Buying in Spain
Guide to Buying Property in Spain
Our consultants at Castle Gallois Properties have many years of experience working within the Spanish Property market. We have experienced the growth and the very difficult recent recession.
Out of the difficulty has emerged opportunity and there are now, we believe, exciting investment opportunities in the region.
At Castle Gallois Properties, we can assist you with all stages of the property purchase process. There are a number of tax and legal implications and considerations when purchasing Spanish properties and we can guide you through them with the assistance of our connected, professional advisers.
In order to best service your requirements, we need to understand what it is you are looking for - be it a golden visa investment opportunity, a second home or emigration to Spain on a full time basis, we have experience in all areas and are dedicated to helping you through the entire process. So, help us understand what you want and need and get in touch with Castle Gallois Properties.
As a buyer of property in Spain, there are a number of costs and taxes over and above the property price that you will have to pay. Depending upon whether you are buying a new property from a developer, or a resale property from a private individual, you will either have to pay VAT & Stamp Duty, or a transfer tax. The different cases are explained below, along with the other costs and taxes that are common to both cases.
NEW BUILD FROM A DEVELOPER (OR BANK)
VAT & Stamp Duty (IVA & Actos Jurídicos Documentados – AJD)
These taxes apply to residential properties being sold for the first time (never previously occupied), or for commercial properties and plots of land. This is a national tax, so VAT is the same wherever the property is located (with the exception of the Canaries, which have their own version of VAT).
At present VAT (known as IVA in Spain) is 10% on the purchase price of residential properties (villa, apartment, etc), and 21% for commercial properties and plots of land.
RESALE FROM A PRIVATE INDIVIDUAL
Transfer Tax (Impuesto sobre Transmisiones Patrimoniales – ITP)
This tax applies if the property is deemed to be a second or posterior transfer (i.e. not the first time a newly-built home is bought), and is paid by the buyer. If any deposit is paid before completion of the sale, it is not subject to ITP pro rata. However, the full amount of ITP still has to be paid upon completion. In this scenario, there is no VAT to pay, and stamp duty is already included in this tax.
The Transfer Tax rate is ceded to the autonomous regions, who can choose to apply the general rate, or their own rate.
The general (national) rule of ITP is 7%, but many of the autonomous regions have applied higher local rates. The rate you pay depends upon the autonomous region where you buy.
Income Tax Provision When Buying From Non-residents
If the seller is not a Spanish resident, the buyer has to withhold 3% of the purchase price and pay it to the tax authorities (application form 211). If this is not done, the property will be considered by the tax authorities as the asset-backing the capital gains tax liability of the seller. This condition is very unlikely to apply when purchasing from a developer.
Costs that affect both new build and resale property purchases
Estate agency fees or commissions are paid by the seller, unless otherwise agreed.
Real Estate agents charge between 2% and 5% of the sale price, depending upon the region and type of property.
You are strongly advised to hire a lawyer to help you during the buying process. Your lawyer drafts and reviews contracts on your behalf and can explain all the legal and administrative issues you face. Your lawyer should also carry out any necessary due diligence (checking ownership claim of the seller, charges on the property, permits, etc.) and arrange all the required documents to complete the process (property registration, tax payments, etc.).
A lawyer – Abogado in Spanish – will charge you according to the service you require. This will vary according to the complexity of the purchase. Many charge around 1-1.5% of the purchase price in legal fees. Legal fees for a purchase without any complications should be in the region of 1.000 to 2.500 Euros.
If you choose to buy with a mortgage, then this will incur several additional costs. First there will be the property valuation that the mortgage provider will require before granting the mortgage. This is paid for the by the buyer and can cost around 500 Euros. Then there will be the costs of the mortgage itself. This varies according to the provider, and even according to the particular branch. However, there is usually some kind of opening fee of around 1% of the value of the mortgage. Finally a mortgage will increase the notary expenses.
Notary expenses are nearly always paid by the buyer and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side, you should calculate notary fees as being 1% of the purchase price declared in the deeds of sale. However, in many cases, notary fees are more like 0.5% (or less) of the price declared in the deeds.
Property Registry Inscription Fees
Expenses related to inscribing the sale with the land registry are also nearly always paid by the buyer, and are calculated in relation to the purchase price declared in the deeds of sale. You should calculate about 1% of the purchase price declared in the deeds, though once again, it depends upon the property and the area, and the fee could be considerably lower.
Bear in mind that it may be prudent to carry out a survey of the property and that this will have a cost.
In Summary, allow for up to 14% of the purchase price in taxes and other costs.
To pay for the property, you will more than likely need to write a banker's cheque. In order to do that, you will need to open an account with a Spanish bank and transfer money from the bank in your country. The cost of transferring the money can go up to 0.2% of the amount transferred. The banker's cheque will most likely cost 0.25% of its amount.
Once you own a property, you will need to furnish it. The cost of furnishing a property depends entirely upon what you want. However, as a very general rule of thumb, a 2 bedroom apartment will cost around 10,000 Euros to furnish nicely, if you buy everything new. Of course there is no limit to how much you can spend, though you can also get away with less than 10,000 if you are on a tight budget (all from IKEA, for example).
Costs of owning property in Spain
There will, of course, be costs associated with owning a property in Spain. Some of these will be maintenance costs, such as cleaning, repairing, reforming, utility bills, rubbish collection, and so on. These will be determined by the size and type of the property you buy. Obviously, a large villa with a garden and pool will require much more effort and cost to maintain than a small apartment. For cleaning a figure of 10 Euros an hour is fairly typical throughout Spain.
Apart from the general maintenance costs referred to above, there are a number of costs in the form of taxes and fees that property owners in Spain face.
Property Ownership Tax (Impuesto Sobre Bienes Inmuebles – IBI)
A local tax on the ownership of property in Spain, irrespective of whether the owner is a resident or not. Calculated on the basis of the valor catastral (an administrative value that is usually lower than the market value, sometimes considerably so) set by the town hall the tax rate goes from 0.4% – 1.1% of the valor catastral depending on the Spanish region.
Owners of property that is part of any development, building, or complex in which common zones are shared with other owners are by law obliged to be members of the community of owners, know as the Comunidad de Propietarios. This will entail paying community fees for the upkeep of the common areas, and any other services that the community vote for. The fees will vary according to the magnitude of the common areas, the costs of maintaining them, and the services that the community vote for. A budget for annual community expenses is approved by majority vote of all owners (or representatives) who are present at the annual general meeting of the Comunidad de Propietarios.
Household insurance will vary according to the circumstances of the owner and the type of property. However it should be born in mind as a cost that all property owners will face.