GUIDE TO BUYING PROPERTY IN SPAIN - Lucas Fox€¦ · LUCAS FOX GUIDE TO BUYING PROPERTY IN SPAIN 2 Please note te information provided is not to e intended as a sustitute for professional

G U I D E TO

B U Y I N G P R O P E R T Y I N S PA I N

w w w . l u c a s f o x . c o m

L U C A S F O X G U I D E T O B U Y I N G P R O P E R T Y I N S P A I N 2

Please note the information provided is not to be intended as a substitute for professional legal advice. Laws and tax rates are subject to change so please consult a tax specialist or the tax authorities for the latest information.

I N D E X

T H E S T E P S T OB U Y I N G A P R O P E R T Y I N S P A I N

W H A T A R ET H E C O S T S I N V O L V E D ?

O N P U R C H A S E A F T E R P U R C H A S E

A D M I N I S T R A T I V E R E Q U I R E M E N T S

A D V I C E F R O M T H E E X P E R T S

1 . FO R M A L O F F E R A N D G O O D

FA I T H D E P O S I T

2 . T H E P R I VAT E A R R AS

CO N T R AC T

3 . CO M P L E T I O N O F

T H E P U B L I C D E E D O F

CO N V E YA N C E

1 . W H E N B U Y I N G A N E W

B U I L D P R O P E R T Y F R O M A

D E V E LO P E R

2 . W H E N B U Y I N G A R E SA L E

P R O P E R T Y F R O M A P R I VAT E

I N D I V I D UA L

3 . S O L I C I TO R ’ S F E E S

4 . N OTA RY P U B L I C ’ S F E E S

A N D L A N D R E G I ST RY F E E S

1 . LO C A L TA X E S

2 . CO M M U N I T Y F E E S

3 . N O N - R E S I D E N T

I N CO M E TA X

4 . W E A LT H TA X FO R

N O N - R E S I D E N TSPa g e 3

Pa g e 8

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The first step when you find a property that you want to

buy is formulating an offer in writing and putting down a

good faith deposit. This deposit is held by the real estate

agency and the amount varies depending on the property

price as well as other factors. Your Sales Agent can

advise you of the exact amount, based on the property

of interest. If your formal offer is accepted and signed by

the Seller then it becomes a reserve agreement and the

property is taken off the market. The reserve agreement

will provide conditions and timelines for the next contract.

We always advise our clients to use a solicitor for the

purchase and can recommend suitable lawyers who speak

your language.

FO R M A L O F F E R

A N D G O O D FA I T H D E P O S I T

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Within the Private Arras Contract there is usually a clause

stating that should the Seller decide to withdraw from

the sale the Buyer is entitled to receive double the

downpayment as compensation and should the Buyer

decide to withdraw from the sale the downpayment

amount is lost.

Prior to entering the contract, due diligence checks will

be carried out regarding legal and technical details for the

specific property.

This is a simple agreement between the Buyer and the

Seller in which the Seller agrees to sell the property and

the Buyer agrees to buy the property at the price agreed.

The Private Arras Contract (Contrato privado de arras) will

contain all the relevant details such as a description of the

property, the purchase price, the payment structure and

the completion date.

At this stage the Buyer will be expected to make a

downpayment, which is normally paid to the Seller’s bank

account and is usually 10% of the agreed purchase price,

but this amount can vary.

On the completion date the balance of the purchase price

(sales price minus any amounts paid to date) must be paid.

The Seller and Buyer then sign the Public Deed of

Conveyance (Escritura de compraventa), which is

equivalent to the title deeds of the property.

The Buyer is then issued with the Public Deed of

Conveyance in front of a Notary Public, who certifies

the property transfer, and a copy of the Public Deed of

Conveyance will be passed to the Spanish Tax Office and

on to the Property Registry.

The Notary Public in Spain is a public official who is

required to witness the deed of sale. However, an expert

and independent legal advisor should be used to protect

your own interests.

T H E P R I VAT E A R R AS CO N T R AC T

(CO N T R ATO P R I VA D O D E A R R AS )

CO M P L E T I O N O F T H E P U B L I C D E E D

OF CONVEYANCE (ESCRITURA DE COMPRAVENTA)

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1. WHEN BUYING A NEW BUILD PROPERTY FROM A DEVELOPER

VAT (IVA, Impuesto sobre Valor Añadido) and Stamp

Duty (AJD, Actos Jurídicos Documentados) apply.

VAT and Stamp Duty are applicable for residential

properties that have never previously been occupied

and building plots of land. VAT is a national tax that

does not vary depending on the property’s location

(with the exception of the Canary Islands). At present

VAT is 10% of the purchase price for new residential

properties (villas, apartments etc) and 21% for

building plots of land. Stamp Duty is a percentage

of the purchase price. This varies depending on the

autonomous region where you buy, between 0.5% and

1.5% (e.g. in Catalonia it is 1.5%).

2. WHEN BUYING A RESALE PROPERTY FROM A PRIVATE INDIVIDUAL

Transfer Tax (ITP, Impuesto sobre Transmisiones

Patrimoniales) applies. This tax applies if it is a resale

property that has been used before. The general ITP

rate varies from region to region, between 6% and 11%

(e.g. in Catalonia it is 10% for properties with a value of

up to €1 million and 11% thereafter).

3. SOLICITOR’S FEES

It is not obligatory by law to seek legal assistance for

a property purchase but it is strongly recommended

to do so. The fees can vary due to the amount of work

required by the solicitor.

4. NOTARY PUBLIC’S FEES AND LAND REGISTRY FEES

The fees vary depending on the purchase price and

complexity of the deed.

W H A T A R ET H E C O S T S I N V O L V E DO N P U R C H A S E ?






1. LOCAL TAXES (IBI, IMPUESTO SOBRE BIENES INMUEBLES)

Local taxes are calculated on the cadastral value (valor

catastral) of the land assigned by the Spanish Tax Office.

It is advisable to ascertain annual local rates for a property

before purchase as this differs depending on the region.

Your Sales Agent can advise you of the exact fees for a

specific property.

2. COMMUNITY FEES

Community fees are only applicable when purchasing

an apartment or a terraced house within a community

of neighbours, not when purchasing a detached house.

Community fees are paid monthly or quarterly and

depend on the expenses of the community of the property

(which may include expenses for a concierge service, lift

maintenance, cleaning, gardening etc). Your Sales Agent

can advise you of the exact fees for a specific property.

3. NON-RESIDENT INCOME TAX (IRNR, IMPUESTO SOBRE LA RENTA DE NO-RESIDENTES)

Non-resident income tax in Spain is paid if you are not a tax

resident in Spain and applies if you own a property in Spain.

3.1. THE PROPERTY IS EXCLUSIVELY FOR PERSONAL

USE AND YOU DO NOT RENT IT OUT

Although you do not earn an income from the property,

in the eyes of the Spanish tax authorities you still derive

a benefit from owning a property in Spain and therefore

have to pay an imputed annual income tax. The base for

the applicable tax rate is generally 2% of the cadastral

value of the property. The cadastral value of the property

is much lower than the commercial value. The tax rate is

19% for EU residents and 24% for non-EU residents.

3.2. YOU RENT OUT THE PROPERTY AND

THEREFORE PAY TAX FOR THE PERIODS DURING

WHICH IT IS RENTED

The base for the applicable tax rate is the income that

you receive from renting out the property. Various

costs can be deducted if you are a tax resident in the

European Union. For example, possible applicable

deductions include costs for property management and

the maintenance of the property. If you have no other

source of taxable income in Spain the tax rate is 19% for

EU residents and 24% for non-EU residents.

W H A T A R ET H E C O S T S I N V O L V E DA F T E R P U R C H A S E ?







4. WEALTH TAX FOR NON-RESIDENTS (PATRIMONIO)

Current legislation prescribes that whoever owns

property in Spain (residents and non-residents alike)

has to pay an annual wealth tax based on the net value

of their assets in Spain after permitted deductions,

such as mortgages. Residents must also include all

worldwide assets.

The base for the applicable tax is the net value of your

property and other assets in Spain (stocks, bank funds,

art collection etc) with a large tax-free allowance. This

allowance can vary between regions (e.g. in Catalonia

it is €500,000 for residents and €700,000 for non-

residents). The tax rate works on a sliding scale with

marginal rates starting at 0.2% and rising to 2.5%. If

two clients are purchasing the property the wealth tax

is divided by two (e.g. €800,000 property purchase by

a couple would count as €400,000 each and the tax is

therefore not applicable).

W H A T A R ET H E C O S T S I N V O L V E DA F T E R P U R C H A S E ?







A D M I N I S T R A T I V E R E Q U I R E M E N T S

PRIOR TO COMPLETION NON-SPANISH BUYERS WILL NEED A SPANISH NIE

(TAX IDENTIFICATION NUMBER) AND A BANK ACCOUNT IN SPAIN

You are required to obtain a Spanish NIE (Número de Identidad de Extranjero), a

tax identification number. The NIE can be obtained and organised through a Power

of Attorney if you do not have time to attend an appointment and collect all the

required documentation. It is best that you do this at the very beginning of your

property search to avoid unnecessary delays or missing out on specific properties

further along in the process.

A Spanish bank account is required to administer all payments. Bear in mind that

the Spanish bank will need you to provide documents that certify the origin of the

funds you will be using for the purchase, so try to make sure you find out as early as

possible about your bank’s exact requirements.






A D V I C E F R O M T H E E X P E R T S

Karen Storms Rod Jamieson

Joanna Papis Shirley Rhodes

International Sales Manager Head of Sales & Operations

Head of New Developments Head of Rentals & Property Management

“If you want to finance your purchase, it is best to start looking at different banks, rates and

possibilities at an early stage. Your Sales Agent can recommend mortgage brokers who can

save you time and energy to find the best deal. Some of them only charge a fee once the

mortgage has been approved and the transaction closed.”

“Listen to your Sales Agent’s advice when deciding to make an offer on a property, as their

experience and in-depth knowledge of the property market will help you decide whether it

is advisable to negotiate or not.”

“Make sure you prepare everything in advance as there is nothing more frustrating than

losing a property because the NIE wasn’t obtained in time, a Spanish bank account

wasn’t opened in time, the funds still had to be transferred to the Spanish bank account or

your finances were not in order. In a multiple offer situation or for a property that has very

recently entered the market it is essential to be prepared in order to seal the deal.”

“It is a good idea to contract a legal advisor even prior to having selected the final

property of your choice. He / she can explain and prepare the necessary steps from a legal

standpoint and prepare all the administrative requirements for you. Often coordinating a

Power of Attorney so that your solicitor can act and sign on your behalf will make a difference

in being able to commit and will help you agree on conditions and secure a property.”

“Be aware that certain cultural customs may be very different to those in your own country.

It is very important to remember this throughout the entire purchase process to avoid

unpleasant surprises or misunderstandings. The way of handling the purchase is often

different, hence the importance of your Sales Agent who will be able to guide you throughout

and give you the best advice for each step and decision.”

“It is also advisable to use our Property Management Service. Whether you have a single

property or an expanding portfolio with complicated management requirements, this service

will give you peace of mind knowing that our knowledge and expertise can protect you and

your investment.”



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GUIDE TO BUYING PROPERTY IN SPAIN - Lucas Fox€¦ · LUCAS FOX GUIDE TO BUYING PROPERTY IN SPAIN 2 Please note te information provided is not to e intended as a sustitute for professional