Buying a home abroad is for many people a major investment and may seem complicated, because it is in a different country with different laws and a foreign language. Here is a brief description of the procedure in connection with a purchase and the taxes and costs that comes to the purchase price. We at Casa Bonanza will help you of course and we're working with good advisers who can assist you with the entire purchase process.
A lawyer is a cheap insurance against possible future problems and will only cost you around one percent of the purchase price.
Normally the purchase is initiated with a reservation agreement, which takes the property off the market. The deposit to pay at this stage could be anything between € 600 to 10% of the purchase price.
Within a couple of weeks a private agreement or option is signed between the seller and purchaser. At this stage it is normal to pay 10% directly to the seller. The seller and buyer's lawyers, together with the agent, should determine all outstanding debts and rates in order to arrange the payment of these according to the agreement.
Normally after one or to two months after you have made your deposit, the completion takes place in front of a notary, who issues the title deed, or "escritura". If the purchase is financed with a mortgage the bank representatives are present in order to pay and sign the mortgage. The title deed should then be registered by the lawyer in the corresponding Property register. Now the property is yours, congratulation!!
When purchasing a property in Spain, there are a few taxes that would have to be settled.
When you are buying a new property the VAT is currently fixed to 10%, applicable to the official purchase price. It is paid directly to the seller In addition you would have to settle the 0,5% Stamp Duty.
Purchasing a second hand property, a transfer tax of 8% is applied to the official purchase sum. This tax is not the same as Value Added Tax, which does not apply to second hand property, neither does the 0,5% Stamp Duty tax
Municipal Capital Gains Tax
This is a council tax (Plusvalía) that is paid each time a property changes hands. Basically it depends on the property's tax value, location, the size of the plot and how long it has been owned by the seller.
It´s normally between 200 Euro and 2 000 Euro. The vendor is obliged due to law, however it has become very common that the purchaser settles the amount. In any case, the purchase contract should state whether the buyer is paying all fees and taxes.
Is generally charged at 1% (depending on the Comunidad Autonoma where the property is located) on the value of the property when issuing public documents. The purchaser of the person applying for these documents will be responsible for paying the tax. This tax will be paid after completion at the Notary's office.
The costs of granting the public deeds are established according to a schedule of fees determined officially, and they are based on the value of the transaction. The costs of granting the Title Deed are payable by the purchaser. The Notary charges according to a fixed scale and depending on the official value of the property.
These are the Registration Officers´ fees for verifying the legality of the Document and the recording in the Property Register. Also these fees have to be paid by the buyer when the Deed is recorded in the Property Register.
As a rule of thumb the costs of registering your newly aquired property in the municipal property registry amounts to approximately 40% of the Notary fees.
The lawyers fee is normally 1% of the purchase price plus 21 % VAT.
The overall cost of taxes and fees for a purchase with 8% IVA / transfer tax is approx. 11%.
Buying as an individual you will have to pay annual Income Tax to the Inland Revenue Offices for having a property in Spain. You also have to calculate for your running cost.
The Income Tax needs to be paid by all fiscal persons who own properties in Spain. This tax, which amounts to approximately 2% of the Cadastral Value of the property, will increase along the years. The Cadastral Value is always lower than the Market or the Purchase value. This the official value assigned by the Town Hall, taking into account several aspects of the property such as location, square metres, populationof the area, etc.
Rubbish Collection: This is an annual tax paid to the local Town Hall for the collection of rubbish. The bills are payable twice a year.
I.B.I. (Impuesto sobre Bienes Inmuebles = Annual Contribution Tax). This Municipal Tax is paid once a year, between the months of July and September. It is based on the total of the square meters of your plot and the square meters of constructed property the Title Deed Holder owns. It is an annual tax paid to the local Town Hall and it is a local tax. In years to come, it may increase slightly according to the Inflation index.
Other expenses is electricity, water, telephone, TV, internet, insurance and security alarm.
When you purchase a home in Spain there are also a community fee. These fees depend on the area and the size of the community and covers maintenance of gardens, pools, security, administration etc.
This is a short summary, and we reserve the right for any incorrect information.
To obtain accurate data and information we highly recommend that you hire a professional advisor when you buy a property or acquiring other assets in Spain. Of course we will help you to hire good advisers. Be aware that according to Spanish law, all non-residents with assets in Spain are required to appoint a fiscal representative to secure the carrying out of tax duties.