Real Estate
Phases of the Property Purchase Process in Spain
When the client selects the property they wish to purchase, our firm begins the full management of the transaction through the following stages:
1. Property Reservation
To take the property off the market, an initial deposit is required (generally around €5,000, although the amount may vary depending on the property and the agency). To ensure maximum legal security, we recommend that this payment be made directly into our client account until we have audited and confirmed that the legal status of the property is correct.
2. Legal Audit
After the reservation, we request the necessary documentation from the seller to carry out a legal audit (Due Diligence), through which we verify that the seller is the registered owner, that the property is free of charges or debts with the Town Hall, the community of owners, or utility companies, and that the property complies with urban planning regulations and has valid water and electricity contracts.
3. Private Contract
If the preliminary analysis is satisfactory, we draft the private contract to formalize the agreed initial payment. This document is crucial, as it establishes the definitive terms of the transaction; therefore, we negotiate each clause to protect your position.
4. Public Deed of Sale
Approximately 3 to 4 weeks after the private contract, the signing of the deed takes place before a notary. You may attend in person or, if you prefer, we can act on your behalf through a power of attorney, an option we recommend for a more comfortable and professional management of the entire process.
5. Taxes and Utilities Management
Our work continues after signing. We handle the opening of bank accounts and the transfer of ownership and direct debit setup for all bills (electricity, water, municipal waste fees, property tax (IBI), and community fees).
6. Other Procedures
We manage the obtaining of your NIE number (a mandatory requirement to purchase any property in Spain). We also provide advice and prepare the Power of Attorney, whether in Spain or abroad, in case we act and sign on your behalf.
Requirements
NIE
The Foreigner Identification Number (NIE) is a personal, unique, and non-transferable code. Its purpose is to identify foreign taxpayers who do not have the national identity document held by Spanish citizens. All foreigners with economic, professional, or social interests in Spain are required to obtain their NIE from the corresponding office of the Ministry of the Interior.
It is essential that the NIE appears on any public document signed by the interested party or issued in Spain. Therefore, the client must obtain this number before the signing of the property deed.
Power of Attorney (POA)
Throughout the signing process at the notary, our clients are always accompanied by their lawyer. This professional supervises the documentation, ensures that everything is in order, and acts as an interpreter.
If professional or personal reasons prevent the client from attending the notary on the scheduled date, we will act on their behalf to formalize the signing of the deed. In this case, the client must provide a previously granted power of representation.
Taxes & Costs
As a buyer, you must consider three main types of taxes: those related to the purchase, which vary depending on whether the property is new or resale; those related to ownership, which correspond to the taxes derived from holding a property in Spain; and non-resident taxes, which include the specific tax obligations applicable if you do not permanently reside in the country.
Taxes
Purchase-related costs:
The type of tax you will have to pay when purchasing your property will depend directly on whether it is a home bought from a developer (new build) or a resale property (second-hand).
Taxes when buying directly from a developer
If you buy a new property directly from a builder or developer, the taxes you must consider are VAT (IVA) and Stamp Duty (AJD – Actos Jurídicos Documentados).
What VAT rate applies?
- Residential properties: 10%
- Land (undeveloped plots): 21%
- Commercial premises: 21%
- Parking spaces and storage rooms: 10%: if purchased together with the property (maximum 2 units in the same deed) 21%: if purchased separately
Taxes when buying resale properties
When you purchase a second-hand property, the main tax is the Property Transfer Tax (ITP). In this case, the rate is not fixed but increases progressively depending on the purchase price.
Tax scale for residential properties:
- 8% for the first €400,000.00
- 9% for the amount between €400,000.01 and €700,000.00
- 10% from €700,000.01 onwards
Garages and storage rooms (separately purchased):
If you buy parking spaces or storage rooms separately from the property, or more than two units in the same deed, the following scale applies:
- 8% for the first €30,000
- 9% for the amount between €30,000.01 and €50,000
- 10% from €50,000.01 onwards
It is also very important to note that if you purchase your property with a Spanish mortgage, you will also have to pay 1.5% Stamp Duty (AJD) on the mortgage liability.
Taxes for Property Owners in Spain
Local Taxes: I.B.I. (Property Tax)
The I.B.I. (Impuesto sobre Bienes Inmuebles) is the municipal tax that every property owner must pay annually to the Town Hall.
- Purpose: This tax contributes to the maintenance of public services such as street lighting, street cleaning, schools, and local hospitals.
- Cadastral Value: Your tax bill will show the “cadastral value” of your property. This is a key figure, as it is used as the basis for calculating other taxes.
- Payment method: For your convenience, the bill can be set up for direct debit from your bank account.
- Mandatory for selling: If you decide to sell your property, you will need to provide proof of payment of the most recent I.B.I. receipt.
Taxes for Non-Residents in Spain
El Impuesto sobre el Patrimonio se aplica tanto a residentes como a no residentes que posean bienes en España. Actualmente, este impuesto solo afecta a aquellos propietarios cuyo patrimonio neto en el país supere los 700.000 €. Tras varios cambios legislativos en los últimos años, este tributo se mantiene como una figura clave para grandes patrimonios, gravando la titularidad de activos a partir de dicho umbral.
Taxes for Non-Residents in Spain
If you live in Spain for less than 183 days per year, the Spanish Tax Agency classifies you as a non-resident. As the owner of a property under these conditions, you are required to submit an annual specific tax declaration.
The amount payable varies depending on the value of each property; therefore, we invite you to contact us if you would like detailed and personalized information about your specific tax situation.
Costs
Without prejudice to the above, the buyer should take into account that they will have to assume other costs related to the purchase, whether buying from a developer or a resale property, which are the following:
- Notary and Land Registry: Approximately 1% of the purchase price.
- Mortgage Costs: If a mortgage is requested in Spain, an additional 1% must be added for Notary and Land Registry management related to the loan.
- Legal fees: Generally 1% in legal fees (plus the corresponding VAT).
Capital Gains Tax
Any profit obtained from the sale of a property is subject to taxation. This tax is calculated on the capital gain, meaning the positive difference between the original purchase price and the current selling price. The applicable tax rate on this gain is 19%.
Mortgages
If you wish to purchase a property in Spain and require external financing, the ideal solution is to apply for a loan through a credit institution.
Before choosing the type of mortgage and financial institution, it is important to understand the options available in the Spanish market. In Spain, there are banks and savings banks that offer different types of mortgages: fixed-rate or variable-rate loans, as well as options with grace periods (where only interest is paid without repaying the principal for a certain period), and flexible mortgages adapted to your needs.
The choice of loan type will depend on your borrowing capacity and personal requirements. To start the process in Spain, you will need to provide the following documentation:
Regarding the applicant:
- Bank application form duly completed.
- Copy of passport.
- Copy of N.I.E.
- Last 3 payslips (for employees).
- Audit report and annual accounts (for self-employed workers).
- Latest income tax return.
- Bank statements from the last two months.
- Recent credit report (such as Experian or similar).
Regarding the property:
- Copy of the deed (property title deed).
- Copy of the private purchase contract.
- Nota Simple (updated extract from the Land Registry).
- Proof of payments made to date.
Residence in Spain and Golden Visa
Non-Lucrative Visa
This visa is ideal if you wish to reside in Spain without carrying out any work or professional activity.
- Processing time: The process usually takes between 2 and 4 months from the submission of the documents.
- Final stage: Once approved, you will be notified by email or post. You and your family will have one month to attend in person at the Consulate General with your passport and flight itinerary to collect the visa.
Golden Visa (Investor Visa)
Under Law 14/2013, non-EU residents can obtain a residence permit through a real estate investment in Spain of at least €500,000.
- Key requirements: The property must be free of encumbrances (no mortgages covering the required minimum investment amount).
- Initial benefits: You will obtain a 1-year visa that allows you to enter and leave the country without restrictions.
- Renewal: After the first year, and provided that you have visited Spain at least once during that period, you may apply for a residence permit valid for 2 additional years.
- Family: The investor may simultaneously apply for residence permits for their spouse and children under the same investment.
