Please follow this link to search for Luxury Property For Sale in Spain from the Prestige Property Group.
Once you have chosen your property, our guide will help you negotiate the Spanish property buying process.
1. Putting down a Holding Deposit
On finding a property you wish to purchase you will need to negotiate the terms, price and conditions of the sale with the owner. This part of the process is not binding. We would recommend using an independent English speaking legal advisor.
Once a purchase price has been agreed, normally a holding or reserve deposit will be required to ensure the property is removed from the market. The sum required will vary between properties and will be based on the purchase price. A time limit for the pre-agreement to be signed will be arranged and there will also be legal checks to be made.
2. Setting up a Pre-agreement (Contrato privado de compraventa)
The pre-agreement will set out the conditions under which the Buyer and Seller agree to complete the purchase of the property and the price they have agreed upon. Relevant details will generally be included for example the property details, purchase price and the date for completion. A deposit will be required at this point, this will vary, but will generally be 10% of the agreed price. This agreement will include a penal clause if the sale does not go through. If the seller pulls out of the sale your compensation will be double the deposit you have paid, but if you decide not to go through with the sale then your deposit will be lost.
Certain checks will need to be made before signing the contract, checks should be made against the title of the property, mortgage status and if the property has any debts held against it. The planning status should also be looked into. These conditions can be varied by the seller and the buyer and other types of agreement can be made.
3. The Contract (Escritura de compraventa)
Before a non-Spanish purchaser can buy a Spanish property they will need to have set up a Spanish bank account and obtained a Spanish tax number (NIE). The completion will take place in the presence of a Notary Public. This is a Spanish public official, by law the deed of sale must be witnessed by a Notary Public. You will also need your own independent, expert legal advisor to act on your behalf.
On Completion the buyer must pay the balance, that is the price agreed after the deposit has been deducted, plus any other fees on the completion date. Both buyer and seller must sign the Escritura de compraventa contract, (this is the Spanish equivalent of the title deeds). The title deeds (escritura) will be given to the buyer, this will be done in the presence of a Notary Public, they will certify that the transfer has taken place. The tax office will be sent a copy and the property registry will be informed of the transfer.
4. Additional Costs for the buyer
Additional costs for the buyer when purchasing a property in Spain include: 8% I.T.P. (Transfer Tax) up to the amount of 400.000€, 9% from the amounts between 400,000€ to 700,000€ and 10% for any amount higher than 700,000€ or 10% VAT and 1.5% stamp duty for new properties bought from a developer.
Additionally, the buyer pays the notary fees and costs for the inscription of the title deeds in the land registry. In compliance with the Decree of the Junta de Andalucía 218/2005
Spanish Properties Taxation & Costs
The cost of buying a property in Spain will be approximately 11% – 12% on top of the purchase price. The fees charged by solicitors will generally be fixed and will vary according to the amount of work that is required for the purchase. There will also be a land registry fee and Notary’s fees. These will be around €1000 – €2000 dependent on the complexity of the deed.
There is a property transfer tax of around 10% of the purchase price which applies to both re-sales (ITP) and new builds (VAT), this tax will be subject to regional variations. Stamp Duty of 1.5% of the purchase price will be applied to new build properties, but not to previously owned properties.
Once the property has been purchased it will be subject to annual property charges. There is a local tax (IBI), which is payable annually. This is worked out by the Spanish Tax office using the rateable value (catastral) of the land. This will vary regionally and can be ascertained from the local town hall before the purchase.
There is an annual non-resident income tax (IRNR) charge which is payable if you do not reside in Spain, but own a property in Spain. You will be considered by the tax authorities to gain benefit from owning the property and this tax will apply even if it is not rented but is exclusively for your personal use and you don’t have any other sources of income in Spain. The tax base will be calculated on 2% of the land’s cadastral value unless the cadastral has been revised since January 1st 1994, then the rate will be 1.1%, the tax rate will be 24% (or 25% for 2006 and before). The actual value of the property is generally much higher than the cadastral, the cadastral is around 0.2% of the value of the property.
There is a Non-Residents wealth tax (Patrimonio). Every property owner in Spain will be charged (both residents and non-residents), this is a wealth tax which is calculated using the net value of property owners Spanish assets. Various deductions are permitted, such as mortgages and the tax is collected regionally. All assets will be taken into account, including property, art collections, bank funds, stocks etc. There is a tax free allowance of €500,000 for non-residents and €700,000 for residents. This tax is calculated using a sliding scale, it starts at a marginal rate of 0.2% which rises to 2.5%.
If the property is purchased in joint names the wealth tax will be divided equally between the purchasers. (e.g. if a couple bought a property for €900,000 each of them would be count as having €450,000 and would therefore not be liable for the wealth tax).
Please follow this link to search for Luxury Property For Sale in Spain from the Prestige Property Group.
IMPORTANT – Disclaimer :
All information provided is believed to be current and provided free of charge. No liability can be accepted for the reliability of the information and statements made as this is obtained from 3rd parties. We always recommend you take legal advice from a fully qualified Lawyer or Notary before buying a property overseas.