Buyer’s Guide

When buying a property there are many factors to consider other than just the purchase price. This guide should give you a good indication of your purchase costs, running costs for the property and things you need to take into account before making any offers.

PURCHASE COSTS:

Transfer tax (I.T.P):

Between 8 – 10%

Paid by the buyer when purchasing any property (villas, apartments, plots, commercial premises & garages).
VAT For brand new properties where the owner is a promoter, the VAT is 10%. For general resale properties the VAT is 21%.
Stamp Duty 1.5 – 2%
Notary & Land Registry Fees Approximately €2.000 depending on the complexity of the sale.
Legal Fees This is a standard fee of 1% of the purchase price.
 

Having said this, we recommend clients calculate 10-11% purchase costs when purchasing a resale residential property, plus legal fees.

Legal Representation

We always advise our clients use a lawyer to represent them when purchasing a property in Spain and we have trustworthy lawyers at hand which we can recommend. A purchaser should ideally instruct a lawyer as early as possible, even before signing a reservation or paying a preliminary deposit.

Once you have found a property you are interested in, your lawyer will carry out a land registry search to confirm ownership, boundaries and whether there are any mortgages or encumbrances on the property. He will also check the property has the necessary planning permissions, first occupation license and the surface area is correct in the Catastro (Registry office). If the property is part of a Community, he will check the Community rules and regulations and inform you if there is anything to be alarmed about or take into account.

Once the sale has taken place, he can also assist you in changing the utilities onto the your name and providing the Community with the your details.

Ownership

Property can be owned by an individual, a Spanish company or a foreign company. When purchasing a property, it is important to ask whether it is owned by a private individual or a Company as if the property is in a holding Company which only owns the property in question, you may be able to purchase the Company, thus saving on taxes.

Residency Permits / NIE

It is not necessary to have a residency permit in Spain unless you are planning to spend 183 days a year here. However, you will need to have a NIE (Foreigner’s Identification Number). Any non-spanish buyer must apply for a NIE number at the local Police Station. Your lawyer can help you organize this and it should take no longer than 48 hours. It is necessary for all property transactions.

THE BUYING PROCESS

Once you have found a property which you are interested in and agreed the terms with the owner, with the help and intermediation of your agent, then it is important that you secure the property so that the owner cannot enter into negotiations with any other parties. To secure the property, a private contract is signed between yourself and the owner and you either pay a reservation or 10% of the purchase price (which is more common practice). You then have a period of time until completion, depending on whether you require finance or not. On completion you will sign an ‘Escritura Publica’ in a public notary and receive the keys to your property.

It will take a few weeks before the property is registered onto your name but from the moment you leave the Notary, the property is officially yours.

Agency fees

Agency fees are paid by the Seller of the property, not by the client. It is normally a fixed 5% + IVA of the sales price. However, most sales are done by 2 agents collaborating, which would mean that typically each agent gets 2.5% on a sale.

Non Resident Property Income Tax

Spanish law requires that non-resident owners of property in Spain have to pay Spanish income tax even if they have no Spanish earnings (such as rental income).

This is due from the year after a property is purchased and calculated as 2% of the Cadastral value of the property purchased. This 2% is subject to a 24,75% tax rate.

If you are renting out your property, then you are already paying 24,75% tax rate on your rental income and would therefore not need to pay the Non Resident Property Income Tax mentioned above.

RUNNING COSTS FOR A PROPERTY

Community fees

Community fees are the monthly fees a property has; each owner is obliged to participate in the expenses resulting from the upkeep of the communal areas. The amount will depend on the facilities and services a community offers. Most communities of apartments and townhouses offer communal pool and gardens, other more luxurious developments may offer indoor facilities such as a spa, gym, pool, etc. which will result in higher community fees.

Community fees are usually paid quarterly in advance.

Property Tax & Refuse collection Tax (known as IBI and Basura)

Both these taxes are paid yearly to the Townhall. The Property tax is calculated as a percentage of the Cadastral Value of the property, and is anywhere from 0,3% to 1,3% depending on the municipality where it is located. It is important to ask the Seller to provide copies of these before you purchase, so you know what your costs will be for the year. The refuse collection tax is a very small amount.