Buyers Guide
The Process
First of all: NEVER sign a contract before you have confirmation that the property belongs to the seller and is free of debts and charges.
This can be done by obtaining a Property Registry Report (Nota Simple) from the Property Registry (Registro de Propiedad).
Be sure that the seller has the Title Deed (Escritura de compraventa) and check if everything that is on the plot is actually written in the Escritura. Especially if you buy rural property there may often be title deeds that do not correspond to what you are actually buying.
If you have found your ideal property and agreed on the price a Deposit Agreement (Contrato de Arras) will be signed which is a simple contract which specifies the amount of deposit that is paid by the buyer to the seller. Normally the deposit amounts to 10% of the price of the property if not agreed otherwise. We recommend that the Deposit Agreement specifies that if the buyer withdraws from the transaction the deposit is lost and if the seller withdraws then double the amount of the deposit has to be returned to the buyer.
At the time agreed on by the buyer and the seller a Public Deed of Sale (Escritura de Compraventa) will be signed which is the moment when the new owner takes over the property and the full price is paid. It is obligatory that this deed must be signed in the presence of a Spanish Notary. Together with the original title deed you get the proofs that the property is up to date with all payments like the local property tax and any other utility payment.
With this escritura the property with the new owners can be inscribed into the land registry (Registro de Propiedad) and the appropriate taxes can be paid (see below in the costs section). You should than also be registered as new owner with the Catastro (Catastro) which is the local government´s registry of property and owners.
The Costs
Apart from the actual purchase price of the property there are a number of costs and taxes that you have to pay. On one side there are the costs associated with buying and selling property and on the other hand the costs associated with owning a property in Spain.
Costs of buying and selling property in Spain
Solicitors Fees: If you hire a lawyer (abogado) to help you through the buying process, he normally charges 1% of the purchase price.
Agency fees: Estate agency fees or comissions are paid by the seller. We charge between 2% and 4% depending on where the property is and the type of property.
Notary fees: Notary fees are paid by the buyer and amount to about 0.5% of the declared purchase price plus 16% value-added tax (IVA).
Property Registry Inscription Fees: Fees related to the inscription of the new owner in the land registry are paid buy the buyer and are calculated in relation to the declared purchase price and depend also on the property and the area. They are also plus 16% value-added tax (IVA).
Banking costs: To pay for the property you need a Spanish bank account and probably you have to transfer the money. The money is paid by a banker´s draft cheque. That means there are costs for the transfer as well as for the cheque.
Transfer Tax (Impuesto sobre Transmisiones Patrimoniales ITP): applies if it is a resale property from a private individual. It is a tax buyers have to pay and it amounts to 7% of the declared purchase price. If you buy a newly built property from a developer it is 7% value-added tax (IVA) plus 1/2-1% Stamp Duty.
Retention Tax (Tributación de no residentes): That is a tax the seller has to pay if he is not a Spanish resident. It amounts to 3% (from the first of January 2007, before it amounted to 5%) of the declared purchase price. Normally it is laid down in the title deed that this amount will be withhold by the buyer and that it is the buyers reponsibility to pay the tax within 30 working days.
Capital Gains Tax: The capital gains tax is a tax sellers have to pay the year after they sell their property. It Amounts to 18% (from the first of January 2007, before it amounted to 35%) of the amount gained by the selling, that means the difference between the old Escritura price and the new one, minus the already paid Retention tax.
Local capital gains tax (Plusvalia): A small localised tax based on the increased value of the land since the last sale of the property. The amount depends on how long the seller has owned the property and is paid by the seller.
Costs of owning property in Spain
Apart from the general maintanance costs there are some taxes and fees property owners have to pay.
Property Ownership Tax (Impuesto sobre Bienes Inmuebles IBI): local tax for residents and non-residents, calculated on the valor catastral (the value of the property inscribed in the catastro which is the local government´s registry of property; this value is usually lower than the market value), amounting to 0.4 - 1.1%.
Annual Wealth Tax (Impuesto sobre Patrimonio): a tax residents and non-resident have to pay at the end of each year. For non-residents who only own property in Spain it is mostly based on the value of the Escritura with a tax rate of 0.2 - 2.5%.
Personal Income Tax (Impuesto sobre la Renta de No Residentes IRNR): a tax non-residents have to pay; the amount depends on whether you are renting out your property or not.
If you have any questions feel free to ask us!