Reserving the apartment
The Reservation Contract is the first agreement between the owner and the buyer. The buyer shows interest in the apartment by paying a deposit of 3.000€.
After signing and pay the Reservation, the owner has to remove the apartment from all portals.
What you need:
- Your NIE
- Spanish bank account
The first part of the buying process in Spain, is to obtain the NIE number (Número de Identidad de Extranjero). (An NIE Number is an identification number used in Spain for all foreigners. Prior to purchasing a property, selling a property, obtaining a mortgage, buying or selling a car or boat, starting up a business or working in Spain, it is a requirement by law for every individual to hold an NIE Number.)
This can be applied for personally at the national police stations, it can be applied for with your lawyer, or it can be applied for at the Spanish Embassy in your own country.
If you can’t be in Spain when you need to apply for the NIE one can be obtained on your behalf through a Power of Attorney (Poder Notarial). You can nominate a trusted individual to represent you in certain transactions and you can sign the power of attorney in the presence of a notary. This means that the purchasing process can still go ahead without you being there.
The aras is the agreement between the owner and the buyer when they set the final price and date in which the final transfer must be completed.
Here the buyer pays a 10% deposit of the buying price. Once signed, the buyer and seller are legally bonded.
According to the Article 1,454 of the Spanish Civil Code:
- If the buyer backs out, he or she loses the deposit.
- If the seller backs out, he or she has to pay twice the amount of the deposit.
Signing the Escritura contract
The Escritura is the title deeds. It groups information about the owner, buyer and apartment.
This contract represents the change of ownership.
Once signed the property is yours.
Taxes on property sales depends on the type of property purchased and the type of seller.
- If the seller is a developer, you will pay VAT taxes of 10% as well as AJT (stamp duty) fees of 1 to 2%. For commercial properties sold by a developer, you will pay VAT taxes of 21%.
- If the seller is not a developer, the buyer will pay a property transfer tax between 8 and 10%.
- Notary fees: €500 – €1000
- Registration taxes: €1500 – €2000
- If you need legal assistance with the buying process, this fee will be roughly 1% of the buying price
Buying as a company
When the property is bought by a company or from a business person, then it is required to pay VAT on your investment. The VAT is set at a general rate of 21%.
Example: If you purchase a property for €100.000 then the final price with VAT will be €121.000. This is excluding the notary and registration taxes.
Hiring a notary
The notary needs to be present to attest to the change of ownership.
Council Tax – IBI (Impuesto de Bienes Inmuebles)
The IBI is a mandatory property tax, which is paid to the local town hall. These taxes are aimed at improving the infrastructure and cleanliness of the selected community.
Both residents and non-residents have to pay IBI.
- On average, the IBI nears the EUR 150 mark for a one-bedroom apartment. If you’ve purchased a detached home with five bedrooms on a 1,000 sq. m land, you’d be looking at an IBI of about EUR 2,000.
Spanish Income Tax
As a non-resident, if you decide to rent your property you will still have to pay income tax in Spain.
In cases where you are not renting out your property:
- You will have to pay 19% of the 2% of cadastral value if there has been no revision since 1994.
- If there has been a revision, you will have to pay just 19% of the 1.1% of the cadastral value.
- If you are not a citizen of EU state, you will have to pay 24% of the cadastral value.
If you decide to rent your Spanish property:
- You will have to pay 24% if your tenant is not a citizen from an EU Nation.
- Otherwise, you will have to pay 20% of your rental income to the tax authorities.
You are considered residents of Spain if:
- You have been living in Spain for more than 183 days in one year.
- Your centre of financial interests is located in Spain.
- Your spouse and/or underage children live in Spain.
Wealth tax for residents
The Spanish authorities will determine your payment annually based on the total net value of the assets that you possess in Spain as a non-resident.
If you are a resident, they will include all your assets across the globe.
However, the first EUR 700,000 worth of assets will be exempted from this tax.
The rate of the Spanish Wealth Tax varies from 0.24% to 3.03%.
If you own your property jointly with other persons, each owner will have to pay taxes according to what percentage of the property belongs to him/her.
Wealth tax for non-residents
- The wealth tax is a cost based on the net value of the property. Non-residents pay a fixed tax rate of 2.5% per year.