Buying process

What are the stages in the completion process?
The property is selected and the terms agreed on. The property must then be secured. This can be done through private contracts between the two parties. It is customary that 10% of the purchase price is paid at this time. On completion a deed of conveyance, the “escritura publica”,  must be signed by both parties at the Spanish Notary Office. 

Legal

Is it necessary to appoint a notary? Yes. The Notary certifies the deed of conveyance as a registered public document. Who pays the legal fees? In theory, notary’s fees are paid by the seller, unless agreed otherwise. The fees are fixed by law on the basis of a sliding scale. It is advisable to appoint a local lawyer, who speaks the purchaser’s language who will carry out a title search, and advise the purchaser on all aspects of the investment. Lawyer’s fees are between 1-2% of the purchase price of the property. Estate Agents’ fees vary depending on the state or region and also on the type of property. On the Costa del Sol, it is customary for the commission to be paid by the seller. The commission is usually a percentage of the selling price (although a fixed fee may be agreed between the seller and the agent) and this may vary depending on the price of the property.

Tax

Is there a transfer tax? On new residential buildings there is VAT (IVA) charged at 7% of the value, plus 1% stamp duty, and these are paid by the purchaser. However, on urban plots, commercial premises and some garages (not annexed to a home) purchased from developing or trading companies, VAT is 16%. On re-sales there is a property transfer tax set at 7%. In all cases there is also a municipal tax, “plusvalia”, which should not be confused with capital gains tax. In theory, this “plusvalia” is paid by the seller. It is a municipal tax on the increase in value on the land only. However, it may be subject of negotiation between buyer and seller.

Registration

Is it necessary to register the new ownership? Yes, this is done by inscribing the deed of conveyance, “escritura publica” at the land register office. This inscription is the final step in assuring your legal title to the property.

Ownership

Are there different methods of ownership? Apart from individual ownership, a property can be owned by one or more companies. Owning companies can be Spanish companies or foreign companies.

Residence Permits

Is it necessary to have a residence permit?                         
No, it’s not necessary for European Union citizens or citizens coming from the Swiss Confederation. Non-European Union citizens who want to reside permanently in Spain must first obtain a special residence visa from the Spanish Consulate in their home country.  With this visa, they can apply for a residence permit.                                                            

Professional advice

The laws and people’s personal circumstances continuously change. These questions and answers are only general, and we strongly recommend that you contact a professional lawyer or financial advisor. Our office would be delighted to recommend reputable professionals in both fields.

Annual Property Taxes
I.B.I . (Impuesto Bienes Inmuebles)

This is an annual real estate tax levied by the local town hall and is usually 0.85% of the cadastral value (valor catastral). This value is the assessed value for tax purposes and is important because other taxes are based on it as well. When you buy, you want to see the seller’s last receipt for the IBI payment. This contains the value and the exact amount of the tax.

Property Income Tax

This tax is yearly and payable during the following year and only for urban properties The Spanish tax agency attributes to you as imaginary income each year 2% of the cadastral value of your property. It then charges you the income tax rate of 25% on this imaginary income. You can also think of it as one half of one per cent of the cadastral value If your cadastral value was sharply increased after 1994, your imaginary income is only 1,1 per cent.

Property owned by a non-resident company

When the owner of the property is a non-resident company, a special tax has to be paid. Since 1996, the rate applicable is 3% of the cadastral value of the property.

Other taxes and expenses

Rubbish collection tax       
To be paid to the local authorities.

Community Fees                           

These are fees paid to the Community of Owners for services and maintenance of communal areas, when the property is located in a development or condominium apartment building.

The above information is intended only as a guide and is subject to errors, omissions and changes. Their accuracy is not guaranteed.