Purchasing a home in Spain
Buying a property in Spain is normally an uncomplicated process, however we always recommend that you involve a reliable agent, lawyer and notary to be completely covered if any unexpected events present themselves.
Here follows a short guide of things that are of substance when buying a property in Spain.
The buying process
Once the property is selected and the terms agreed on, the property must be secured, which can be done through a private contract between the two parties. Normally 10% of the purchase price is paid at this time. On completion, a deed of conveyance, the ‘escritura pública’, must be signed by both parties at the office of a Spanish public notary. The notary’s obligation is to certify the deed of conveyance as a registered public document.
Notary’s fees are paid as stated by law, 80% by the vendor and 20% by the purchaser unless otherwise agreed, although in practice it is usual that the purchaser pays for the full amount. The fees are fixed by law on the basis of a sliding scale. It is wise to appoint a local lawyer, who speaks the purchaser’s language; the lawyer will carry out a title search, and advise the purchaser on all aspects of the investment. Lawyer’s fees are around 1% of the purchase price of the property. Together, both fees amount to approximately 1.5% of the purchase price.
Estate Agent’s Fees
Estate agent’s fees vary depending on the state, region and the type of property. In Costa del Sol, it is expected for the commission to be paid by the seller. The commission is usually a percentage of the selling price (although a fixed fee may be agreed between the seller and the agent), and this of course may vary depending on the price of the property.
Overall, taxes, legal fees and expenses directly related to the purchase of a completed residential property sum up to approximately between 10% -11%. However, there are certain exceptions that may apply. If so, consult with your lawyer. In all cases there is also a municipal tax, ‘Plusvalia’ (not to be confused with Capital Gains Tax, which the seller is accountable for when the property is sold). This ‘Plusvalia’ is paid by the seller, unless otherwise agreed. It is a municipal tax on the increase in value on the land, from the date when it was purchased until it is sold. If the purchaser applies for a mortgage on the property, there will be approximately 3% additional expenses.
It is necessary to register the new ownership by inscribing the deed of conveyance, at the Land Register Office. This is the final step in declaring your legal title to the property.
Unless you are planning to live in Spain for over 183 days per calendar year, a residence permit is not necessary. In that case, you need to apply for fiscal residence in Spain. Non-European Union citizens who want to reside permanently in Spain must obtain a special residence visa from the Spanish Consulate in their home country. With this visa, they can apply for a residence permit.
N.I.E. (Foreigners’ Identification Number)
All non-Spanish buyer must apply for an NIE number from their local police authorities. This number is obligatory for any property transaction (buying, selling, utilities, insurance, etc.).
Annual Property Taxes
IBI (Impuesto Bienes Inmuebles – Real Estate Tax)
This is an annual real estate tax collected by the local Town Hall and is at present a percentage of the cadastral value (‘valor catastral’), and may vary depending on the municipality where the property is sited. The tax scale goes from 0.3% to 1.3% of the cadastral value of the property. The cadastral value is the calculated value for tax purposes and is important, because other taxes are based on it as well. When you buy, you need to see the seller’s last receipt for the IBI payment, which holds the value and the exact amount of the tax.
Non Resident Property Income Tax
This is an annual tax, mandatory to be filed and paid from the year after the property is acquired. The Spanish tax agency takes the view that all non-resident property owners originate financial benefit from their property, and thus assign to each property an imputed income each year of either 1.1% or 2% of the cadastral value of their property. If the property’s cadastral value has been revised in the previous ten years, this imputed income is 1.1 % of the cadastral value, used as taxable base to calculate the Non-Resident Property Income Tax. If the cadastral value was revised over ten years ago, then the imputed income to be taxed on is 2% of the cadastral value. Property owners who are resident in countries outside the European Union, Norway and Iceland are obligated to pay 24% on the taxable base (be it 1.1% or 2% of the cadastral value). Property owners who are resident in another member state of the European Union, Iceland and Norway pay 19% on the taxable base.
Wealth Tax in Andalusia
Wealth tax applies for assets owned between 2011 and 2016. All property owners in Spain (both resident and non-resident) are subject to this tax, which ranges from 0.24% to 3.3% of the net asset value. The net value is reduced by mortgage debt on the property, as well as a €700,000 exemption (for residents and non-residents alike).
The value of the real estate assets will be considered to be the highest value of the following: the cadastral value, the purchase price or the value set by the Administration for other taxes.
Tax residents in Spain have additional benefits, according to their individual circumstances.
Be aware of that laws and regulations might change, and so can the individual circumstances of each client. This list is put together to provide guidance in the process of buying a potential property in Spain, and does not apply as legal advice which should be provided by a professional.