Buying Property In Spain

There are no restrictions on foreigners buying property in Spain. However, you must have certain documents in place before you can…

The most important is a NIE number or Número de Indentificación de Extranjero. It is a tax identification number that you must have to purchase a property, sell a property, obtain a mortgage, start up a business, or work in Spain. The NIE is obtained in person from a National Police Station office upon arrival in Spain (for free) or you can appoint a Power of Attorney (Poderes in Spanish) and pay them to apply and collect the NIE for you. Once you have the NIE number (printed on a sheet of paper), it’s yours for life.

A Spanish notary will be involved in preparing the contract of sale and issuing the public deeds. As the buyer, you have the right to choose which notary you use. The notary is a public servant who must by law provide you impartial legal advice on all aspects of the contract before you sign. It is a good idea to seek advice from the notary early on. When a date is set for signing the contract, you have three days before that date to visit the notary and ask any questions you may have about any aspect of the contract.

Many people use a gestor (loosely translates as an administration manager) to do all their paperwork. If you do employ one, be sure it is a Gestor Administrativo with the GA kite mark. Only they are professionally qualified and certified to process paperwork directly with the Spanish administration.

Buying Process

Once you’ve made an offer and a price has been agreed upon, you need to confirm the ownership of the property and that it is free of all outstanding debts. Your lawyer will help you do this.  

Once all this has been confirmed, you and the seller can sign the preliminary contract (contrato privado de compraventa). You’ll then pay a deposit of 10% of the purchase price. These funds will be held by your real estate agent in a bonded client account.

Once you sign the sales contract, the escritura de compraventa, you pay the balance of price and all fees. The entire sales process can typically be completed in just 12 days.

Transaction And Holding Costs

Compared to most other countries covered in depth in this course, costs of acquisition are quite low in Spain…

Costs Of Buying Property
Fee	Amount	Paid By
Transfer Fees	6% – 10% depending on region you’re buying in	buyer
Registration Fees	0.02% for over €601,012.10; 0.03% for €150,253.03 – €601,012.10; 0.075% for €60,101.21 – €150,253.03; 0.125% for €30,050.61 – €60,101.21; 0.175% for €6,010.12 – €30,050.61; €24 flat fee for under €6,010.12	buyer
Stamp Duty	0.50% – 1.50% depending on region you’re buying in
Notary	0.03% for properties over €601,012.10; 0.05% for €150,253.03 – €601,012.10; 0.10% for €60,101.21 – €150,253.03; 0.15% for €30,050.61 – €60,101.21; 0.45% for €6,010.12 – €30,050.61; €90 flat fee for under €6,010.12	buyer
Agent Fees	2.50% – 3%	Seller
VAT	10% (for new residential property)	Buyer

Property tax (Impuesto sobre Bienes Inmuebles, IBI) in Spain applies to the cadastral value of the property, which is adjusted every eight years. The tax rate is generally 0.4% for urban properties and 0.3% for rural properties.

There’s also a special tax levied on real estate held by non-residents of 3% of the property’s cadastral value annually.

Rental income is classified as investment income in Spain. Non-resident foreigners will be taxed at a 24% flat rate on gross income.

Non-residents will be subject to a flat capital gains tax rate of 19%. The buyer must remit 3% of this to the Spanish tax authority.

An “Urban Land Appreciation Tax” (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana, IIVTU) will apply to urban land that has appreciated for non-residents. This amount is calculated based on the cadastral value of the land multiplied by a percentage (the number of years the land was held up to a maximum of 20, multiplied by a coefficient from 3 to 3.7). The rate is determined by municipality; the highest is 30%.

Spain does have a wealth tax that ranges from 0.2% on up to 193,000 euros to 2.5% for over 12,316,000 euros. The tax is applied to net wealth of all Spanish assets. Property for this is valued at either the cadastral value, tax value, or sale price, whichever is highest.

Special Notes

Making sure you are aware of some key points to avoid making any costly mistakes:

• Always use an independent attorney who specializes in property sales and Spanish land law (urbanismo), speaks fluent English and Spanish, and has professional indemnity insurance.

• Don’t sign anything unless you are presented with an official translation.

• Make sure the agent or developer is a member of a professional association.

• If you buy a new-build or off-plan property, make sure your deposit or stage payments are paid into an escrow account to protect your money until the property is completed.

• Make sure your attorney checks into any local laws that may affect the purchase of your property. The Valencia land-grab story and the Coastal Law (ley de costas) resulted in many expats losing their homes, in some cases to bulldozers. That said, buying a second-hand property in Santander is unlikely to be subject to any odd planning laws.

• Avoid cash sales.