What should I budget for in the way of extra expenses on top of the purchase price I have agreed with the Seller?

The total expenses incurred in the purchase should not, on average amount to more than 11% of the purchase price. This can be broken down as follows:

Stamp Duty (Transfer Tax)
There is no stamp duty threshold as in England and you will be required to pay at the appropriate rate based on the declared price. If you buy a new property from a developer I.V.A. (Spanish VAT) is charged at the rate of 7% of the declared price. In addition you will have to pay a further 1% for the Legal Documented Acts Tax. Resales vary between 5% and 7% depending on the area of Spain.

Land Registry Fees
The fees charged for registering the property at the Land Registry will aproximatly be between 250 and 600 euros.

Notary's Fees
These will amount to approximately 650 Euros depending on the value of the property.

Legal Fees
The fees that your Legal Representative charges will vary from firm to firm. You should allow between 1-2% of the purchase price.

Power of Attorney
If you are not able to appear before the Notary in person for the signing of the Escritura (title deed) you will need to authorise someone, such as your lawyer, to appear for you by means of a power of attorney.

The Seller has asked me to underdeclare the purchase price on the Transfer Deed to save the Transfer Tax. Is this a good idea?

Whilst it may appear that by doing this you will be saving 7% tax on the underdeclaration, there are several reasons why you should think twice before doing so. The first is that the underdeclared value is the figure on which your capital gains tax liability will be calculated when you sell. The current rate of capital gains tax for non-residents is 35% and therefore you may be saving 7% now to pay 35% later. You will in effect be picking up part of the Seller's tax bill. The second reason is that the Revenue can reassess the value declared and charge you the 7% tax on the difference between the declared value and the market value of the property.