Unique Living
November 18th, 2019 | by Serge Cowan

Property Buyers Advisory Guide to Spain & the Balearics

Why buy a property in Spain?

Spain currently offers a ‘golden visa’ program for property owners.

This is a form of investor’s visa. If you invest more than €500,000 in Spanish property, buying one or more properties, you will normally then be automatically eligible for a residency visa. This is not a work permit, but it will allow you to live in the country. It’s primarily aimed at retired people and holiday home buyers.

Spanish Property Financial Planning 

The first thing we would recommend you do is sit down and review your numbers, ideally even before you start looking at properties.

It may be that you can afford to spend more than you had thought with some thorough financial planning.

Spanish Residential Mortgages

Even if you have sufficient capital to buy property in Spain outright, you may wish to consider using a mortgage to fund the purchase for various reasons:

    • – Fiscal – you may be eligible for tax allowances such as inheritance tax
    • – Financial – you may earn a higher rate of return on capital invested than you would pay to service a loan
    • – Security – a bank will carry out its own due diligence and only lend against a property that meets its criteria

We recommend you explore all of your fiscal options, let’s schedule a meeting

The Process of Buying a Property in Spain 

Once you have found a property the procedure is generally as follows:

 

        • Although there is no legal obligation to do so, we advise buyers to use a lawyer who specialises in Spanish land law (urbanismo) and understands the location:

 

      1. 1. Instruct your lawyer to check the property is legal and that the vendor has the right to sell it.
      2. 2. It is not normal practice to carry out a survey here unless you have serious concerns but we would always recommend one if you have the resource as another means of protecting yourself. That said, surveyors are available but expensive.
      3. 3. If you need a mortgage and have not already applied for one, provide your bank with documentation to support your application.
      4. 4. When the above steps are complete, you normally pay a deposit – usually equivalent to 10% of the agreed price – and sign a private purchase contract with the vendor, or their legal representative, to remove the property from the market and agree a date for completion.
      5. 5. Open a Spanish bank account to be able to issue a bank-guaranteed form of payment (normally a bankers draft) at completion.
      6. 6. Apply for a NIE (número de identificación extranjera), the foreign identification number you will need to comply with your fiscal obligations with the Spanish Tax Agency (Hacienda).
      7. 7. At the conclusion of the period agreed in the private purchase contract, sign the escritura (public title deed) in front of a notary and make payment in full to the vendor as agreed, at which point you should take possession of the property.
      8. 8. Post-completion, your lawyer also should make sure the following is done:
        – Pay all taxes and charges to the relevant authorities.
        – If you are buying property from a non-resident, your lawyer will withhold 3% of the purchase price to pay to the Spanish Tax Agency on behalf of the seller, to ensure the municipal tax on the increase of value of the land (Plusvalía) is paid.
      9. 9. Transfer the existing contracts for utilities and other services pertaining to the property to your bank account.
      10. 10. Register the change in ownership with the Cadastre (Catastro) and, if applicable, the community of owners (comunidad de propietarios) in order to receive future bills in your name.
      11. 11. Register the change in ownership with the Land Registry.

Spanish Property Purchase Taxes
As a general rule, buyers should set aside an extra 10-15% on top of the agreed sale price to pay for taxes arising from the sale.
When a property is sold in Spain, the buyer pays most of the taxes and costs. These can be divided into: taxes due to your local Town Council (Ayuntamiento) and the Spanish Tax Agency (Hacienda).
Taxes on new property in Spain

If you buy a residential property that has never been occupied and is being sold for the first time, you are required to pay value-added tax (Impuesto de Valor Añadido, IVA).  In addition, you have to pay Stamp Duty (Impuesto sobre Actos Jurídicos Documentados, AJD
Taxes on plots and commercial property in Spain

If you buy a plot of land or commercial property, you are required to pay value-added tax at 10%.
Mortgage Taxes in Spain

If you buy either a resale or new property in Spain with a mortgage, you are required to pay Stamp Duty on the purchase price.  The bank will have their own charges which are normally 1%.
Withholding tax in Spain

If you buy a resale property from a non-resident seller, you are required to retain 3% of the agreed price and deposit the sum with the Spanish Tax Agency within one calendar month of the date of signature of the public title deed.
Fiscal arrears

All taxes arising from the sale of a property in Spain must be paid within 30 days of the date of signature of the public title deed.
PROPERTY SURVEYS IN SPAIN
Whilst it is an additional expense, we always recommend you have a survey carried out on any property you are thinking of buying to ensure there are no hidden defects. This is primarily for peace of mind.
We offer a choice of surveys, carried out by a qualified British chartered surveyor and based on the internationally recognized Royal Institute of Chartered Surveyors (RICS) Home Survey standard.
We recommend you carry out a survey, let’s schedule a meeting
SPANISH MONEY TRANSFERS

Property purchased in Spain must be paid for in Euros, so it pays to shop around for the best exchange rate, if required.  You can literally lose or save thousands of Euros depending on the currency provider you use. In most situations, a specialist FSA regulated currency broker can offer you a much better exchange rate than your bank. Please contact us for our list of recommended currency brokers. We recommend you only use brokers regulated by the FSA.
COST OF OWNERSHIP

Whether you’re a resident or non-resident in Spain, owning property entails a number of fiscal obligations and other ongoing costs.

These can be divided into: taxes and fees, due both to the local Town Council and the Spanish Tax Agency, and running costs, including community fees, utility bills, and insurance.

We can arrange for this information to be drawn up for you once you have found your perfect property

      • * The information provided in this Buyers Guide is subject to change without notification, every effort is made to keep these details up to date.

 

Serge Cowan

Serge Cowan

Managing Director and Founder

Serge has an extensive marketing background, after a broadcasting career, Serge moved into marketing where he worked for BSkyB & a number of leading Public Relations agencies.
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