A GUIDE TO Annual costs, legal information AND PROPERTY taxes
The following information is intended to be a general guide in terms of what can be expected when purchasing a property in Spain.
Costs
Having found the property of your choice, you should add around 10% to the purchase price for the costs involved in the actual purchase. This 10% covers a number of things that have to be done in order to effect the purchase of your property:-
Transfer Tax - This is the most expensive item of all the costs. If you purchase a resale property you will pay 7% of the declared value, on a new build there will be 7% IVA (VAT) of the declared value. If it is your intention to have a garage or pool built it would be advisable to have it included in the sale of the property because if you build later it will attract tax at the higher rate of 16%.
Solicitors fees - Never purchase a property without the assistance of a solicitor.
Notary fees - A Notary witnesses the signing of contracts and is there to protect the buyer as well as the seller. He will make sure that all of the documentation is legal. His fee is set on a fixed scale by law.
Registration - Having the property deeds inscribed in your name.
Who pays what? - Unless stipulated otherwise in the Contract, Spanish Law states that taxes and fees are divided between the buyer and seller as follows:-
The Vendor pays:
- Estate Agency Fees.
The Purchaser pays: -
The transfer tax or IVA
Registration fees
notary costs
Something that is important to note is that any debts on the property remain with the property when it is sold. This is another good reason to employ the services of a solicitor who will make the necessary searches to ensure that your chosen property is free from encumbrances and debt.
ownership of property
The simplest and most fundamental right related to a property, recorded in the Land Registry, is the actual ownership of the property. That is why the first fact that stands out when one consults the Registry is the identity of the owner of the property in which you may be interested. However in Spain, as in any other country, there are circumstances which could modify the rights an individual may have, including the one of real estate property ownership.
For example, a mortgage in favour of a bank, a right of way or an embargo declaration in favour of the Tax Authorities, are all such occasions that will be stated in the Registry. However, the analysis and interpretation of this information could be quite complicated to someone not versed in the matter. This is another reason why you need a solicitor who can handle this type of verification for you.
Some important matters to note about contracts. We have mentioned previously that any loans or mortgages remain with the property when it is purchased. It is therefore important to ensure that the property is sold free of burdens and encumbrances and free of tenants or occupants of any kind. If this is not done prior to the purchase then the buyer becomes responsible for these debts and obligations and the seller relinquishes them. In cases where the buyer purchases the property with an agreement to take over the mortgage payments on a property this would have to be specifically mentioned in the contract and deed expressing the exclusion of any other burden. The only safe way of making sure that everything is in order is to employ the services of a Spanish lawyer.
Checks must be made to ensure that the current expenses attached to the property have been paid by the seller and up to date at the time of completion. In order to be able to do this, the seller must provide corresponding receipts of at least the last two billing periods.
The expenses would include:-
a) Each year's Land rate taxes (known as Impuesto de Bienes Inmuebles or I.B.I.).
b) Community fees where applicable.
c) Services such as water, electricity, rubbish collection, telephone etc. where applicable.
Expenses related to property purchase
Local Tax on the increase in value of the land, known as Plus Valia, which should not be confused with capital gains tax. Plus Valia is calculated on the theoretical increase in the value of land, regardless of whether or not there is construction on it. On rural property this tax is not always applicable.
bank accounts and methods of paying
Non-residents can open accounts in any Spanish bank. Generally they can have such accounts in any type of currency they wish and can use the account to transfer and deposit any amount from outside Spain. It is also permitted to transfer any amount of money from the referenced account to any country other than Spain.
Control regulations with regard to money
The following control regulations apply, specifically designed to prevent laundering of illegal money:-
a) Each non-resident importing cash or banker's drafts to Spain (made out to cash) for an amount higher than 6,000 Euros (Approx £4,000) must declare this at the Spanish frontier when entering the country. If this is not done, there could be problems at the time of depositing the referenced cash or banker's draft (made out to cash) in any bank account or at the time you might want to utilise these funds for an investment payment.
b) Each resident or non-resident who takes an amount of cash or banker's draft (made out to cash) higher than 6,000 Euros (Approx. £4,000) out of Spanish territory, must also declare it at the Spanish frontier when leaving Spain. If this is not done and it is detected, a file would be opened with sanctions that could be quite substantial.
You are required by law to pay certain taxes:-
a) Value added tax or IVA (Impuesto sobre valor añadido) at 7% is charged on newly built properties.
b) A further tax of 1%, called AJD (Actos Juridicos Documentados), is also charged. c) A transfer tax (ITP - Impuesto de Transmisions Patrimoniales) on resale property. This is based on the value of the property and is charged at 7%. The 7% rate also applies to the purchase of commercial premises or land, when the seller is acting as a private individual.