Buying Property in Spain
 |
Our team is renowned for its smooth and transparent handling of transactions. 'Customer Service' is not just an empty slogan for us. All our endeavours are geared towards providing you with complete satisfaction, both during the transaction and after the purchase is complete.
What is important to keep in mind when buying real estate in Spain? The purchase of real estate in Spain is briefly explained in the following:
1. Purchase of real estate in Spain
Spain has its own distinctive legal system, but Spanish real estate legislation can be regarded as watertight. Spain also holds a register of properties. Even considering the special regulations in force, purchasing real estate in Spain can be regarded as low risk.
Citizens of the European Union (EU) are not subject to any restrictions regarding the purchase of property in Spain. In general, they have the same rights as the Spanish. There are some issues which citizens of countries not belonging to the European Union need to take into account, but the purchase of property in Spain is still basically unproblematic for them.
As soon as you are registered as a property owner in the land register, you will receive the same absolute protection with regard to your property as you would in the United Kingdom. There is also the decision to be made whether to buy your property privately or through a Spanish limited liability company (Sociedad Limitada - S.L.). The latter option can bring tax advantages with it.
2. Handling of the purchase
There are no formal requirements regarding the sale of property in Spain: Even verbal contracts may be valid and recognized in law. This is, however, very unusual and it is highly recommended to conclude a sale with a private contract (contrato privado) and to have it notarized.
Private contract of sale
 |
The purchaser gains the ownership of the property when the title deed (escritura pública de compraventa) is handed over. The title deed is a precondition for the registration in the land register (registro de la propiedad). All the necessasary details concerning the purchase are agreed and recorded in the private contract. In particular, this includes the date by which the title deed should have been drawn up which, in turn, fixes the date by which the real estate should be handed over to the purchaser.
Deposit
At the same time that the private contract is signed, the purchaser is required to hand over a deposit. This is usually 10% of the agreed purchase price and will be subtracted from the purchase price when it is paid.
Finance
The time between the conclusion and the notarization of the private contract is used to prepare financing, if required.
Investigation
All properties being offered have already been checked before you view them for existing mortgages and preemptive rights. To make sure you won't have to pay the debts of the previous owner, proof of payment of property tax (IBI) and the local tax due on the property for the previous year are required from the vendor.
Appointment at the notary and land register
Three days prior to the notarial registration of your property, the notary will request an extract from the land register. With the sending of this extract, the property is blocked for five days. If another notary requests the same extract of the land register during this period, the request will be rejected with an appropriate comment attached. At the appointment with the notary, the vendor and the purchaser must identify themselves. Afterwards the notary reads out the prepared document and notes that the purchase price has either been paid before signing the title deed or will be paid at this moment. On the same day, the notary must notify the land registry about the contract of sale. He later sends a copy of the title deed for the registration in the land register.
Payment of the purchase price
The purchase price is due in full at the appointment with the notary to sign the title deed. The purchase price can be paid by financing (a representative of the financing bank issues a cheque), by handing over a cheque certified by a bank, or by payment in cash. It is still the usual practice in Spain to make the purchase price quoted in the title deed lower than the purchase price which was actually agreed. There is no doubt that this is for reasons of tax evasion though this is difficult to prove. This practice does, however, save large amounts in taxes and duties for both the purchaser and the vendor. The Spanish authorities do carry out controls though, so this practice should not be carried too far. In cases where the actual value of the property deviates greatly from the purchase price in the title deed, the tax office can carry out a value determination which can result in a retrospective tax demand and a surcharge for those concerned.
3. Purchase costs and follow-up costs
The basic rule is: The purchaser pays for everything. This often leads to the vendor trying to get the purchaser to pay the increment value tax for which the purchaser is not actually legally liable. Ensure that, as the purchaser, you bear the purchase costs, but do not pay the increment value tax. Spanish law states that the purchaser and the vendor must agree on the division of the costs associated with the transfer of the property.
Increment value tax
As mentioned above, the law states that the vendor must pay this tax if this payment has not been agreed between the purchaser and the vendor. We attach great importance to a proper settlement and we do not support the usual shifting of this tax onto the purchaser.
Therefore, the costs of the whole purchase are:
If you budget for an additional ten percent of the purchase price to cover the purchase costs, you will be on the safe side.
 |
Which taxes result from the purchase?
If you purchase from a private individual (second hand property), you will be liable for the land transfer tax (transmisiones patrimoniales) at a rate of seven percent. If you purchase from a property developer (new building), you will be liable for value added tax (IVA) also at a rate of seven percent.
Cost overview
The acquisition costs, as percentages of the recorded purchase price, consist of the following items:
Land transfer tax 7% or IVA 7%
Fees for the notary and the registration 1% to 1.5%
The ongoing annual costs, as a percentage of the document value of the real estate, consist of the following items:
Wealth tax 0.2%
Income tax 0.5%
Property tax 0.4 to 0.8% (depending on the property in question and the land registry)