If you decide buying a property in Spain is important to know, that “things go different over here”. The country is divided into 17 autonomous communities, that have specific habits and different tax systems. Below you´ll find a summary of the most important things you should be aware of.
In general, the properties for sale are offered with a net price for the seller. To calculate your total disbursements, you should count with the following costs.
1. Purchase Costs:
If you buy from a private person, you must pay the transfer tax, at this moment 10% in most of the Spanish regions, if you purchase through a project developer, the tax rate would be 10% VAT, plus +/-1,5% stamp duty. The taxes will be calculated over the official transfer price that will be declared in the purchase Deed.
Notary and Registration costs
After the official Deed is signed at the Notary office, it must be registered in the so called REGISTRO DE LA PROPIEDAD (Land Registry). For these two items, you should calculate approximately 1,5% of the buying price. The Notary will require an estimation/up-front payment, which will be adjusted with the real costs as soon as everything has been registered.
2. Yearly costs
IBI (Councel Tax)
This is a local or municipality tax, to be paid every year. Although the amount will vary in each village or town, you should calculate with approx. ½ % of the cadastral value of the property. The cadastral values in Spain are still very low.
For instance: For a purchase of approx. 250.000 euros and depending of the cadastral value, you should count on 500-750 euros per year. It is recommendable to prepare an automatic payment through your Spanish bank accoun
House owners Society
In case you buy an property within a building or complex, you will automatically become member of that society. According to the statutes, you are obliged to pay a yearly service charge, for maintenance, general insurance, lift, administration fee etc.
According the Spanish law, you are expected to obtain a private use of 1,1- 2% of the cadastral value of your property. Over this amount there will be 19% applied (current rate in 2018) per year. In case the property is rented, the taxes will be 25% of your rental income, but you can deduct all related expenses before paying taxes. As a non-resident, you must present your tax declaration, the so called 210 form, every year.
For instance: Property of € 250.000, with a cadastral value of €150.000, the yearly cost would be between € 315-€570.
Capital taxes (patrimonial taxes)
To be paid for properties starting €600.000.
Financing / Mortgage in Spain:
Non residents in Spain could also apply for a mortgage. En general the spanish bank would finance up to 60/65% of the purchase value. For instance if you would purchase an apartment of €300.000.-, the schedule could be as follows:
Purchase price: 300.000 euros
Purchase costs: 39.000 (taxes, notary, lawyers, mortgage setup costs etc.)
Total: 339.000 euros
Mortgage: 180.000 euros (60% of purchase value)
Private funds: 159.000 euros
Actually we have different options available in Spain, either on a fix interest rate (for instance 10 years at +/-2%) or variable rates depending the economical situation.
Banks normally charge a kind of set-up/opening fee of 0,5-1% of the mortgage + the corresponding taxes (1,5% approx)+ the expenses of the notary Deed and the valuation report.
For the purchase:
• Additionally, in Spain you would need a so called NIE number (identity number for foreigners) to be able to purchase a property. We could organize the necessary papers for you.
For the mortgage:
• Latest tax declaration, preferrably in spanish.
• Letter of recommendation of your home bank.
• Solvability document, issued by an official institute in you country.
• Other additional documents to justify that you are able to pay for the monthly payments, during the period of the mortage.
An example of the various steps during the purchase process
After you have visited various properties, either on with your personal advisor or through a real estate agency, you decide to start the negotiations with the seller of the property.
Either you accept the asking price of you make an official, written offer. Depending on the personal situation of the seller, a small discount could be accepted. Please check with your advisor, what would be the best way to negotiate.
The Standard purchase procedure would be as follows:
- Reservation document
Together with the offer on the property, the buyer will make a deposit at the estate agency, in order to show that he/she is serious. This amount could vary between 2.000 and 3.000 euros. Important that the amountthat has been offered is mentioned in that document. The seller will be contacted, and if he agrees, the sales contract will be prepared. In case the seller would not accept the offer, the reservation fee, will be returned to the buyer.
- Purchase contract
If it has been signed by the two parties, this is an official, legal document. All relevant detais have to be included, like total sales price, final date for the Notary Deed, detailed information from the Property Register and if there are any outstanding debts, like a mortgage. Upon signing of the contract, normally a payment of 10% is done.
In most cases there exists the so called “escape clause”. The buyer could withdraw during the process, and he would lose his downpayment/deposit in benefit of the seller. In case the seller would like to withdraw, he should double the amount received by the buyer, in order to compensate him/her.
As soon as the sales contract is signed, the preparations for the mortgage could start. You should count on approx. 8 weeks. The variable interest rate is at this moment (autumn 2018) +/-1,85% and the fix rate could be approx 2-2,5% during 15, or more years.
- Notary Deed
The last and most important part of the purchase will be the Notary Deed, at the spanish notary. Immediately afterwards the property will be presented at the Land Registry. On the day of the Deed, you will receive a so called “Copia Simple”,with is a copy of the document. Once the purchase has been registered, you receive the original document. This could take approx. 6-8 weeks.
Barcelona, autumn 2018
Paul van den Hout
Real estate agent