This guide offers valuable insights to navigate the property acquisition process in Spain, covering crucial aspects from the initial decision to buy to the finalization of ownership, along with an overview of taxes associated with property purchase and ownership.
The Property Buying Process
Upon selecting a property and reaching an agreed-upon sale, the buying process unfolds in several key steps:
1. Reservation Deposit: Secure the chosen property by paying a reservation deposit, typically 1% of the sale price, which removes the property from the market.
2. Private Purchase Contract: Set a date for signing the private purchase contract, where 10% of the sale price is commonly paid to solidify the transaction’s terms.
3. Deed of Sale Formalization: Both parties must sign the official deed of sale (public deed) before a Spanish notary public. This notarized document certifies the transaction and becomes a registered public record.
N.I.E. (Tax Identification Number)
Non-Spanish buyers must obtain a Tax Identification Number (“NIE”) from the Local Police. This number is obligatory for real estate transactions, including buying, selling, securing services, insurance, etc.
Purchase Costs and Taxes
Generally, expenses related to purchasing a finished residential property, such as taxes and legal fees, account for around 10% of the sale price.
• New properties from developers: No transfer tax, but a 10% VAT and 1.2% stamp duty apply.
• Second-hand homes: A 7% Transfer Tax based on property reference value.
Notary and Lawyer’s Fees
Notary fees (about 1.5% of purchase price) are typically shared between buyer and seller, with the buyer often covering the entire amount. Engaging a local lawyer, costing approximately 1% of the property’s price, is recommended for comprehensive legal advice.
Registration
Register ownership by lodging the sale deed (escritura pública) at the Land Registry. This step finalizes legal property ownership.
Ownership Possibilities
Properties can be owned by individuals or legal entities, including Spanish or foreign companies. Consulting a tax advisor is recommended to make informed decisions.
Annual Property Taxes and Expenses
• Real Estate Tax (I.B.I.): Levied by the Town Hall, this tax is a percentage of cadastral value, varying across municipalities (0.3% to 1.3%). Before purchase, obtain the seller’s last I.B.I. receipt for accurate tax assessment.
Community Charges
For properties in urbanizations or condominiums, pay fees to the Community of Owners for maintenance. A current certificate from the community, paid by the owner, is required during the sale’s notary signing.
Golden Visa Opportunity
Introduced in 2013, the Golden Visa program encourages investment in Spain by granting a residence permit for 2 years (extended to 5 years in 2015), allowing work, and providing a pathway to long-term citizenship. Eligibility requires an investment of at least €500,000 in Spanish property or alternative investment options.
Always consult professionals for tailored advice to ensure a smooth and successful purchase experience.
We are happy to introduce you to professional local law-firms and advisers, which we can warmly recommend.
