Information of Spanish property law and related taxes in Spain
taxes, purchase tax, notary, land register
Buying in Spain
Spain is a member of the European Union and has a strong legal system governing property and land rights. With the help of professional consultants, purchasing a property in Spain is legally safe and at little risk. Citizens from Member States of the European Union (EU) are not subject to any restrictions in purchasing property in Spain. For non-EU citizens, there are some particular details to be considered, but, in principle, the acquisition of property is not a problem.
Tax identification number
(N.I.F. número de identificación fiscal or N.I.E. número de identificación de extranjeros).Everyone who engages in monetary transactions in Spain will need a N.I.E. number. To acquire property, it is first necessary to apply for a tax identification number (N.I.E.) with the Spanish police and then to register this with the tax office. We will be happy to handle these bureaucratic tasks for you.
Preparation and support for the ownership transfer at the notarys office and translation of legal documents are, of course, part of the customer service provided by our trained staff. After the notarial transfer of ownership, the property is registered in the Land Registry office to you, the new owner, so that you can enjoy absolute protection as the propertys owner under European law. We will be pleased to advise you on the tax advantages of a making the land purchase through a Spanish limited liability company (S.L. sociedad limitada). Forming this company is quite straightforward.
2. Finalising the purchase
Spain does not have formal requirements for property purchases. Even oral contracts of sale are permitted and are legally enforceable. It is recommended, however, and is customary, to draft a private, written contract (contrato privado) with subsequent notarisation. This contract will set down all of the key agreements related to the property: the purchase price, the inventory (what is included with the purchase), payment method, the latest possible notarisation date, etc.
Once this private written purchase contract has been signed, usually a deposit equal to 10% of the total price is agreed, which is later deducted from the final payment made before the notary. Only after the notary issues the Escritura Pública de Compraventa do the ownership rights transfer to the buyer. This notarised document is a prerequisite for registration in the Land Registry (Registro de la Propiedad).
The notary and land registration:
Before the official certification, the notarys office will request a title search for the property at the Land Registry. Once this document is sent to the notary, the property is locked from further transactions for five days. If other notaries apply for such a title search, it will be rejected with an appropriate note.
At the notarys offices, both the buyer and the seller will be required to identify themselves and can only be represented by a third party through a power of attorney issued by a notary. The notary reads the prepared purchase agreement with all the data that has been reviewed, such as the cadastral and register numbers, the payment of local property tax as well as the form of payment. Usually, the agreed sum, minus the deposit, is then paid by handing over a certified check issued by a bank. If the property purchased is financed by a bank, this is done by a representative of the bank. Only after both parties and the notary have signed the contract does the right of ownership actually transfer. The notary will send notice of this on the same day to the Land Registry.
3) Acquisition and subsequent costs
The basic rule is: the buyer pays everything, including the notary costs and land registration. You should allow for transaction costs amounting to 10-12% of the purchase price. Excluded from this is usually the capital gains tax on the property (the Plusvalía). Spanish law says that the buyer and seller must agree on the costs for this tax and it is common for the seller to pay it. This tax is calculated individually by each community. It is based on the number of years of ownership and its increase in value and applies only to the property. It is levied at between 16 and 20% of the capital gain realised by the property. Only the gain on the land value is taxed, not any gains on improvements on the property.
Applicable tax rates when buying a property in Spain:
Individuals pay 10% real estate transfer tax (I.T.P. Impuesto de Transmisiones Patrimoniales) when purchasing a property with existing improvements.
When buying a new construction, 10% value added tax (IVA impuesto sobre Valor Añadido) plus 1.5% stamp duty (AJD Actos Jurídicos Documentados) are levied.
Income Tax (Declaración de la Renta)
The Spanish income tax return is as a rule levied only against permanent residents of Spain. If you do not have a residence or a residence permit (Residencia) and live more than 183 days a year in Spain, you will be deemed a resident for tax purposes and will have to pay Spanish income tax on your global income.
Property tax (IBI - Impuesto sobre Bienes Inmuebles) equals 0.4 to 0.7% of the assessed value, depending on the municipality.
The property tax is due each autumn and is based on the assessed value of a property. Tax rates are usually between 0.4% and 0.7% of the assessed value, with assessment done locally according to local regulations.