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You've found your dream villa in Ibiza. The asking price is €5 million, and you're ready to move forward. But here's the question most buyers don't ask until it's too late: is that €5 million your total budget, or just the starting point?
In Ibiza, the gap between the property price and what you'll actually pay can be significant, typically adding 10% to 14% to your total investment. Understanding these costs upfront isn't just about avoiding surprises. It's about having productive conversations with your broker, negotiating effectively, and ensuring your dream property doesn't become a financial miscalculation.
What you need to know
Purchase taxes vary based on whether you're buying new construction (10% IVA + 1.5-2% stamp duty) or a resale property (8-13% progressive transfer tax)
Total acquisition costs typically range from 10-14% of the property price, including taxes, legal fees, notary charges, and registration
Your broker needs to know your real budget, whether the figure you're discussing includes or excludes these additional costs, as this changes your actual buying power by hundreds of thousands of euros
Budget clarity from day one prevents wasted viewings and ensures you're looking at properties you can actually afford once all costs are factored in
The Two Tax Paths: New vs Resale
The single biggest factor determining your purchase costs is whether you're buying a brand new property or an existing one. Each path has a completely different tax structure.
Buying a Resale Property: Transfer Tax (ITP)
When you purchase an existing property in Ibiza, you'll pay the Property Transfer Tax, known as ITP (Impuesto sobre Transmisiones Patrimoniales). This is a progressive tax—meaning the rate increases as the property value climbs.
Here's how the ITP breaks down:
- Up to €400,000: 8%
- €400,001 to €600,000: 9%
- €600,001 to €1,000,000: 10%
- €1,000,001 to €2,000,000: 12%
- Over €2,000,000: 13%
This progressive structure means you don't simply multiply your property price by 13%. Instead, each portion of the price is taxed at its corresponding rate. For a €3 million property, you'd pay 8% on the first €400,000, then 9% on the next €200,000, and so on, resulting in a blended effective rate.
Why this matters: If you're comparing a €1.8M property to a €2.1M property, crossing that €2M threshold means the top portion jumps from 12% to 13% tax—something to factor into your negotiation strategy.
Buying New Construction: VAT and Stamp Duty
When the seller is a company, typically a developer, and you're the first occupant of a brand new build, VAT applies instead of transfer tax.
The rates are:
- Residential properties: 10% IVA (VAT)
- Land or commercial properties: 21% IVA
But there's an additional cost that many buyers miss: when IVA applies, you must also pay Stamp Duty (AJD - Actos Jurídicos Documentados) when registering the property in your name.
Stamp Duty rates:
- Properties up to €2M: 1.5%
- Properties over €2M: 2% (flat rate on total value)
One of the most important caveats: the stamp duty percentage is calculated on top of the 10% VAT, not instead of it.
The Complete Cost Breakdown
Let's move beyond tax rates and look at every expense you'll encounter. Here's what you need to budget for:
Legal Fees
Typical range: 1% to 1.5% of purchase price
A local real estate lawyer isn't optional in Ibiza,it's essential. Your lawyer will verify the property is free from debts, check that all licenses are in order, review contracts, and ensure you're protected at every step.
For a €5 million property, expect to pay €50,000 to €75,000 in legal fees. This investment protects you from issues like undisclosed mortgages, unauthorized renovations, or land classification problems that could cost far more to resolve later.
Notary Fees
Typical range: €800 to €9,000+ depending on property value and transaction complexity
In Spain, all property sales must be formalized before a notary public. The notary is a neutral party who verifies identities, ensures all parties understand the contract, and officiates the transfer of ownership.
Notary fees are regulated and based on a scale tied to property value. More complex transactions, such as those involving mortgages or corporate entities, will be at the higher end of the range.
Land Registry Fees
Included in the notary fee range above
After the notary signing, your property must be registered at the Land Registry (Registro de la Propiedad). This is the final step that formalizes your legal ownership under Spanish law. Registration fees are typically bundled with notary costs and scale with property value.
Real-World Examples: What You'll Actually Pay
Numbers in a table don't always tell the full story. Let's walk through two realistic scenarios so you can see exactly how these costs add up.
Scenario 1: €5 Million New Build Villa
You're purchasing a newly constructed villa directly from a developer. As a first-occupancy property, VAT applies.
Property Price: €5,000,000
- IVA (VAT) at 10%: €500,000
- Stamp Duty (AJD) at 1.5%: €75,000
- Notary Fee: €7,000
- Lawyer Fee at 1%: €50,000
Total Additional Costs: €632,000
Final Purchase Cost: €5,632,000
The reality: Your additional costs represent 12.64% of the property price. That €5M villa actually requires a €5.63M budget.
Scenario 2: €8 Million Resale Finca
You're buying an existing finca from a private seller. Transfer tax applies with the progressive ITP structure.
Property Price: €8,000,000
- ITP (Transfer Tax) at 8-13% progressive: €990,000
- Notary Fee: €9,000
- Lawyer Fee at 1%: €80,000
Total Additional Costs: €1,079,000
Final Purchase Cost: €9,079,000
The reality: Your additional costs represent 13.48% of the property price. That €8M finca requires a €9.08M budget.
A Note on Ownership Structure
One additional consideration: if you're purchasing shares in an SL (Sociedad Limitada) that owns the property, rather than buying the property directly, the tax treatment can be different. When you buy a company that holds real estate, you're acquiring shares—not the property itself—which changes the transaction structure and may affect which taxes apply.
We'll explore the full implications of SL ownership versus private ownership, including purchase tax considerations, in a dedicated guide. For now, just know that this is an important distinction to discuss with your lawyer early in the process.
Why Budget Clarity Matters From Day One
Here's what happens when buyers aren't clear about their true budget:
Scenario A: You tell your broker your budget is €5 million, and they assume that's your total available funds. They show you properties listed at €4.3M to €4.5M, leaving room for the additional 10-14% costs. But you were thinking of the property price alone and expected to see €5M listings. You've just spent 2 days looking at properties below your actual capacity.
Scenario B: You tell your broker €5 million, meaning the property price. They show you stunning €5M villas. You fall in love with one, sign a reservation agreement, and then discover you need €5.63M total. Now you're scrambling to arrange additional financing, renegotiating with the seller, or worse, losing your deposit because you can't complete the purchase.
The simple fix: When you first speak with your estate agent, clarify whether your budget includes or excludes purchase costs. A professional broker will ask this question immediately, but it's worth volunteering the information to avoid any confusion.
Questions to Ask Your Broker
As you begin your property search, here are the questions that will keep everyone aligned:
1. Does my stated budget include or exclude purchase costs?
Set the foundation for an efficient search from the start.
2. For this specific property, what would my total acquisition cost be?
Get a detailed breakdown before falling in love with a property you can't afford.
3. Is this a new build or resale, and which tax structure applies?
The 10% IVA + stamp duty vs progressive ITP question can mean a difference of tens of thousands of euros.
4. Are there any unique costs associated with this property?
Some properties may have community fees, pending work requirements, or other factors affecting total cost.
5. Can you recommend local lawyers who specialize in Balearic real estate?
A good broker will have a network of trusted legal professionals to refer you to.
The Bottom Line
Buying property in Ibiza requires budgeting around 10% to 14% above the asking price to cover taxes, legal fees, notary charges, and registration. These aren't optional costs or negotiable line items, they're legal requirements that every buyer must meet.
The difference between a smooth purchase and a stressful one often comes down to one thing: clarity about your true budget from the very first conversation. When you understand these costs upfront, you can:
- Search for properties in the right price range
- Negotiate effectively without overextending yourself
- Arrange financing that covers your total investment
- Move confidently through each stage of the purchase
Ready to start your property search with a clear budget in mind?
Contact our team for a personalized cost estimate based on your specific requirements. We'll help you understand exactly what your budget can achieve in Ibiza's competitive property market, and ensure there are no surprises along the way.
Please note: The figures provided in this guide are estimates for informational purposes only. Actual costs may vary depending on the specifics of your transaction. We strongly recommend consulting with a qualified lawyer and tax advisor familiar with Spanish and Balearic regulations for advice tailored to your situation.
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