties, which is drafted as follows:

“The acquirer of the property or right shall be a passive subject and, in his/her absence, the persons who initiate or request the notarial documents, or those in whose interest they are issued.

In the case of Loan Title Deeds with mortgage guarantee in Spain, the lender will be considered the taxpayer.”

These stamp duties charge legal actions that are granted by notarial, mercantile and administrative documents, giving a value to the legal act in question and on which the tax is applied. The tax rate varies depending on the autonomous community where the public document is granted, hovering between 0.5% and 2%. In the autonomous community of Andalusia, the tax rate on mortgage loans granted by banks is 1.5%, to be applied to what is known as ‘mortgage responsibility’.

But what is Spanish mortgage responsibility? So as not to burden the reader with technical questions and for practical purposes, we will say that this does not coincide with the amount of the mortgage loan requested, but with a higher amount. The reader may ask, ‘Why higher?’ Well, let’s continue.

As we noted, this ‘mortgage responsibility’ in Spain is calculated by adding to the principal of the loan that they give us certain amounts that would originate in the event that the bank has to execute the mortgage loan for non-payment of the instalments: a maximum amount for ordinary interests, plus a maximum amount of delayed interests and another for judicial and/or extrajudicial costs. Mortgage responsibility is not always fixed, and it varies from one banking institution to another. Normally, it ranges between 30% and 60% of the principal of the loan that is granted to us.

For example, let’s say we apply for a mortgage loan with a principal of 150,000.00 euros. Assuming that the maximum amount for ordinary and extraordinary interests and costs is 50,000.00 euros, the total mortgage liability would be 200,000.00 euros. Applying 1.5% of the stamp duties of the autonomous community of Andalusia, the amount to be paid would be 3,000.00 euros, which, effective November 2018, is assumed by the bank and not the borrower.

Do you need any information regarding this tax on mortgages in Spain? Do not hesitate to contact us in the event that you need any clarification or advice.

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