Buyers Guide in Spain
Answers to frequently asked questions
Buying process in Spain
What stages are there in the completion process? The property is selected and the terms agreed on. The property must then be secured. This can be done through private contracts between the two parties. It is customary that 10% of the purchase price is paid at this time. On completion a deed of conveyance "escritura pública" must be signed by both parties under notarial supervision in spain.
Legal Advice in Spain
Is it necessary to appoint a spanish notary? Yes. Who pays the legal fees? In theory, notary's fees are paid by the seller, unless agreed otherwise and are fixed by law on the basis of a scale. It is advisable to appoint a local lawyer, who speaks the purchaser's language who will carry out a title search, and advise the purchaser on all aspects of the investment. Lawyer's fees are between 1-2% of the purchase price of the property.
Taxation in Spain
Is there a purchase tax? On new residential buildings there is VAT (IVA) charged at 7% of the value, plus 1% stamp duty, and these are paid by the purchaser. However, on urban plots, commercial premises and some garages (not annexed to a home) purchased from developing or trading companies, VAT is 16%. On re-sales there is a property transfer tax set at 7%. In all cases there is a surplus value tax “plusvalia” (not to be confused with capital gains tax payable by the seller on the profit made when selling the property). In theory, “plusvalia” is paid by the seller, and is a municipal tax on the increase in value on the land only. However, it may be subject of negotiation between buyer and seller.
Is it necessary to register the new ownership? Yes, this is done by entering the deed of conveyance “escritura publica” at the land register office.
Are there different methods of ownership?
Apart from individual ownership, a property can be owned by one or more companies. Owning companies can be Spanish, from countries with double taxation agreements with Spain or offshore or a combination of these.
Is it necessary to have a residence permit?
No, it's not necessary for EEC citizens or citizens coming from the Swiss confederation. For non-EEC citizens, if they want to reside permanently in Spain, they would need to obtain a special visa at the spanish consulate in the country of origin which allows them to apply for a residence permit.
A non-resident seller is subject to a 5% tax withholding on account of any possible capital gains tax. If the seller's liability is less than 5%, the seller can claim it from the tax office. Capital gains tax is 35% of the profit of the sale. There is an exception regarding the 5% retention: when the property has been owned by the vendor, at the date of the 31st of December 1996, for more than 10 years and when the vendor is an individual (not a non-resident company).
The laws and people's personal circumstances continuously change. These questions and answers are only general, and we strongly recommend that you contact a professional lawyer or financial advisor. Our office would be delighted to recommend reputable professionals in both fields. A recomended site for legal advice in spain is mallorcasolicitors.com.
Annual Property Taxes
I.B.I . (Impuesto Bienes Inmuebles)
This is a real estate tax levied by the local townhall and is usually 0.85% of the cadastral value (valor catastral)
Property Income Tax
It covers the period starting from Jan. 1st to Dec. 31st. of each year, and is payable during the following year (only for urban properties). The income rate is 25% and is applied on the taxable base. This base, which is the estimated income, is obtained by multiplying the cadastral value of the property by 2%. In some cases the multiplier is 1,1%: when the cadstral value has been updated after Jan.1st 1994; when the property has no cadastral value or the owner of the property has not been notified of this value, in which case the value to be adopted is 50% of the purchase price declared in the title deed, or that assessed by the tax office, whichever is the higher.
Property Wealth Tax in Spain
The non-resident owner of a property in Spain will be taxed on the value of the real estate on account of wealth tax. The base is taxed according to a sliding scale (between 0.20% to 2.5%). The taxable base will be the highest of the following values: a) The cadastral value; b) The value estimated by the tax authorities; c) The purchase price declared on the deed of conveyance.
Property owned by a non-resident company
When the owner of the property is a non-resident company, a special tax has to be paid and from 1996 the rate applicable is 3% of the cadastral value of the property (when there is no cadastral value, the same rule of the wealth tax is applicable).
Garbage collection tax.
To be paid to the local authorities.
These are fees to be paid to the Community of Owners for services and maintenance of communal areas, when the property is located in a development or condominium.
The above information is intended only as a guide and is subject to errors, omissions and changes. Their accuracy is not guaranteed.
For More information, legal aspects or appointments with solicitors please contact us:
+34 971 86 77 00 / +34 971 53 22 21
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