Advice
Legal Advice
Just like anywhere else in the world, when it comes to purchasing a property it is worth getting to know the peculiarities of the legislation and the fiscal regulations applicable in each country.
Subject to the specific circumstances of each transaction, a summary has been provided below, as a general guide to the sales procedure in Spain.
Once you have decided wich property you want to buy, you have to be sure with your real estate agent, to ask about all the information further of the property you are going to buy: urbanistic situation in the “Plan General de Ordenación Urbana (PGOU)”, if it has mortgage charges, how much are the community fees, the property tax “IBI” (Impuesto sobre Bienes Inmuebles) and wich else are the fees to buy a property in Spain.
Our recommendation is to use a lawyer to take the necessary steps to make all those managements and will be the responsible to make the contract of sale between the both parts, let´s say, the seller and the buyer. In this contract, it has to be reflected all the particulars circumstances of the buying and selling and also make reference to all the sums of money wich had been left as a deposit, even expiry dates and amounts accord until the moment of the signing of the Public Title Deed Sale at the Notary (“Escritura de Compraventa”). This is approximately the 10% of the price of the sale It is very important that the information in the contract should also include the method of payment for some of the taxes arising the transfer of the property. During this procedure, the buyer can ask about a mortgage. The bank companies use to provide approximately until 70% - 80% of the amount, in the case if it is a first property for a resident in Spain or between 50% - 60% for non residents.
Once this contract has been signed, the appropriate funds for purchasing the property should be prepared and a final check made on all the details before signing the Public Title Deed of Sale. And the Notary Public´s fees have to be paid as well, when it is already signed.
Once a property has been purchased in Spain, after signing the deeds before a Notary Public, certain tax requirements must be fulfilled and the property registered. The tax arising from the transaction on the property has to be paid at the local Tax Collection Office for registration. Once the property has been registered, the Land Registry Office supplies the buyer against any third party claims, and at wich point the buyer must also pay the Registrar´s fees.
Tax Advice
THE MOST IMPORTANT TAXES:
IVA VALUE ADDED TAX (VAT)
Vat is payable at the rate of 8% of the value of the property, where the property is a newly built house; and at 18% on the value of the property, where the property purchased is a newly built bussines premises or plot.
Additionally, a further 1% in respect of a tax on documented legal transactions, known as the “Impuesto sobre Actos Jurídicos Documentados (A.J.D.), is payable on all the above transactions.
CAPITAL TRANSFER TAX
Where no VAT is applicable, a Capital Transfer Tax, known as the “Impuesto sobre Transmisiones Patrimoniales”, is payable at the rate of 7% of the sale price. Normally, this tax is payable when the seller is a private or individual rather than a company. For example: If the client buys a property of 480.000 €, will pay the 7% of those 400.000 €, let´s say 28.000 €; and the 8% of those 80.000 €, will pay 6.400 €. It would be a total amount of 34.400 €.
“PLUSVALÍA”
“Plusvalía” is the tax paid on the increase in the value of the property. This tax is applied on the increase in the value of land classified as urban land. The amount payable varies from one town to another and depends on the number of years that have past since the last time the property changed ownership. The tax has to be paid to the municipal tax office, known as the “Oficina Tributaria Municipal” of the town in wich the property is located. This Tax must be payed by the seller.
TAX DEDUCTED AT SOURCE
Where the property is purchased a non resident person or from a non resident company, the buyer is obligated to retain 3% of the sales price. The funds retained have to be paid to the central tax inspectorate, known as the “Oficina Tributaria Estatal”, as a guarantee on any liabilities the vendor might have in respect of income tax.
INCOME AND PROPERTY TAX
If you are a non-resident citizen, you should make only one annual tax return on any property you own in Spain.
If you are a resident, you will have the same tax liabilities as any other Spanish citizen.
LOCAL PROPERTY TAX
Your local tax authorities will charge you annual rates on your property, wich as a general rule will be fairly low –approximately 0,70% of the cadastral (rateable) value of the property–, a figure wich might vary slightly from one town to another.
Finally, we recommend that, for each specific situation, you seek the kind of professional advice available from any of the legal firms and tax advisors that we work with on a daily basis.
