What are the costs Involved In Purchasing A Property?
There are, in principal, three fees and two taxes to pay when purchasing a property in Spain. As a rule of thumb, you should estimate that the combined total of these amounts to be around ten percent of the purchase price.
- Legal fees: Usually between 1% and 2% of the purchase price whichever is the greater, plus value added tax (IVA) currently charged at 21% on the fee amount.
- Notary fees: the scale is fixed by law and normally range from 300 euros for lower priced properties to 1200 euros for higher priced properties.
- Land Registry fees: Generally about 20% less than notary fees.
THE TAXES- VAT (IVA) or transfer tax (ITP):
ITP applies to resale properties only. IVA applies to off-plan properties. Both are currently at 7%. Stamp duty (AJD) of 1% is payable when purchasing off plan.
- 'Plus Valia' is a local municipal tax and is based on the officially assessed increase in the value of the land since the last time the property changed hands. This tax is normally payable by the vendor, but it may be stipulated that the buyer pays. This tax may range from a few hundred euros to as much as several thousand euros on larger properties with a lot of land. Who pays this will be discussed in the negotiations and in consultation with your lawyer. With a copy of the deed in hand, the seller must go to the City Hall (or wherever local taxes are paid). After filling out the form, the seller will receive in the mail a notice of how much they have to pay. This amount is calculated based on the number of years the property was held, and on the property's valor catastral. Be aware that each town has a different procedure regarding payment of this plusvalia. It's best to ask at the notary's office about this payment.
What is a “Nota Simple”?
With a nota simple from the Property Registry (Registro de la Propiedad), you'll find out if the property is free of debt, if it really belongs to the seller, and if the description of the property matches what the buyer has been told (to avoid surprises about missing square meters).
What do I need to apply for a mortgage?
The documents typically required by a bank are:
Your contract of employment
Your last 3 payslips
Your latest income tax return
Your pre-agreement with the seller
Proof that the property tax (IBI) on the house is paid up.
Details of other mortgages or loans that you may have
All property titles, both in Spain and overseas
Certificate from work authorities (vida laboral), showing your past work history
Records of your current assets (bank/mutual fund statements, etc.)
Prenuptial agreements, if any
Nonresidents: A certificate of nonresidency (form available from the bank)
If self-employed: Local tax on economic activities (IAE)
If self-employed: Records of your assets during the last two years
If self-employed: VAT tax you paid for the last quarter and last year
If you get a mortgage, you will become acquainted with an appraiser (tasador). The bank requires an appraiser to ensure that their loan to you is safe. You will need to pay for the appraiser's work, usually between 300-500 euros. Note that the tasador by law is a licensed architect, so even if you don't need a mortgage, but have doubts about the structural integrity of the house, you might want to hire an appraiser. I
What are some pitfalls in buying a property in Spain?
The property is not registered, most likely because it was illegally built. Many unregistered properties are being sold to foreigners, since foreigners are less likely to check the registration. If you find a bargain, chances are it's not registered. We guarantee that every property we sell will have the necessary paperwork and licences in place.
How can I find out the market price of a property?
For a detailed analysis of the property's value, you should hire an appraiser. They will charge you roughly 300 euros (depending on the value of the property). The appraiser uses two approaches to calculating the value of a property.
- They will measure the property to draw up a floor plan and calculate the square meters, then multiply this by the value per square meters in the area. This value then gets adjusted by a number of factors, such as whether the house can be moved into right away or needs renovation.
- They will find similar properties that have been sold in the area recently.
Regarding price per square meter for apartments, make sure whether you're dealing with m2 construido (constructed) or with m2 util (usable). Construido includes common space: stairs, air shafts, walls, etc. The difference between the two numbers can vary widely, but on average m2 construido is 27% more than m2 util.
If you're getting a mortgage, the bank will require you to pay for an appraisal, though they choose the appraiser. This step comes after you pay the down payment on the property, though, so if your offer is significantly higher than the appraiser's value, you'll lose this down payment if you back out now. For that reason, you might want to pay for your own appraisal before paying the down payment. Some of the largest appraisers:
Sociedad de Tasacion
If I'm buying a spanish property can I save on taxes by creating a company? In some cases, yes.
Example: Stan is a resident of Spain and earns a 100,000 salary from outside Spain. Stan has two choices:
Pay personal income tax in Spain (if he's paying income tax elsewhere then this can be reduced). Stan is in the 42% income bracket, so he will pay around 40,000 euros.
Establish an SL, and the SL pays him. Stan's company pays a corporate tax of 30% (after the first three years, this rises to 35%). However, corporate tax deductions are extensive in Spain. Stan deducts housing, car, and food for 50,000 euros. 30% of the remaining 50,000 euros is 15,000 euros, so the savings are well worth the costs of SL creation and accounting.
With an SL, there are more options: money that Stan doesn't plan to spend in the near future can be put in the company reserves, making it nontaxable. I
What information should I get from my real estate agent?
For a new construction, you should get:A registry listing (nota simple) of the full plot of land.The CIF and full name of the construction company. The construction permit (licencia de obra).
For an existing house, you should get: A registry listing (nota simple) of the property.A copy of the deed (escritura).
Do I have to be personally at the signing of the deed?
If you are not able to appear before the Notary in person for the signing of the Escritura (title-deed) you will need to authorise someone, such as your lawyer, to appear for you by means of a power of attorney. The cost of this will generally be in the region of 100 €.
To have a holiday home, do I have to pay any taxes?
Unfortunately yes. You are deemed a non-resident in Spain if you spend less than 183 days a year there. As a non-resident you will be liable for two annual taxes, wealth tax (patrimonio) and income tax (impuestos sobre la renta). Wealth tax is charged on the value of all your assets in Spain, but is only at a rate of 0.2% in general, so the amount payable is very small. Income tax is charged on the rental income from your holiday home and is charged at 25%. However, if your property is not let out then you will be taxed on a deemed income of 2% of the value of the property.
Do I need a Fiscal Representative?
Until comparatively recently it was necessary for a non-resident who owned a property in Spain to appoint a Fiscal Representative, resident in Spain to deal with his tax affairs. This rule has now been relaxed where the only asset in Spain is a holiday home. However, it is a good idea to employ one as you will find that they are not expensive in general. Without one you will have to attend to completion of the tax returns yourself, and any assessments will be sent to your Spanish address. If they arrive at a time when you are absent from Spain, you may well find that you are out of time to appeal against them if incorrect.
How can I minimise my liability to Spanish Death Duties?
As in the case of a non-resident of Spain it is worthwhile considering owning the property in joint names where appropriate, and passing your respective shares in the property to, for example children. If you pass your share to your spouse you will in effect be paying double Spanish death duties as there may be death duties on your death and in turn on your spouse's death not only on her own share but on the share inherited from you. Each beneficiary has their own tax allowance and accordingly the more beneficiaries there are, the more allowances can be set against the value of the estate. In the case of a Spanish resident, currently 95% of the value of their permanent home is exempted from death duty.
What is the best way to transfer money from abroad?
If you do not live in Spain, and you need to make payments in Euros, you could benefit from massive savings by using a reputable currency exchange company. These companies can help you achieve the best exchange rates making your money go further. They can also offer a range of services that will help protect you against adverse currency fluctuations.