What is the tax on legal mortgage documents?

The tax on documented legal acts or, as it is also known, mortgage tax is a tax that is calculated on deeds made public before a notary and that is applied to the act of legalising all kinds of notarial, commercial and administrative documents.

The tax is regulated by Spanish Royal Legislative Decree 1/1993, of 24 September, which approves the revised text of the Tax Law on Property Transmission and Documented Legal Acts.

Spain is usually the EU country with the highest tax, ranking above countries such as France, Italy or Portugal, where the customer is responsible for paying this tax, whereas countries such as Germany, The United Kingdom and Holland do not have this kind of taxation.

What percentage is paid for the tax on documented legal acts?

In Spain, it depends on two factors. Firstly, the autonomous community in which the loan is formalised and, secondly, on the value or amount of the mortgage. The percentage that applies is between 0.5% and 1.5% of the mortgage liability.

The communities that apply a higher tax (1.5%) are Andalusia, Aragon, Valencia, Castile and León, Catalonia, Galicia and Murcia. The communities that apply the lowest percentage (0.50%) are Ceuta, Melilla, Navarre and the Basque Country. Castile-La Mancha applies a rate of 1.25%; Asturias, The Balearic Islands and Extremadura apply taxation of 1.2%; Canary Islands, Cantabria and La Rioja apply 1% and, lastly, Madrid applies a rate of 0.75%.

Percentage of tax on documented legal acts by autonomous community

It should be noted that many autonomous communities offer reductions or even the cancellation of this tax. The objective is to facilitate access to housing for different groups: large families, young people or people with disabilities, among others.

Who has to pay the tax on documented legal acts for the notarial deeds involved in their mortgage?

Over recent years, there has been an intense debate about who should pay the tax on documented legal acts: The person applying for the mortgage? The bank or financial institution that grants the loan? The customer and the bank?

Up until October 2018, the Tax Law on Property Transmission and Documented Legal Acts stated that the client interested in the mortgage loan was liable for payment of the tax. However, in November of that same year, various statements were made before the Supreme Court that amended the mortgage law, stressing that, except in The Basque Country, it is the lender, i.e. the bank or financial institution, that should be held solely liable for this expense.

Example of how the tax on documented legal acts is calculated

We will using the following scenario of a mortgage applied for in Madrid for reference. The first thing we do is check the above table, where we can see what percentage is applied for taxes on legal acts in the Community of Madrid, which would be 0.75% in this case.

Now we just have to multiply that by the amount of the mortgage liability (principal + ordinary interest + default interest + costs and expenses), which would be €350.000 in this case, for example

Tax on Documented Legal Acts = Value of Mortgage Liability x General Rate

For this scenario the result would be:
Tax on Documented Legal Acts = €350.000 x 0.75% = €2,625