Buyer’s guide Buying a property in Spain

With the purchase of a property in Spain, you will be confronted with several different aspects as taxes, notary fees and registry costs, but also other regular costs as community fees, etc. Because of the rapidly changing regulations within the European Community, it is not easy to give a standard guide book. Nevertheless we will try to explain some main guidelines.

Your real estate agentThe real estate agent in Spain is paid by the seller. Prices are the same at the real estate agency and the developer. However, the big difference is that the real estate agent will show you properties that better match your desires and budget, while developers can only offer their own products.
In addition, your real estate agent can help organize financing, and a legal advisor will guide you through the purchase process.
Your real estate agentThe real estate agent in Spain is paid by the seller. Prices are the same at the real estate agency and the developer. However, the big difference is that the real estate agent will show you properties that better match your desires and budget, while developers can only offer their own products.
In addition, your real estate agent can help organize financing, and a legal advisor will guide you through the purchase process.
The purchaseThe purchase process in Spain differs in several aspects from buying in France, Belgium, or other countries. For example, in Spain, there is the possibility of taking an option, but for the sale to be valid, a deposit must be paid for the reservation. In most cases, this amount is around 3,000 euros. If you do not confirm the final purchase within 30 days, you will lose this deposit.
The purchase contract is usually a combination of a reservation document and a purchase agreement. This means that if you meet the reservation terms and respect the first payment mentioned in the agreement, the reservation will automatically become a definitive purchase agreement.
Notary and land registry feesWhen signing the deed before the notary, you should consider approximately 3% of the registered purchase price for notary fees, land registry inscription, and filing expenses. The notary's fees and registration costs will be invoiced by the notary as an estimate. Once the property is registered in the Land Registry, you will receive the final settlement, and any discrepancies in the advance amounts will be corrected. In general, for a purchase, we advise our clients to consider approximately 12-13% for additional costs (including VAT/Transfer Tax) to avoid any later disappointments.
Tax Identification NumberBefore signing to obtain the public property title in Spain, you are required to apply for a tax number, known as NIE (Número de Identificación de Extranjeros). You will also need this number later for future tax declarations. Your legal advisor can assist you with the NIE application.
FinancingIf you wish to obtain a mortgage loan for purchasing a property in Spain, there are several options. Many possibilities exist, including financing up to 70% of the purchase price with a term of up to 30 years. To apply for a mortgage in Spain, a property valuation must be conducted, income must be proven, and a risk report must be provided.

Remaining Costs and Taxes

Of course, in Spain, you will also have additional costs such as utilities, local taxes, and, in most cases, community fees. The community fee depends on the number of services and utilities in your community that you and your fellow owners have use and/or possession of. Think of communal parks and gardens, swimming pools, and other facilities. But also hallways, galleries, and elevators are part of the services.
Income tax and wealth tax are entirely based on your assets and possible income in Spain.

Note: Non-residents must appoint a tax representative to handle their taxes, which can be either an individual or a company, but most likely it will be an administrative office specializing in these matters. You will pay around 150 euros for a standard declaration as a non-resident. These offices can receive your tax correspondence, make all the declarations and payments, and answer any questions related to your property in Spain. This way, you won't have to worry about the financial aspect of your property and can enjoy your vacation home in Spain.

With the previous explanations, we hope to have provided you with a better understanding of the property purchase procedure in Spain. Remember that for you, it's a big event, but for us, it's our daily routine to guide you through the procedure in the most pleasant way possible.

Tax information about the purchase of your (second) homeB&L Promotions Costa Blanca informs you about the fiscal aspects to consider when buying a second home in Spain. Any foreigner owning a property in Spain must pay taxes.
The average buyer is not familiar with the types and amounts of taxes to be paid and where they should be paid. Below is a short list of taxes to keep in mind:

- Personal Income Tax

- Wealth Tax

- Property Tax

- Non-Resident Income Tax

- Capital Gains Tax

- Property Sale Capital Gains Tax

- Transfer Tax

- VAT

Personal Income Tax - IRPFAny foreigner residing in Spain must file a tax declaration on their personal obligations and worldwide income. If you have lived in Spain for more than six months in a year, you will become a tax resident even without applying for a residence certificate.
However, there are certain types of income (such as state disability pensions) that are exempt from income tax. Spain has agreements with many other countries that indicate where different types of taxes should be paid.
Spain has a progressive income tax rate, with a maximum of 45%. As a resident, you can deduct your mortgage expenses, up to a maximum amount on your tax declaration.
In some cases, income below around 5,500 euros is exempt from income tax, and under certain circumstances, this limit can go up to 22,000 euros.

Wealth TaxOn January 1, 2008, the wealth tax was reduced to 0%. However, there is still an obligation to file a tax return. Using the Model 214, you can declare IRNR and IP if you only own one property. Until last year, Spanish residents enjoyed a tax-free deduction of €167,129, and above this amount, a percentage of between 0.2% and 2.5% applies.
Property TaxEvery property owner is subject to pay between 0.3% and 0.8% property tax. Each municipality uses a different percentage for the calculation. There is no difference between residents and non-residents for this tax.
Non-Resident Income TaxThe Spanish tax system uses an income type calculated for non-resident owners. This tax does not apply to residents.
If you do not rent out your property, you will pay 19% on 2% of the cadastral value. If you rent your property, you must pay 24% income tax on the rental income. You will need to pay a proportion based on the period in which the property was not rented.
PlusvalíaWhen selling your property, you must pay the tax on the increase in land value. This tax is paid to the local government and is calculated based on the land size, the years you owned the property, and the municipality's area.

Property Sale Capital Gains Tax It is unlikely that a Spanish citizen will pay this tax, as they typically reinvest the capital in real estate. If this new property is cheaper, they will have to pay an 18% tax on the gain, deducting expenses. In the case of selling a second home, even if the owner is a resident, the 18% tax on the profit must be paid. The tax is payable on the difference between the purchase price and the selling price. The selling price can be increased with maintenance expenses, improvements, etc. For the calculation of this tax, an indexation is applied to account for inflation.
Upon purchase, the buyer must withhold 3% of the sale price and pay it to the tax authorities using Form 211. This is an advance payment that is the buyer's responsibility. If the buyer does not pay this 3%, the tax administration will require the buyer to pay it. Owners who had their property before 1994 can apply for a reduction.

Property Transfer Tax If you buy a property from a private individual, you will need to pay a 10% tax on the declared value of the property.
If the purchase is through a company, you will have to pay VAT.
VAT When purchasing land from a developer, you will have to pay 21% VAT. If you buy from a private individual, no VAT is paid, but property transfer tax is applied. When purchasing a new property, including land from a real estate developer, you will only need to pay 10% VAT.
If you purchase the land and then order the new construction, you pay 21% VAT on the land and 10% VAT on the building.
Extras such as swimming pools, garages, terraces, etc., ordered separately are subject to 21% VAT.
VAT for New Construction When buying a new holiday home, the buyer must pay VAT.
For more precise information, we can arrange an appointment with our accountant. Tax advice is individualized and should be designed for each owner separately.