Purchasing a house in Spain is not very complicated, but it is different at what you are used to in the UK. This article is a brief overview of the buying process in Spain, which documents you need and what costs are involved.
We are dedicated to making your experience of buying a property with us as stress free as possible and without any surprises.
Before signing anything, you should inspect the following papers:
– Nota Simple: this is a title deed of the Property Registery (Registro de la Propiedad). In this title deed you will find a description of the property, the details of the owner, if there is a mortgage, other debts or court embargo existing on the property.
– The Referencia Catastral: the Catastro is another system of property registration in Spain, concentrating on the location, physical description and boundaries of the property. While the Property Registry focuses almost exclusively on ownership and title, the Catastro is concerned with property valuation.
– The IBI receipt: check out the ‘lmpuesto sobre Bienes lnmuebles’, or lBI, which is the municipal property tax.
You can count on us to check these documents before putting a property on the market.read more
Usually 2 documents are signed in the process of purchasing:
Contrato de Arras
When you found your dream home and agreed on the price with the seller, it is customary in Spain to sign a purchase contract and to pay a deposit (arras) of between 5% and 10% of the agreed price. This contract is called a "contrato de arras penitenciales" and is legal. "Penitenciales" (penalty) means that if the buyer pulls back he/she loses the deposit, however if the seller pulls back he owes twice this amount to the purchaser. In this contract, the payment terms, the date of signing with the notary and all other agreements (eg the house is sold furnished) are recorded.
Escritura de compraventa
The “escritura de compraventa” is the official title deed that is signed at the notary. Usually it will be signed within 2 months after signing the purchase contract.
Numero Identidad Extranjeros (NIE)
In order to purchase a property you need a NIE number. The NIE (Numero Identidad Extranjeros) is a personal, individual, and unique identification number required for all foreigners in Spain who want to work in Spain, purchase a property, sell a property, obtain a mortgage, or start up a company. We can assist you in applying for this number, but you must go personally to the foreign police office to get this number. The foreign police have a regional office in each province. We can make an appointment for you and prepare everything for you making sure that one visit is sufficient.
A Spanish bank account number
In order to open a bank account with a Spanish bank you will need the NIE number.
The cost of purchasing a property consists of three items:
– Notary expenses: the notary fees are calculated in relation to the purchase price declared in the deeds of sale. On average the notary fees are 1% of the purchase price declared in the deeds of sale. However, in many cases the notary fees will be less (about 0,5%). If you buy with a mortgage, this will add an additional deed and additional costs.
– Property Registry Inscription Fees: these are the costs for registering the deeds of sale in the land registry. These costs are approximately 0,5-1% of the purchase price.
– Transfer tax (Impuesto sobre Transmisiones Patrimoniales – ITP): this tax is applied on the sale of existing properties. This transfer tax is 10% in Catalonia and 8% in Aragon of the price in the deeds of sale. For new construction, 10% IVA (VAT) is paid.
There will of course be costs associated with owning a property in Spain. Some of these will be maintenance costs and utility bills. Obviously these expenses depend on the property and the utilities. Apart from these costs there are a number of costs in the form of taxes and fees that property owners in Spain face. These costs are discussed in this article. Overall, it's cheap to own a property in this region.
IBI: Spanish local property tax
IBI is a local tax on the ownership of a property. The letters I.B.I. stand for Impuesto sobre Bienes Inmuebles, literally an immovable property tax. It is calculated on the basis of the valor catastral. This is an administrative value that is normally considerably lower than the market value, and is set by the town hall. The tax rate goes from 0.4% – 1.1% of the valor catastral depending on the Spanish region and are generally low in this region. It is advisable that you make arrangements for the payments to be debited directly from your Spanish bank account in order to avoid missing payments.
At the key details section of each property on our website, you can find the annual IBI tax for that property.
Spanish non-resident income tax
Non-residents who own property in Spain have to pay an annual income tax (Impuesto sobre la Renta de No Residentes – IRNR) that varies according to whether the property is rented out or not.
Non-resident property owners who do not rent out their property and who do not have any other source of income in Spain pay income tax based on the value of their property. The tax payable will usually be very low as the tax rate is fixed as 19% of 2% of the valor catastral of the property. Example: you own a property with a cadastral value of €60.000,–. The catastral value is: 2% = €1200; 19% * € 1200 = €228. You will be liable for € 228,– as non-resident income tax.
If you do rent out the property then you will be required to declare the income received and the expenses you have incurred per quarter. The taxable base and the tax rate will be determined by each person’s particular circumstances (taking into account the double taxation treaty – if any – between Spain and the country of origin). You can expect to pay quarterly tax upon the net income earned at a rate of 19%, taking into consideration deductible expenses. But in many cases non-residents simply pay a flat rate of 25% of the gross income they earn from their property in Spain.
Home insurance will vary according to the circumstances of the owner and the type of property. You can opt for an insurance that covers the buildings, the contents, or both. The more you cover, the more it will cost.
Buildings cover insures the structure of your property, and all fixtures. Contents cover insures all personal belongings that are not part of the structure or fixtures. Most policies will also include a level of third party liability cover.
In some areas the cost of refuse collection (basura) will be included with the IBI, in others it is a annual separate charge of about € 70,–.