Spain Buying / Selling Guide

Spain Buying Guide

TYPES OF PURCHASES

EXISTING PROPERTIES

Existing properties can be bought from an individual or a company. These properties are built and have generally been rented or owner occupied for some time.

The purchase is agreed between both parties and a purchase timescale is set.

Checks are carried out to confirm that the property complies with the existing local building regulations and that the seller is up-to-date with the payment of local taxes and running costs.

Many re-sale properties have been greatly reduced in price since the recession and there are opportunities for motivated buyer

NEW PROPERTIES

These properties are generally under construction or can be bought from the development plans. You can often tailor the design and finishes to fit your own requirements.

The payment plan for this type of property can be appealing as only a deposit is paid at the outset followed by instalment payments during property construction, with the balance paid on completion.

The property must be built before completion can take place. Construction time can vary between 12 to 36 months.

AUCTION/BANK REPOSSESSIONS

Auction properties increased in popularity during the recession with the rise in numbers of distressed properties available. Extra care and advice should be taken with such purchases as there may be encumbrances attached to the property. Independent legal representation is essential with such transactions.

Buying a property at a Spanish auction can be time consuming and many of the best opportunities have already passed. Many properties being sold at auction now have little added investment value and research is needed to identify opportunities.

The NIE is an identification and tax number which is required in all dealings with the Spanish tax authorities.

We recommend that you apply for your NIE as early as possible, ideally before viewing properties. The NIE number can be obtained at one of the Spanish Consulates or during your visit to Spain, or by power of attorney.

The NIE number is legally required for non-Spanish nationals for a variety of purposes including purchasing property, buying land, inheriting property, applying for a mortgage or open a bank account.

NIE – Numero De Identificación De Extranjeros (Foreigners’ identification number)

It is worth noting that from 2013 the old yellow NIE forms and old white NIE forms are no longer valid. All new NIE forms have a 3 month expiry date from day of issue shown in the bottom right hand corner of the form. If the form has expired then you will have to get an up to date NIE certificate when finalizing any transaction.

Preliminary Contracts

Once a verbal offer has been made buyers will be invited to sign a reservation agreement to remove the property from the market whilst your legal representatives review the contracts (contrato privado de compraventa). Reservation forms should be non-binding and are typically accompanied by a refundable deposit of between €6,000 and €10,000 euros depending on the value of the property.

Reservation deposits are made by wire transfer, credit card or cash, usually at your lawyer’s office and paid into an escrow account. Once the legal representative has made their relevant checks and surveys on the property, preliminary contracts can be signed.

Legal Checks:

• Land/Title Searches
• Planning Consent
• Bank Guarantees
• License of First Occupation
• Charges and Unpaid Bills

We can recommend law firms here who have a lengthy track record of conveyancing for non-residents.

Deed Of Sale

Escritura de Compraventa

The next stage in a formalized completion and transfer of ownership is to sign the deed of sale. The law in Spain requires this to be done in the presence of a Notario. Any deposits taken up to this point will be taken as part of the purchase price and the balance is paid.

In many cases it is possible to give power of attorney to a representative or solicitor to sign the deed on your behalf.

If the property forms part of a development then the Notario will draw up estatutos de la comunidad, or co-ownership rules.

The original document is retained by the Notario and an official copy is sent to the land registry for registration and recording of ownership. At this point the sale is deemed to have completed and if using finance to complete the bank should deal with any payment of taxes and the registration of the property so that they can register their interest and charge on the asset.

Ownership Structures

The structure of title should be considered at an early stage in the process. Changes to the ownership structure after contracts are entered into can be expensive due to the Tax Office levying any transfer of ownership.

Individual:

This is the most common method of purchase where buyers purchase in their own name, jointly with a spouse or children or as a group.

Company Purchase:

Purchasing a property through a company or SPV (Special Purpose Vehicle) is a complex procedure which is sometimes considered as a way of reducing certain tax liabilities, however in all cases certain taxes are still payable.

We strongly recommend seeking independent professional tax advice in your country of origin and Spain in all cases.

Mortgages & Taxes

Mortgages in Spain are based on the Euribor, which is the base interest rate set by the European Central Bank. There are various types of mortgages available.

INCOME TAX

Income Tax or (impuesto sobre la renta) will be due in Spain if a property is let and this must also be declared in the by Non-residents with an allowance being granted for tax being paid in Spain. The rate for non-residents is a flat 24.75%.

IVA- IMPUESTO SOBRE EL VALOR ANADIDO (SPANISH VAT)

Spanish VAT is called IVA (impuesto sobre el valor anadido). The standard rate of IVA is 21%

STAMP DUTY – IMPUESTO DE ACTOS JURIDICOS DOCUMENTADOS

This tax applies to both new property purchases where the property is purchased from the developer and to mortgages. It is calculated at the rate of around 1 % of the value of the property for the purchase and 1 % of approximately 1.5 x the value of the mortgage.

TRANSFER TAX ITP (IMPUESTO DE TRANSMISIONES PATRIMONIALES)

Transfer Tax applies when purchasing an existing property from an individual. In this case IVA is not payable. Transfer Tax is regulated by the regional governments and can vary between 6% – 8% of the transaction value. The payment is due on completion.

CAPITAL GAINS TAX (CGT) – IMPUESTO SOBRE LA RENTA DE NO RESIDENTES, GANANCIA PATRIMONIAL.

Capital gains tax is payable on any gain made from land, buildings, shares, and certain other personal property. If the property is a primary residence at the time of sale, no CGT will be due. Non­residents are charged at 21%.

INHERITANCE TAX

Inheritance tax is paid in Spain by each beneficiary and not by the estate. Therefore beneficiaries are liable to pay inheritance tax in Spain but only for the Spanish assets that they will inherit. Inheritance tax is calculated on the value of the estate combined with other factors.

This document is a guide only. We recommend that you seek independent professional tax advice.