Your Property Investment in Spain
Buying Property / Law & Taxes

Buying a property abroad can feel like a bold move. But when you're out of your comfort zone, working with the right professionals is key to a successful transaction.

In this article, we look at the most important legal aspects to consider when buying a property in Spain and answer the most frequently asked questions.

Taxes payable when buying a property in Spain

The taxes you have to pay when buying a property in Spain depend on a number of factors, such as the region in which you are buying. For this reason, it is important to analyse each transaction individually and carefully.

In the case of new build properties, i.e. if you are the first owner of the property, the purchase is subject to VAT of 10% and stamp duty of 1.5% or 2% stamp duty for purchases over 1 million euros.

In the case of second-hand properties, the buyer must pay the transfer tax (Impuesto de Transmisiones Patrimoniales / ITP).

This is a progressive tax that is structured as follows in the Balearic Islands:

  • from €0 to €400,000 at a rate of 8%
  • between €400,001 and €600,000 at a rate of 9%
  • between €600,001 and €1,000,000 at a tax rate of 10%
  • between €1,000,001 and €2,000,000 at a rate of 12%
  • from €2,000,001 at a rate of 13%

The real estate transfer tax is calculated on the basis of the purchase price confirmed in the purchase contract. For example, for a property with a purchase price of €1,600,000, the property transfer tax would amount to €162,000, taking into account that the tax is progressive. The tax must be paid within 30 days of the transfer of ownership. A different rate applies to car parks, as well as to the purchase of land or business premises. Each purchase must be analysed and adapted to the particularities of each transaction; the information provided here is of a general nature only.

Taxes after the purchase

  • IBI (Impuestos sobre Bienes Inmuebles) - Municipal property tax
  • Property tax on the purchase price of the property
  • Income tax for non-residents (Modelo 210)
  • Refuse collection

What you should consider before buying a property

Get a NIE number:

A NIE number is a Spanish identity number for foreigners. All foreigners who have professional, social or economic interests in Spain are issued with a NIE number. The NIE number is an important document that must be presented when buying a property. This number also serves as a tax identification number. However, we have lawyers who will make your life easier and take the stress out of your life by processing the necessary applications quickly and efficiently for you.

Consider taking out a mortgage for your property purchase:

If you buy a property in Spain with a mortgage, you can reduce taxes, maintain liquidity and diversify your investments. Another fact to bear in mind is that equity release is not easily available in Spain, so it is always advisable to take out a mortgage at the time of purchase.

A professional mortgage broker like us, based in Spain will save you time and money, as it is a common mistake to underestimate the process of buying property in a foreign country.

When you instruct a specialist Spanish property lawyer from us, they will represent you from A to Z and on the day of completion at the notary, ensuring that everything is correct and in your best interests. Many clients believe that the Spanish notary system offers sufficient legal protection when buying a property. However, the notary is a representative of the government and it is not their job to ensure that the contract you have signed with the seller is in your best interests. Their only job is to oversee the completed transactions and signatures.

To understand the benefits of buying a property in Spain with a mortgage, you should contact a professional and experienced mortgage broker who knows the market and can give you suitable financing advice. The team of mortgage advisors will ensure that you get the best mortgage in Spain tailored to your needs and circumstances at any given time. We have such a professional team in-house.

The most important steps in the buying process

In short, it is a four-stage process:

  1. Purchase decision: We check all relevant information; the land register, cadastral information and all documents relating to the property.
  2. Draft contract: A lawyer or we draw up a bilingual or, if necessary, trilingual contract containing the conditions to be signed, subject to an agreement with the seller. A technical and urban planning due diligence must be carried out to verify the condition of the property. The first 10% of the purchase price must be paid to secure the deal.
  3. Signing the purchase contract at the notary: This step is mandatory in Spain. The remaining 90% of the price must be paid in order to obtain full ownership and possession of the property.
  4. Taxes and registration: The property is registered in the Land Registry in the name of the new owners and the corresponding taxes must be paid.

How long does the process take?

Usually 2 to 3 months until completion. The reason for this is that you first need the NIE number before the contract and due diligence can be carried out and before you can finally go to the notary.

What you should consider after finalising the purchase

Once the purchase has been completed, we have another company in our portfolio that usually offers a service that takes care of the administrative transfers, everything in Spanish, such as electricity, water, internet, community fees, alarm system, etc. and sets up a direct debit on your account.

Insurance

It is advisable to hire an insurance specialist to help you manage all or at least most of the risks.

Planning permission advice

If you are looking to renovate or extend your property, one of our lawyers can seek specialist advice from architects and surveyors to determine what changes can be made to the building and what structural defects exist.

Secure holiday lettings

If you are buying a property with the intention of letting it out, you will need advice on the legal permissions required and the application process; one of our lawyers will need to draw up a tenancy agreement to protect your interests. Ownership of the holiday rental licence - if the property has one - will need to be transferred to the new owner and one of our lawyers will advise you every step of the way.

When you buy a property from our company, one of our lawyers can provide ongoing advice in your language, ensuring transparency and understanding, offering discretion and confidence, providing a bespoke and personalised service, with the security of your investment as a top priority.

Your real estate agent, Manfred Herden

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