The purchase of real estate in Spain
Buying property in Spain should be relatively straightforward, but we would always recommend that you engage the services of a reputable agent, lawyer and notary.
The property is selected and the terms agreed on. The property must then be secured. This can be done through a private contract 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 pública’, must be signed by both parties at the office of a Spanish public notary. The notary’s duty is to certify the deed of conveyance as a registered public document.
Notary’s fees are paid as stated by law, 80% by the vendor and 20% by the purchaser unless otherwise agreed, although in practice it is customary that the purchaser pays for the full amount. 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; the lawyer will carry out a title search, and advise the purchaser on all aspects of the investment. Lawyer’s fees are around 1% of the purchase price of the property.
Notary and registry fees are set by law and according to a sliding scale. Together, both fees amount to approximately 1.5% of the purchase price.
Estate Agent’s Fees
Estate agent’s 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.
Overall, taxes, legal fees and expenses directly related to the purchase of a completed residential property amount to approximately between 10% -11%.
On new residential buildings, direct from the developer or builder, there is VAT (IVA in Spanish) charged at 10% of the value, plus 1.5% Stamp Duty, these are both paid by the purchaser. Whereas on commercial premises and garages, not annexed to a home, and parcels of land purchased directly from a developer or builder VAT is 21% plus 1.5% Stamp Duty. On re-sales there is a property transfer tax according to a sliding scale, as follows:
|Tax rate||All re-sale properties||Garages not annexed to properties (2 maximum)|
|8%||Up to 400.000€||Up to 30.000€|
|9%||400.001€ – 700.000€||30.001€ – 50.000€|
|10%||From 700.001€||From 50.001€|
However, there are certain exceptions for residents, professionals and companies:
- 7% transfer tax on the acquisition of a permanent home when the real value (normally the purchase price unless it is under the market value, being the minimum value the updated cadastral value multiplied by the rate of the municipality where the property is located) does not exceed 130.000 euros. The rate is reduced to 3,5% if additionally, the purchaser is not over 35 years old, or 180.000 euros when the property is to be used as the purchaser’s permanent home and the purchaser is certified as having over 33% disability.
- 2% when a property is purchased by an individual or company whose business activity is classified within the real estate sector for further resale, and it is specified in the purchase title deed. The new owner will have a period of 5 years to sell the property. If not sold within this time frame, the owner will have to pay the difference to compensate up to the normal rate applicable.
- If both vendor and purchaser are companies or self-employed individuals subject to IVA (VAT), and they waive their right to IVA exemption, there will be a ‘Taxpayer investment on VAT’, and in this case there will be 0% IVA and 1,5% Stamp Duty. In short, second and subsequent real estate transactions between companies/self-employed individuals are only subject to 1,5% Stamp Duty.
On 28th April 2021 the regional government in Andalucía approved the reduction of Transfer Tax to a flat rate of 7% for all resale properties within Andalucía instead of the previous range between 8 to 10%, as well as Stamp Duty for new build properties which is reduced from 1,5% to 1,2%. The new rates will only be effective until 31st December 2021.
In all cases there is also a municipal tax, ‘Plusvalia’ (which should not be confused with Capital Gains Tax which the seller is liable for when the property is sold). This ‘Plusvalia’ is paid by the seller, unless otherwise agreed. It is a municipal tax on the increase in value on the land, from the date when it was purchased until it is sold.
Since January 2013, proof of payment of the Plusvalia must be provided in order to register the new ownership. Since 2017, the method to calculate the taxable base of this tax was declared null by the constitutional court for cases in which the property is sold at a loss or, more recently, in cases in which even selling at a profit this tax is higher than the profit. It is recommended to obtain professional advice in those cases.
If the purchaser applies for a mortgage on the property, there will be approximately 3% additional purchasing expenses.
It is necessary to register the new ownership by inscribing the deed of conveyance, ‘escritura pública’, at the Land Register Office. This inscription is the final step in assuring your legal title to the property.
Besides individual ownership, a property can be owned by a company. Owning companies can be Spanish or foreign companies. You can find more information about buying a Spanish property through a company here. In any case we recommend seeking professional advice.
N.I.E. (Foreigners’ Identification Number)
Any non-Spanish buyer must apply for an NIE number from the local police authorities. This number is required for any property transaction (buying, selling, utilities, insurance, etc.).
Annual Property Taxes and Expenses
- IBI (Impuesto Bienes Inmuebles – Real Estate Tax) – This is an annual real estate tax levied by the local Town Hall and is at present a percentage of the cadastral value (‘valor catastral’). It may vary depending on the municipality where the property is located. As a reference, the tax scale goes from 0.3% to 1.3% of the cadastral value of the property. The cadastral value is the assessed value for tax purposes and is important because other taxes are based on it as well. When you buy, you need to see the seller’s last receipt for the IBI payment. This contains the value and the exact amount of the tax.
- Garbage Tax – To be paid to the local authorities for the amount stipulated by them.
- Community Expenses – These fees will be paid to the Community of Owners for the services and maintenance of the common areas when the property is located in an urbanization or condominium. At the signing of the deed of sale at the notary’s office, these fees must be up to date and the owner must provide a certificate issued by the community of owners, stamped and signed by the administrator. The cost of this certificate will be charged to the owner.
Annual taxes on individuals
- Non-Resident Property Income Tax
This is an annual tax, due to be filed and paid from the year after the property is purchased. The Spanish tax agency takes the view that all non-resident property owners derive financial benefit from their property and therefore assign to each property an imputed income each year of either 1.1% or 2% of the cadastral value of their property.
If the property’s cadastral value has been revised in the previous ten years, this imputed income is 1.1 % of the cadastral value, used as taxable base to calculate the Non-Resident Property Income Tax. If the cadastral value was revised over ten years ago, then the imputed income to be taxed on is 2% of the cadastral value.
Property owners who are resident in countries outside the European Union, Norway and Iceland will pay 24% on the taxable base (be it 1.1% or 2% of the cadastral value).
Property owners who are resident in another member state of the European Union, Iceland and Norway pay 19% on the taxable base. This is a reduced rate applied since 2016.
If you are renting your property to a third party, residents in the EU, Iceland and Norway are taxed on a quarterly basis on the net income (deducting certain expenses) and at a tax rate of 19%. The rest of non-residents are taxed on gross income (no expense is deductible) and the tax rate is 24%. In this case and during the rental period you would not be liable to the above described tax on imputed income but on real income.
- Resident Income Tax
Spanish tax residents are subject to taxes that differ from those for non-residents. They take into account the individual’s work-related income, real estate assets, tax benefits, etc. Please seek further professional advice due to the many relevant factors that can vary according to the individual circumstances.
- Wealth Tax in Andalusia
Wealth tax is applicable on the net value of Spanish assets for non-residents and worldwide assets for residents. This is a tax for individuals exclusively and each individual is a separate taxpayer. The net value of a Spanish property is reduced by mortgage debt on the property. There is a 700.000 euros exemption (for residents and non-residents alike) for owner/taxpayer. The tax rate for 2021 ranges from 0.22% to 2.76%.
The value of the real estate assets will be considered to be the highest value of the following: the cadastral value, the purchase price or the value set by the Administration for other taxes.
Tax residents in Spain have additional benefits, according to their individual circumstances.
Property owned by an off-shore company
When a property is owned by a corporate structure situated in a jurisdiction that qualifies as tax haven for Spain, a 3% annual tax on the cadastral value is to be paid.
It is not necessary to have a residence permit to buy a property in Spain unless you are planning to live in Spain for over 183 days per calendar year. In that case, you need to apply for fiscal residence in Spain.
Non-European Union citizens who want to reside permanently in Spain must obtain a special residence visa from the Spanish Consulate in their home country. With this visa, they can apply for a residence permit.
With an aim of enticing investment into Spain, the government decided in 2013 to give the promise of a residency permit valid for 2 years (extended to 5 years in 2015 and including the right to work in the country) and a path to citizenship in the longer term, to anyone willing to invest at least €500,000 in Spanish property. Alternatives to real estate investment include depositing one million euros in a Spanish bank account, investing in Spanish company shares to the same amount or two million euros in Spanish public debt, or indeed bringing a job-creating project to the country.
It may be renewed indefinitely as long as the investment is maintained. During one year the investor may live or not in Spain, without jeopardizing his residence visa. To maintain and renew this visa, the applicant must only enter Spanish territory at least once a year.
Information last reviewed in April 2021
Laws and regulations are subject to change, and so are the personal circumstances of each individual. This has been compiled as a guide for potential buyers of property in Spain, it does not seek to provide or replace legal advice which you should obtain from a qualified professional, nor is it intended to have any contractual effect.