What extra taxes do you pay if you have two homes in Spain?

It’s typical in Spain for families to own two properties – one apartment or house in a city somewhere and then a second home by the coast or in an inland rural village belonging to their ancestors.

These second homes are used much like the way foreigners have second homes in Spain – for holidays.

With summers getting increasingly hotter in Spain and businesses shutting up shop for most of August, it’s an appealing prospect if you can afford it.

Then there's the appeal of buying a second home for investment purposes too with many Spanish cities becoming more popular with other foreigners and digital nomads.

Other than the initial cost of your second home, however, how much extra will you pay in taxes to have a second property in Spain?

According to Banco Sabadell, there are several fees and taxes you have to pay when buying a second property in Spain. These include:

The notary certificate – Approximately €200.

VAT tax – If the property is new, value-added tax (VAT) must be paid, which is set at 10 percent of the value. This applies throughout Spain except in the Canary Islands, where the Canary Islands' general indirect tax (IGIC) is applied, which is 6.5 percent.

AJD tax – For second-hand homes, tax on documented legal acts (AJD) must be paid. This is varies depending on which region of Spain you buy the property in and could be anywhere between 0.5 and 1.5 percent.

ITP tax – You will also have a pay a property transfer tax (ITP). Again the amount of this and any rules surrounding it are dependent upon the region where the property is located. It usually ranges between 4 and 10 percent of the property price.

Property Registration – Between €600 and €1,000.

Agency fees – Only paid in some cases if you have hired agent to help you look for a property. Typically around €300.

If you are applying a for a mortgage for your second home there will also be additional costs involved including:

Mortgage loan fee – This costs between 0.1 and 2 percent of the loaned capital, but is only charged by some banks, not all.

Home appraisal – Between €300 and €500

Copy of the mortgage deed – Between €0.60 and €1 per page.

Negotiating mortgage financing - Keep in mind that with segundas viviendas (second homes), most Spanish banks will not offer the same 90 or 80 percent financing as with a first residence, and more likely to offer 60 or 70 percent instead.

READ ALSO: The hidden costs of taking out a mortgage in Spain

Income tax and other regular taxes

Once you have purchased your second property in Spain, there are several more taxes that you'll have to pay on a yearly or even a quarterly basis, depending on what you use it for.

Just for you – Firstly, if you use your second home just for you and your family, it must be declared as real estate not used for economic activities, that means not rented out to tourists or similar. If this is your case, you’ll pay two percent of its assessed value. This assessed value is the calculated based on the main tax levied on homeowners, which is the IBI or Property Tax.

IBI tax - IBI stands for Impuesto sobre Bienes Inmuebles in Spanish, which translates to tax on property goods. The IBI amount is decided by the town hall in which your property is located, and there can be big differences between municipalities. IBI tax on urban properties must be between 0.4 percent and 1.1 percent of the value of the property, although it can be up to 1.3 percent in provincial capitals with more services and amenities. This tax is paid regardless of whether you rent it out or not.

Community fees - If your second home is in a complex or residential building, you'll have to add the gastos de comunidad to your monthly expenses list.

READ ALSO: Is it better for landlords in Spain to rent to temporary or long-term tenants?

To be rented out – If you bought you second home as an investment and rent it out, the income earned must be declared, less any deductible expenses, such as community fees, insurance, or the cost of repairs to the home.

Income from renting a home is considered real estate capital gains in Spain. If the tenant uses the property as their primary residence, the landlord can apply a 60 percent deduction to the net income.

If you rent your second home out temporarily though to tourists when you’re not using it, for example, the 60 percent deduction cannot be applied.

You will also be expected to pay taxes on any income generated from this and it will be treated like a business.

READ ALSO: Why having an empty home in Spain could soon cost you more

Are there any deductible costs when buying a second home in Spain?

When purchasing a second home in Spain, there are certain expenses that may be considered tax deductible.

Mortgage interest is one of the main deductible expenses, as it can be subtracted from the Personal Income Tax (IRPF) tax base under certain circumstances.

Likewise, expenses related to the formalization of the mortgage loan, such as bank fees, may also be considered deductible.

In addition, notary and registry fees related to the purchase of a second home are deductible under personal income tax.

On the other hand, taxes paid upon the acquisition of the property, such as property transfer tax (ITP) or VAT, are not directly deductible, but they can be taken into account when calculating the acquisition value and potential future capital gains.

In conclusion, before buying home number two in Spain it's important to crunch all the numbers and figure out if it's financially viable.

Ask yourself if it's worth it, will you give that second home as much use as you think, or will staying at an Airbnb from time to time cover your needs? Will it make enough money if you let it out, or will it cost you more than it makes?