It depends on whether the home is new or resale
It is the first question and the one that changes everything, because they are two different taxes and are not paid the same way.
If the home is resale, the buyer pays property transfer tax (ITP). The rate is set by each region, so the same purchase costs differently in Madrid, Catalonia or Andalusia. In the Community of Madrid the general rate is 6%.
If it is a new build sold by the developer, VAT is paid —10% for homes— plus stamp duty (actos jurídicos documentados), which in Madrid is 0.75%.
And there are reliefs: for age, large families, disability or buying a first home, depending on the region. Almost nobody claims them because almost nobody knows they exist.
What else you need to add
The deadlines that slip by
Property transfer tax has a short deadline from the deed to file and pay it. Miss it and there is a surcharge, and if the authority gets there first, a penalty.
And there is a second surprise that arrives months later: the value check. If the tax authority considers the property is worth more than declared, it issues a supplementary assessment for the difference. Since 2022 the starting point is the cadastral reference value, not the purchase price.
That assessment can be challenged, and the challenge is often won, but it also has a deadline. Whoever leaves it in a drawer thinking it is just a notice loses their defence.
Further reading: who pays the municipal capital gains tax (plusvalía) and what to check before buying a home in Madrid.
Questions about purchase taxes
What is the reference value?
A value the cadastre sets for each property, which since 2022 serves as the minimum base for property transfer tax. It can be disputed, but you have to do it, and do it in time.
What if I buy below that value?
The tax is calculated on the reference value even if the price is lower, unless you can prove that the value does not reflect the reality of the property.
Does the bank pay the mortgage costs?
Much of them, yes: the mortgage stamp duty since November 2018, and the notary, registry and processing agency since the 2019 Mortgage Credit Act. The valuation is paid by the customer.
Can you tell me how much I will pay before I sign?
Yes, and it is part of the prior review. Knowing the total before the arras avoids the worst surprise of all.