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 agent
The real estate agent in Spain is paid by the seller. Prices are the same at the estate agency and the promotor. However, the big difference lies in the fact that the real estate agent will show you those objects which are most suitable to your wishes and budget, while on the other hand the individual developers can only offer their own products.
Furthermore, your own real estate agent can assist you with the arranging of financing and you will be guided by a legal advisor during the purchase procedure.
The process of buying in Spain differs essentially in a number of aspects from buying in the UK or other countries. For example, in Spain the possibility exists to take an option, however for the deal to be legitimate, an amount for reservation needs to be paid. In most cases, this amount is approximately 3000 euros. If you don't turn the option into a final purchase within a 30 days, you will loose the amount for reservation.
The purchase agreement often is a combination of a reservation document and a buying agreement. This means that if you accomplish the option and the first mentioned payment in the agreement is fulfilled, the option automatically will become a definite buying agreement.
Before you are going to sign for the public title deed for your property in Spain you are obliged to apply for a fiscal number, called NIE number (Número de Identificación de Extranjeros). You will also need this number later on for doing your future tax declarations. Your legal adviser can help you with the application for the NIE number.
Notary fees and register fee
With the signing of the deeds you have to take into account approximately 3% of the registered purchase price for notary costs, registration and the presentation costs. The notary and Register fees will be charged by the notary by means of estimation. As soon as the property is registered in the Property Register you will receive a specified invoice and the possibly too much or too little calculated amount will be rectified. In general, we advise our clients at purchase to bear in mind approximately 12-13% extra costs (including VAT/transmission tax) so that disappointments afterwards will be avoided.
In case you want to use a mortgage for the purchase of a property in Spain, there are several options. There are numerous possibilities, even till 70% of the purchase price and with a running time up to 30 years. To provide a mortgage in Spain a valuation of the property has to be made, prove of income and a credit report has to be shown.
Remaining costs and taxes
Of course in Spain you will also have costs like the public utilities, communal taxes and in most cases also community fees. The community fee depends on the amount of services and utilities in your Community, of which you and your fellow owners have the use and /or the possession. Think about community parks and gardens, pools and other facilities. But also corridors, galleries and elevators are part of the services.
Income tax and wealth tax are totally depending on your possessions and possible income in Spain.
Note: Non-residents have the obligation to appoint a fiscal representative to arrange their taxes; this can be a person or a company, but most likely this will be an administration office that is specialized in these matters. You will pay approximately 150 euro for a standard declaration, being a non-resident. These kind of offices can receive your tax mail, make all the declarations and payments and answer all the questions referring to your property in Spain. On this way you won't have to worry about the fiscal part of your property and you can use your time enjoying your holiday home in Spain.
With the above explanations we hope to have given you more intelligibility concerning the purchase procedure of a property in Spain. Please do not forget that for yourself it is quite an event, but for us it is our daily routine and we will guide you through the procedure as pleasant as possible.
Fiscal information about the purchase of your (second) home
B&L Promotions Costa Blanca informs you about the fiscal items when purchasing a second home in Spain. Any foreigner owing a property in Spain has to pay tax. The average buyer is not familiar with the sort and the height of tax to be paid and where they have to pay them. Below you find a short list of the taxes where you have to count with:
- Income tax
- Wealth tax
- Property tax
- Income tax for non residents
- Tax on capital increase of the plot
- Capital gains tax
- Transmission tax
Income Tax Residents (Impuesto Sobre la Renta de las Personas Fisicas - IRPF)
Any foreigner being resident in Spain has to make a tax declaration about his personal obligations and worldwide income. If you reside in Spain for over 6 month per year you will become a fiscal resident, even without having applied for the residence certificate.
But there are some sorts of income (like state pensions for disability) which are exempted for income tax. Spain has agreements with many other countries stating where to pay the different sorts of tax.
Spain counts with a progressive income tax percentage with a maximum of 45%. Being resident you can deduct the cost of your mortgage up to a maximum from your income tax declaration.
In some cases, the income below about 5.500 Euros are exempted for income tax and under certain circumstances this limit is 22.000 Euros.
Wealth Tax (Impuesto Sobre Patrimonio)
Per 1st of January 2008 the wealth tax has been lowered to 0%. So there still is an obligation to produce the tax declaration. Through the model 214 one can make a declaration of IRNR and IP in case you own only one property. Until last year Spanish residents had a taxation free allowance of 167.129 € and above this there is a percentage of 0,2% up to 2,5%.
Property Tax (Impuesto Sobre Bienes Inmuebles)
Each owner of property is obliged to pay between 0,3 and 0,8% property tax. Each municipality uses a different percentage. For this tax there is no difference between residents and non-residents.
Income Tax For Non Residents (Impuesto sobre la Renta de No Residentes)
The Spanish tax system uses a kind of computed income for non resident property owners. This does not count for residents. In case of not renting out your property, you will have to pay 19% over 2% of the cadastral value. In case you are renting out your property, you have to pay 24% of rental income tax. You will have to pay a proportion over the period that the house was not rented out.
Tax on Capital Increase of the Land (Plusvalia)
At selling your property you have to pay tax on the increase of value. This tax is payable to the town hall and is calculated by the plot size, the amount of year that the property was owned by you and the area of the municipality.
Capital Gains Tax (Impuesto Sobre Incremento de Patrimonio de la Venta de Bien Inmueble)
A Spanish citizen will unlikely pay this tax as he normally reinvests the capital in real estate. In case this new property is cheaper, he has to pay 18% on the benefit, deducing several costs. In case of selling a second home, even if the owner is a resident, a capital gains tax of 18% over the benefit has to be paid. The tax has to be paid over the difference between the purchase price and the sales price. The sales price can be incremented with expenses for maintenance, improvements etc. For calculating this tax an indexation is used to look after the inflation.
At the purchase, the buyer has to retain 3% of the selling price and pay this to the tax office through a form with the number 211. This is a pre-payment which is obligation of the purchaser. In case the purchaser does not pay this 3%, the tax office will oblige the purchaser to pay for this. Owners who had their property before 1994 can apply for a reduction.
Transmission Tax (Impuesto de Transmisiones Patrimoniales)
In case you purchase from a private person, you will have to pay 10% transmission tax over the declared value of the property.
Buying from a company you will have to pay VAT.
Purchasing land from a promoter you will have to pay 21% VAT. Purchasing from a private person you do not pay VAT but transmission tax. Buying a new property including the land and from a promoter/developer you will have to pay only 10% VAT. If you purchase the land first and later you order the new build, you pay 21% on the land and 10% on the building. Extras like pools, garages terraces etc, ordered separate are charged with a 21% VAT.
VAT at new built
At the purchase of a new holiday home, the purchaser has to pay VAT (IVA).
For more exact information we can make an appointment for you with our accountant. Fiscal advice is individual and will have to be designed for each property owner separately.