Purchasing property in Spain
Your NIE number
Before you start searching for a property in Spain it is mandatory that you have an NIE number – this number is required for any financial transaction in excess of €3,000.00 (three thousand) as taxes are incurred and therefore you have to have a registered tax number.
If you start negotiating the purchase of a property on your own and have not yet applied for your NIE number you will find that any offer you make will not be taken seriously. Having your NIE means that you have a bank account and are legally permitted to make a transaction and are in a position to pay a deposit when agreement is reached.
If you are not resident in Spain and as purchasing property in Spain incurs a number of taxes it is advisable that you engage the services of:
- A lawyer specialising in conveyancing – A Spanish Notary/solicitor.
- A Spanish qualified tax consultant or financial advisor in Spain.
Taxes applicable to purchase of property:
Official costs involved in purchasing a standing residential property which is being re-sold are in the region of 10 to 11%. It the property is being sold for the first time then you can calculate around 12% if VAT is paid on the purchase price. Plus lawyer’s fees which you will find vary according to the individual lawyer and the value of the property.
I.T.P. is payable by the private buyer not a developer or someone who trades in resale of properties. This includes the purchase of residences, commercial properties and garages.
If the property you purchase is bought at a price below the Government evaluation price then the I.T.P. is charged on the price calculated by the Government evaluation of its value.
Tax percentage applicable to values:
8% for any amount up to and including €400,000. When a garage is purchased the percentage tax is on €30,000 except when the garage belongs to a dwelling and there are no more than two.
9% is payable on any amount between €400,000 and €700,000 and for garages between €30,000 and €50,000.
10% is applicable for any amount above €700,000 or for garages above €50,000.
VAT and Stamp Duty
If the purchase is from a developer, a promoter, or habitual trader and is a residence with an annexed garage 10% +1.5%
If the purchase is of a parcel of land or the first sale of a brand new commercial property and the purchase is from a developer, promoter, or habitual trader or a company: 21% +1.5%
Notary and Property Registry Fees
This is not fixed as the fees charged depend upon the complexity of the title deed as well as the property value.
Municipal Added Value Tax (Plus Valía)
This tax is usually the responsibility of the seller unless otherwise agreed. This is a tax levied by the town hall and is levied on property that has not changed hands in many years. The tax is based on the value of the property between the time of the first purchase and the present purchase.
Lawyer’s fees are usually 1% of the selling price but this will depend on the individual lawyer and also on the purchase price of the property.
Going Ahead with a Purchase
Deciding on the amount to offer: If you are to purchase your property through an Estate Agent should be able to give you useful information about the seller – i.e. if they are open to offers, if the sale is urgent etc. If the seller is Mallorquin or German then there is no point in doing other than accepting the asking price.
This information will help you decided on how low you can go in making an offer. Under normal circumstances when there is no urgency attached to a sale then making an offer that is unrealistically low will just waste time and put the seller off, and they may decide not to consider any further offers from you.
Making your offer: It is a good idea to get advice from your agent/lawyer, but it is a good idea to include a requirement of a formal survey and valuation, although this is an extra cost it will save you a lot of heartache should there be anything wrong with the property which is not patently obvious under normal viewing circumstances.
At this point it is important that you have appointed your own lawyer as you need to know if there are any legal issues attached to the property such as: tenure, debt, and ownership.
Make a verbal offer with a proposal of how the purchase is to proceed i.e. that you need a survey done, that should there be any legal issues (above), that your offer will have to be re-considered.
Your offer in writing:
Option to Purchase: An ‘Opción de Compra’ or Purchase option should then follow the agreed verbal offer. This is a written contract which outlines the terms and conditions of the sale and is signed by the seller and the purchaser. This document will confirm that the purchase will be as per the agreed verbal offer.
The Opción de Compra should include:
- The full names of both purchaser and seller as well as ID information and valid present addresses of both parties.
- Legal description: A full description of the land size, the building’s size and any rights of way that are on the property.
- The property’s registry and title deed number. This can be checked to ensure seller is the owner of the property free of liens or any encumberances – (tenants etc.).
- Its rates number.
- The agreed price and form of payment.
- The agreed deposit amount. When it is to be paid. Who is to hold the deposit and under what conditions. Usually 10% of the purchase price.
- The date set for the completion of the purchase. Usually 30 to 60 days after payment of the deposit.
- Conditions of the sale – i.e. penalties for a broken contract.
- If the seller has engaged the services of an agent then the commission payable by the seller must be stated on this Option to Purchase.
- Clause stating that the sale is subject to a survey.
Properties not yet completed:
LAW 38/1999: states that all payment due during the construction of the residence must be guaranteed by either a bank or insurance company. It also states that should completion be delayed, i.e. not completed on the date stated in the contract you, the purchaser, have the right to reclaim any payments made plus the legal interest. There is also a law which requires the developer to hold insurance for a further period of 10 years whereby the purchaser is covered should any construction defects come to light during the 10 years following completion.
On completion of Purchase:
On completion: The seller issues the Public Deed of Conveyance (escritura) to the purchaser which must be free of liens or any encumberances. The title deed is issued to your Spanish Notary who will then submit the deed to the tax office to be assessed for Transfer Tax, or for Stamp duty if it is a sale direct from a developer.
The deed is then submitted to the Property Registry. A provisional inscription is made as soon as the title deed is issued.