Property purchasing costs Spain
Property purchasing costs Spain
Our step by step guide to property purchasing costs Spain
Purchasing a property in a foreign country can be daunting, but with our easy to read guide this process will make you more prepared on exactly what to do and what are the property purchasing costs Spain.
Establishing a relationship with an agent
Google is a great tool for finding properties, however keep in mind that it is still over the internet and there is still fraudulent websites, so when doing searches stick with experienced, qualified and AIPP registered agencies and make sure all the information on the company is verified by Google and that they have a valid CIF/VAT number registered to their office address. Establishing a relationship with an agent will help you through the process of looking for your property, who can share their market knowledge and give you great advice on the area. If what you are looking for is not in their inventory, they will go out and find the property for you through colleagues in other agencies on a commission-sharing basis.
Choose a Lawyer
It is highly recommended to hire a solicitor in Spain that can speak english to handle all of the paperwork that will be entailed when purchasing your property. Your agent will have a few recommendations for you and once you are in Spain to view the properties it would be beneficial to set up a meeting with a solicitor as it might be more difficult to arrange once you are back home. Keep in mind you will have to give your solicitor power of attorney to avoid travelling to sign at each stage of the purchase process.
Reservation or Holding Agreement
Once you have found your ideal property and you have come to an agreed price with the vendor, then the next step is to reserve and remove it off the market. This is achieved by making a reservation or holding agreement along with a fee of €6000. This reservation agreement will hold the property, removing it off the market while you and your solicitor start the due diligence process. This fee is fully refundable pending due diligence checks.
Private Purchase Contract
Around 30 days after the reservation agreement a private purchase contract will have to be signed and a 10% payment made to the lawyer. The private purchase agreement would provide details such as legal description of the property, purchase price, form of payment, date of completion, date of possession etc. Of course this 10% is only payable upon the full satisfaction from your solicitor that the full due diligence has been completed and that there are no liens and encumbrances. New properties are paid over the construction period, and all payments on account before finishing must be guaranteed by a bank or insurance company. If the property is not finished by a certain date, a purchaser has the right to reclaim the monies paid plus legal interests. There is also a law in place that the property developer has to arrange a ten year insurance policy with respect to any basic building defects with the purchasers beneficiaries.
Documentation and Banking
Once the purchase process has started you will be required to get a NIE (an identity number issued to foreigners) which your solicitor will help get by making an application to the local police station with a copy of your passport and reservation agreement. The NIE will be used by the notary when completing the sale and by the bank when opening an account.
Completion
Once the remaining balance has been paid the seller will issue the public deed of conveyance (escritura) to the purchaser, free of liens and encumbrances. The deed is issued before a Spanish notary and then passed from the notary to the tax office to be assessed for Transfer Tax to see if the property is a resale (second hand property) or assessed for Stamp Duty if the property is sold directly by the developer. It’s then presented to the property registry for inscription (there is a provisional inscription made immediately upon the issuance of the deeds).
Property purchasing costs Spain
Up front expenses (these are estimated prices and excluding VAT) Property purchasing costs Spain
Some of the fees below may be included in your solicitors fee of 1% which of course will depend on the purchase price.
Legal Fees
- These vary between 1% of the selling price depending on the solicitor and the price of the property (it could be more or less).
Power of Attorney
- €80
NIE
- €150 (some solicitors may include this in their 1% fee)
Land Registry Reports and certificates
- €100 (these documents show current legal status of property, encumbrances and any problems with the title deed and the costs of the NIE and the land registry).
Town Planning Certificate
- €400 (this gives a clean bill of health to any urban or any planning issues).
Property purchasing costs Spain
Expenses - Completion
The total official costs involved in purchasing a constructed residential property should be around 10-11% for resale properties or around 12% for new properties (if VAT is paid on the purchase price plus lawyers fees).
Transfer Tax (I.T.P) – Scaled at 8%, 9% & 10%
Payable by the buyer for the purchase of any Real Estate (villas, flats, land, commercial premises, garages), provided the vendor is not a developer or normally trading in the business of resale properties. If the “minimum fiscal value” of the property as per the Regional Government is greater than the price, then the minimum fiscal valuation applies:
- 8% is applicable up to the amount of 400,000€ or 30,000€ in the case of garages except those belonging to the dwelling and with a maximum of two.
- 9% is applicable to the amount between 400,000€ and 700,000€ or between 30,000€ and 50,000€ for garages.
- 10% is applicable to the amount exceeding 700,000€ or 50,000€ for garages.
Notary and Property Registry Fees
The fees as the Land Registry correspond to the registration of the deed of sale in the Land Registry in question. Although this registry is not compulsory to prove ownership, it is however, advisable to have some proof to third parties.
Municipal Added Value Tax (Plus Valia)
This is a tax by the town hall based upon the increase in the index value of a property between the years of purchase to the year of sale. The tax corresponds by its nature to the vendor who is responsible for its payment. Unless otherwise negotiated this can range from a few hundred Euros up to thousands of Euros on a property that has not changed hands in many years with lots of land.
VAT and Stamp Duty – 10% + 1.5%
Villas, apartments or a garage (that is annexed to an apartment or villa) where the vendor is a developer, promoter or habitual trader for brand new properties.
VAT and Stamp Duty – 21% + 1.5%
First sale or resale of parcels of land and for the first sale of brand new commercial premises, where the vendor is a developer, promoter or habitual trader or a company. Please note: In all cases where the vendor cannot pass on the VAT to the purchaser, i.e. where the vendor is a natural private person (not a business developer), whether being a resident or non-resident of Spain, the transfer tax to be paid by the purchaser will only be the I.T.P and VAT will not be applicable.
Property purchasing costs Spain
Expenses - Annual property costs
The fees below will vary on a case to case basis depending on the property size.
Community Fees
- between €200 - €400 pm (these fees are set by the community of owners who appoint a administrator to run a defined set of services. The building is maintained and insured through this process. Fees vary depending on the size of gardens and facilities).
Utility Services
- These cover electricity and water and will vary upon your personal consumption.
Insurance
- As the building is insured by the community, the insurance will be for contents and damage by fire and water etc. It is mandatory that in a communal building owners are insured.
Town Hall Tax (IBI)
This is paid once a year to the Town Hall based upon the capital value estimated by the regional community and the size. Small towns have lower IBI rates to Marbella.
Non Resident Income Tax (IRNR)
This is a wealth tax based on the value of the property which is a percentage of the previous tax. Property purchasing costs Spain 
