The buying process is simple. Unique Living and our local team offer assistance at every step of the process. Although there is no legal obligation to do so, we always advise buyers use a lawyer. Once you have found a property the procedure is as follows:
- Instruct your lawyer to check the property is legal, free from encumbrances, and that the vendor has the right to sell it.
- Conduct survey to ensure the property is free from structural defects, complies with planning laws, and power and water connections meet utility providers’ standards.
- If you need a mortgage and have not already applied for one, provide your bank with documentation to support your application. Once your application is accepted, the bank will instruct a valuer to provide a valuation of the property.
- 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. A private purchase contract is generally binding on both parties, unless otherwise stipulated.
- Open a Spanish bank account, to be able to issue a bank-guaranteed form of payment (normally a bankers draft) at completion.
- 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). This will normally be done by your lawyer.
- 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.
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.
- Transfer the existing contracts for utilities and other services pertaining to the property to your bank account. This will also enable you to pay future bills via direct debit, if you choose. You may be asked to pay a nominal deposit when contracting utilities, but this is refundable if you change provider or terminate the contract.
- 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. Failure to do so may result in a fine.
- Register the change in ownership with the Land Registry.
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).
Municipal tax on the increase in the value of land (Plusvalía)
By law, vendors are required to pay this tax but, if both parties agree, buyers can accept to pay it on the vendor’s behalf. Some vendors try to insist buyers pay, but there is no obligation to do so. If the buyer is getting a particularly good deal, he or she may choose to pay but, in general, we do not recommend clients do this.
The amount due depends on the cadastral value of the land at the time of sale and the length of the vendor’s ownership. The taxable base is calculated as a percentage of the cadastral value, varying from 3% to 3.7%. The tax rate varies from municipality to municipality and is set by the local Town Council, subject a maximum rate of 30%.
Taxes on resale property
If you buy a previously occupied property from a private individual, you are required to pay Transfer Tax (Impuesto de Transmisiones Patrimoniales) to the Spanish Tax Agency, levied on a sliding scale, depending on the sale price:
- 8% up to 400,000€
- 9% from 400,000.01 to 700,000€
- 10% over 700,000.01€
Parking spaces (when sold separately from a dwelling or, if sold together, when more than two spaces are sold at the same time) are taxed in line with a separate scale:
- 8% up to 30,000€
- 9% from 30,000.01 to 50,000€
- 10% over 50,000.01€
Joint owners can benefit from a potential discount because, although the same rates of tax apply, the taxable base of the purchase price is calculated in proportion to ownership.
For a property costing 750,000€, the amount of Transfer Tax due is as follows:
- 8% of the first 400,000€ = 32,000€
- 9% of the next 300,000 € (from 400,000.01 € to 700,000 €) = 27,000€
- 10% of the remaining 50,000 € (from 700.000.01 to 750,000€) = 5,000€
- TOTAL 64,000€
Joint purchasers (for example, a couple who each buy 50% of the property):
- Owner 1: 8% of 375,000€ = 30,000€
- Owner 2: 8% of 375,000€ = 30,000€
- TOTAL 60,000€
Taxes on new property
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) at a rate of 10% of the sale price. In addition, you have to pay Stamp Duty (Impuesto sobre Actos Jurídicos Documentados, AJD), at a rate of 1.5% of the sale price, making a total of 11.5%.
Taxes on plots and commercial property
If you buy a plot of land or commercial property, you are required to pay value-added tax at a rate of 21% of the sale price. In addition, you have to pay Stamp Duty, at a rate of 1.5% of the sale price, making a total to 22.5%.
If you buy either a resale or new property in Spain with a mortgage, you are required to pay Stamp Duty, at a rate of 1.5%, on the principal loan, together with any costs and interest levied in the case of non-payment.
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. If this is not complied with, the Spanish Tax Agency will hold the property, and the buyer, liable for the retention (i.e. 3% of the agreed price).
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. If not complied with, buyers will be charged an additional 20% in fines and interest on top of the amount owed.
We recommend you have a survey carried out on any property you are thinking of buying, to ensure there are no hidden defects.
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. Both options include photography of the property and reports are normally completed within two weeks.
RICS HomeBuyer Report
This type of survey is recommended for conventional properties in reasonable condition, or for those where small-scale work is planned, and includes a valuation based on market comparison. It includes a limited inspection of the property and provides concise information of the state of repair and condition, restricted to immediately accessible and visible areas. It also includes a description of any urgent or significant defects and is designed to provide the information necessary to help a potential buyer decide whether to purchase.
This type of survey is recommended for older or more unusual properties, those in poor condition, where large-scale work is planned, or when the structure of the building may be unsound. It does not include a valuation, although one can be provided at extra cost. It includes an extensive, technical inspection of the property and provides detailed information about its structure, fabric, and condition. It typically includes checks for signs of movement and deterioration, damp and rot, and the general condition of finishes, fittings, and services. It also includes a description of any visible defects and potential problems caused by hidden flaws, an outline of repair options, advice for legal advisors, and details of serious risks and dangerous conditions.
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 fiscal (you may be eligible for tax allowances), financial (you may earn a higher rate of return on capital invested than you would pay to service a loan), or security (a bank will carry out its own due diligence and only lend against a property that meets its criteria) reasons.
Loan to valuation or purchase price %
Mortgages are granted against either the valuation or purchase price (banks lend against whichever is lowest). The days of 100% mortgages are behind us and banks are now unlikely to lend over 70% of the valuation for a primary residence, although more may be negotiated by younger individuals who are resident in Spain and have a low-risk financial profile. For second homes, older purchasers, and non-residents, 60-70% is normally the maximum. For rural or high-value properties, mortgages generally do not exceed 50% of the valuation.
Loans are generally granted based on your earnings, with the maximum monthly payment calculated at 35% of your net income. If you have an existing mortgage on another property, both payments are usually taken into account.
Most mortgages in Spain are offered at a variable rate, sometimes with an initial fixed-rate period (1-3 years) at a preferential rate, and subsequently tied to the Euribor (Euro Interbank Offered Rate), plus an additional percentage.
Terms up to 35 years can be offered to younger residents, but non-resident and older buyers are generally given a maximum of 30 years, up to an age limit of 75 years old.
Set-up and cancellation fees
Mortgages fees are generally higher in Spain than in other countries. Typically, banks charge 1¬1.5% of the total loan amount to set up a mortgage, up to 1% for partial or total cancellation, and 0.5% to change lender.
Banks demand a valuation by a firm appointed by them at the buyer’s expense. You should expect to pay 250-1,000€, and more for large, high-value properties.
Completion fees and taxes
If you buy using a mortgage, this must be declared in front of the notary upon signature of the public title deed and a separate mortgage deed witnessed. Fees are fixed by the government and vary depending on the complexity of the deed. Buyers are liable for Stamp Duty on both resale and new properties bought using a mortgage, at a rate of 1.5% of the principal amount. You also need to register the mortgage in the Land Registry. This is normally done by a bank-appointed gestor and typically costs 200-400€.
When arranging a mortgage, banks often try to insist you contract property and contents insurance, usually their own products. By law, however, you are under no obligation to do so. If you decide to contracts insurance, there is no obligation to specify the lender as the beneficiary. The amount insured is as per the valuation, but is calculated as the amount necessary to rebuild the property, not including the value of the land. Banks also often try to insist you take out life insurance or a policy to protect you in the event you cannot work. Again, you are under no obligation to do so, but contracting one or both may enable you to negotiate better mortgage conditions. Costs are based on your age and the loan amount.
Supporting documents for your mortgage application
You normally need to provide your bank with the following documentation:
- Copy of your passport
- Copy of your NIE
- Recent credit report (e.g. Experian)
- Last six months of your personal bank statements
- Nota simple of the property you wish to purchase
If employed, you will also need to provide:
- Copy of your last annual tax certificate (e.g. P60 for UK taxpayers)
- Proof of last three months of salary payments
If self-employed, you will also need to provide:
- Copy of your last annual tax declaration
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 will be able to 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.
Potential advantages of using a FSA regulated currency broker include:
- More competitive exchange rates than those offered by banks
- Lower fees for currency transfers
Additional services, such as: spot rates, regular transfers (where exchange rates can be fixed for up to 24 months), forward buying of exchange rates (useful for buyers with long or delayed completions), and the ability to set market watches to keep you informed or trade automatically when a specified exchange rate is met.
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.
Over the course of the year, depending on the size of your property and where it is located, the costs of ownership in Spain can add up to a significant amount. 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.
Municipal property tax/rates (Impuesto de Bienes Inmuebles, IBI)
This is levied annually by the local Town Council on every property in Spain, whether the owner is resident or not. It is calculated in accordance with the cadastral/ratable value (determined by the Town Council’s valuation, which is generally lower than market value). The rate varies between 0.4-1.1% of the cadastral value. Parking spaces, if registered on a separate title deed, are also subject to municipal property tax.
Estate/wealth tax (Impuesto sobre el Patrimonio, IP)
Until December 31, 2015, both residents and non-residents are liable for payment of estate/wealth tax in Andalusia. IP is levied by regional governments and varies from region to region. In Andalusia, the regional government (Junta de Andalucía) levies IP on the taxable base (the net value of a taxpayer’s assets in Spain at the end of a fiscal year), when the total value exceeds 2,000,000€. The first 700,000€ are exempt from taxation and the remainder is taxed in line with a sliding scale, ranging from 0.24% to 3.03%. From January 1, 2016, IP will no longer be levied in Andalusia, unless the law changes again… For more information, click here.
Non-resident income tax (Impuesto sobre la Renta de No Residentes, IRNR)
Non-resident owners are liable for ‘imputed’ income tax, even if a property is owned solely for personal use and does not generate rental income. The taxable base is calculated as 2% of the cadastral value (if this value dates from prior to December 31, 1993), or 1.1% (if the value has been revised since January 1, 1994). If the property is rented, the full amount of rental income, minus certain expenses, is considered the taxable base. From January 1, 2015, residents of European Union member states pay a rate of 19%, while residents of other countries pay 24%.
If your property is part of a community of owners (any private property that forms part of a development where owners share common areas or services), you will be liable for fees to cover shared costs, such as cleaning and lighting of public areas, and maintenance of buildings, gardens, swimming pools and other communal facilities. Fees are calculated in line with the percentage of the community which your property represents, in terms of the built area of your unit compared to the entire community, plus a share of the public areas. Fees are normally paid on a monthly basis, in advance, and are set for the fiscal year at the annual meeting of the community. On occasion, additional fees may be demanded, in cases when extraordinary work is required. As the owner of a property in a community, you, or a representative you choose, has the right to attend all community meetings. Non-payment of community fees may result in you being taken to court by the community to enforce payment and can lead to a forced sale of a property to cover debts, if necessary.
Refuse collection (basura)
Your local Town Council charges a fee for collecting refuse, calculated in accordance with the cadastral value of your property and set by each council for a fiscal year. Refuse collection may be charged together with municipal property tax/rates or may be billed for separately, and is usually charged on an annual basis. If your property is part of a community, the community fee may include refuse collection.
As a result of liberalization of the energy sector, Spain has licensed dozens of companies to resell electricity and gas, and consumers can, in theory, choose freely from whom to contract utilities. In practice, however, not all the companies in the market supply everywhere in the country, so choice may be limited depending on where your property is located. The biggest companies – such as Endesa, Iberdrola, and Gas Natural Fenosa – offer both electricity and gas, and allow customers to combine both forms of energy in one bill, usually at a (small) discount. Smaller, local suppliers – such as Zencer, based in Fuengirola – provide all their power from renewable sources. Outside of large urban areas, mains gas supply is rare. If you do not have a mains connection, butane or propane can be purchased from two suppliers that deliver nationally – CEPSA and Repsol. Your choice of gas will depend on the space you have available to store the bottle or if you have an underground gas tank installed. Some villas and independent properties have gasoil or diesel tanks and dozens of specialist suppliers can deliver any amount of heating fuel to your door.
Water and sewage
Dozens of private and public-sector providers, together with public-and-private partnerships, offer water supply and sewage treatment services in Andalusia. In theory, customers are free to choose a provider, but not all offer services in every location. The two biggest providers – Hidralia and FCC Aqualia – cover all of Andalusia, while smaller, local providers limit their service to certain areas. A full list of providers licensed by the regional government can be found here:
Spain has liberalized telecoms and a number of operators offer both fixed-line and mobile telephone and ADSL/Internet services nationwide, although some only serve certain regions. Other operators only provide mobile voice and data services, some using proprietary networks and others reselling under their own brands. The big three are Movistar, Vodafone, and Orange, while smaller operators include Jazztel and Ono, the latter using its own fibre-optic networks in certain urban areas. All offer telephone, ADSL/Internet, and mobile services separately or as part of a package. Some packages also include online TV. Certain rural areas and country properties are too remote to have fixed-line connections and mobile coverage may also be limited. Iberbanda, part of the Telefónica group, provides wireless telephone and Internet services, using WIMAX technology.
Most parts of Andalusia, with the exception of remote rural areas, receive satellite TV signals. A variety of national and overseas providers offer a range of services and packages. Certain urban areas also have cable TV connections. Ask your neighbours or community president if this service is available in your area. Some communities have a default provider for satellite TV connections and it is worth asking your neighbours or community president before contacting a provider for an individual installation. Please contact us for an up-to-date list of recommended providers.
Once you’ve purchased a property in Spain, we recommend you insure both building and contents adequately. Building insurance provides cover for the property itself, including the structure and fixtures, based on the insurable value (calculated as the cost of rebuilding the property, not including land) in line with standardized tables. The quality of the build affects its value, hence if your property is built with very high-quality materials, you should ensure the insurer is duly informed.
Contents insurance provides cover for everything that is not an integral part of the structure and fixtures of the property, including such items as furniture, electronics, white goods, jewellery, and other personal belongings. Typically, policies include umbrella coverage up to a certain sum, but may have limitations for specific items. If you own objects of value, it may be worth confirming that these will be covered by the policy or paying a supplemental fee to include these. Almost all home insurance policies sold in Spain include some third-party liability coverage for any claims that could result from issues with your property. This may well be less than you are used to if you live abroad, but awards for damages are also generally lower. You should be able to reduce insurance premiums by fitting security measures, such as burglar alarms, window bars or shutters, and reinforced doors. Consult with your insurer whether this is worthwhile.
If you plan to rent out your property, you should ensure your policy covers additional risks. If your property is located in a development, the community may already have insurance to cover the building and third-party claims, but we recommend you always insure your own property individually. Any contribution to community insurance premiums is usually included in the monthly or annual community payment, but often the policy will not provide adequate cover or protect against all potential risks. In general terms, home insurance premiums in Spain are relatively cheap compared to other countries. There are various online comparison sites where you can tailor a quote to suit your particular circumstances, but we can also provide details of reputable insurance brokers who are used to dealing with overseas clients and specialist brokers for high-value properties.