Tax On Buying Property In Spain?

Tax On Buying Property In Spain
Taxes on buying a Spanish property – Spanish property taxes vary depending on whether you are buying a new home or a resale property. New refers to a property that has never changed hands before – in this case; it is usually sold directly by the developer.

Resale refers to homes that have been sold at least once before. This includes new properties that were bought by banks or taken on by them in case of default on mortgage payments, for example. Expect to pay between 8% and 11.

5% in taxes on a property purchase in Spain.

What are the legal costs of buying a property in Spain?

It is many people’s dream to buy a property in Spain , even after Brexit. The quality of life, generally low prices and the sunshine are appealing factors. When buying a property in Spain, it is important to anticipate the general costs and expenses you will incur, as well as possible pitfalls as a result of unexpected expenses.

I will outline this information for a resale property purchase , as the cost of buying a newly built property will differ slightly. They will be considered in a future article or feel free to contact me to discuss.

Agent’s Fees On occasions, when you are buying a luxury holiday home, you may decide to engage a property agent to find the right property for you. These types of agents do not sell properties and would be acting just for you and look after your own interest.

  • Their fees may vary and, although they are not totally necessary, if you are very specific in the property you would like and without compromising and wasting time, they can be a good investment to find the right property for you and can also negotiate a reduced price;

So unless you are instructing a top agent, normally the estate agencies are instructed and paid by the seller. The seller may request that an additional cheque be paid to the agent on their behalf and deducted from the price upon completion, but apart from your bank commission to issue cheques or otherwise agreed with the sellers, these fees should be borne by them.

Legal costs Appointing a good lawyer who can advise on the whole process is important. You need an approachable lawyer with whom you can communicate and who can also respond to your queries. Instructing a lawyer who is also familiar with English law can be very beneficial, as they can explain your queries with the jargon you are more used to in English conveyancing.

Legal costs may vary depending on the property you are buying. As a general rule, they may be around 1% plus VAT of the property price, with a minimum price in the case of small value properties. Your lawyer will ask you to sign a Spanish power of attorney to assist with the whole transaction.

This will assist with many steps in the transaction, but also avoid you having to go to Spain for every signature which may be required. A UK based Spanish lawyer will be able to make this process easier, as they can draft the document and organise signature and legalisation for you.

This will have additional costs as a UK Notary Public will be required to assist with the signature (fees vary from £70 to over £250 plus VAT) and legalisation of the document (£30 per document plus postage). Purchase tax There is a tax which you will always need to pay when buying a resale property.

  • This is the transfer tax;
  • This tax varies depending on the region of Spain where you are buying the property and your own circumstances, but generally will be between 7% to 10% over the purchase price;
  • It is important that your lawyers consider the minimum tax value of the property before completion;
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This is because if you buy a property at a bargain price, you may be buying it at a price which may be less than the value set up by the Spanish tax authority. If so, they are likely to demand further taxes in the future. Currently, the Spanish tax authority calculates the minimum tax value by applying a tariff to the cadastral value of the property.

The tariff depends on the region where the property is located and it may not be very straightforward. The way of calculating this minimum tax value is changing from 1st January 2022, therefore it is very important to consider this point before completion so you know exactly how much tax you need to pay and avoid unpleasant surprises in the future.

The new minimum tax values are likely to be based on average prices in the area, without taking into account the specific condition of a property, whether it is in need of repairs for example. A house that needs a full refurbishment may have, before the Spanish tax authority,  the same value as a luxury property situated next to each other.

  1. So watch this space! Spanish Notary & Land Registry’s Fees Further costs to incur would be fees of the Spanish Notary and the Spanish Land Registry;
  2. It is usual practice in Spain that the buyer would pay for these fees;

Notary fees are regulated but the level of fees may vary depending on the number of pages attached to the deeds. In a transaction in which many documents are required, the cost is likely to increase. An average cost for a Notary may be around EUR850-1,250 plus Spanish VAT of 21% and the Land Registry fees may be around EUR650-EUR850 plus Spanish VAT.

  • However, these are just estimates and you will need to wait for the invoice to find out the exact amount;
  • Surprisingly the law indicates that the seller would need to pay the majority of the Notary fees;

In some areas of Spain, this is now more common, however, in most areas, it is general practice to agree that the buyer pays the fees. Further expenses NIE You may need to obtain a Spanish non-resident number (NIE). You can obtain this in the Spanish Consulate if you are lucky to live close to one and get an appointment without delay.

Alternatively and possibly quicker, you can also ask your lawyer to obtain this for you. Surveyor report You may decide to instruct a surveyor to inspect the property before fully committing to buy it. The cost is likely to be between EUR500-EUR1,000 depending on the property and the content of the report, as well as the language in which it is prepared.

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This could be either before the exchange of contracts or before completion. Just bear in mind that the Spanish contracts would not generally include a clause indicating that the purchase is subject to survey, so unless you are very specific in the contract, you may lose your deposit if you change your mind after exchanging contracts.

  • Changes with the utilities Following completion, you may wish your lawyer to also assist you further with the change of name and setting up direct debits with the utilities;
  • The process can be very burdensome and not as straightforward as it could be in the UK;

On occasions, the utility suppliers ask for further documentation or they may ask you to pay a fee if the meter needs to be replaced for example. Your lawyer is likely to charge additional fees to assist in this respect. Mortgage If you need to obtain a Spanish mortgage to buy the Spanish property, it is likely that you will need to pay additional fees so it is worth checking with the lender.

These expenses are not as significant as they used to be, as they have now been regulated and reduced with new laws in Spain. The sum you are likely to pay now should be limited to the mortgage fee and copies of the deeds and the cost may be around EUR350-EUR450 as an estimate, although mortgage fees have no limits so the lenders may introduce high fees soon.

Each case is a different world, so make sure you have someone looking after your own interests and not those of the seller. It is recommended that you instruct an independent Lawyer to assist you and someone you can trust. If you would like to discuss your case, or would like assistance with your Spanish purchase of sale, do not hesitate to contact me on 01273 284 120.

Is there stamp duty on Spanish property?

What is the main cost of purchasing property in Spain? – The main cost of purchasing property in Spain is tax , as is very often the case with any property purchase anywhere in the world. If you purchase a new property in Spain then the greater part of the tax payable will be VAT, whereas if you buy a resale property in Spain you will pay a purchase tax or stamp duty.

  1. The amount of VAT or stamp duty you will pay will depend upon where in Spain you purchase property;
  2. So, if you buy a resale flat in Barcelona you will pay 10% purchase tax (called ITP) to the Catalan autonomous government, whereas if you buy a new build in Tenerife you will pay 7% VAT (called IGIC) and 1% stamp duty (called AJD);

Buying off plan on the Costa Brava attracts VAT (IVA) of 10% and stamp duty (AJD) of 1. 5%, whereas buying resale at La Manga Club will cost you 8% purchase tax (ITP). Arguably, the basis on which the purchase tax is calculated ought to be the purchase price of the property.

The unorthodox commercial practises of the pre-recession era (encouraged in no small part by the banks), as well as the reduction in value of Spanish property prices since 2008, coupled with the artificial increase in the value of properties for taxation purposes (qua rateable values) across Spain, has resulted in the tax agencies of the governments of the 17 autonomous communities in Spain requiring that whatever the real purchase price of a property, purchase tax or stamp duty must be based on the lowest value of the property for taxation purposes (or lowest official value) as set by that tax agency.

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This, to many, will sound not dissimilar to the modi operandi of such organisations as the Cosa Nostra. Of course, you would not be far wrong. It is a method of extorting from property purchasers higher amounts of tax that would not be payable if the true purchase price were to be used a basis for the calculation of tax.

This practice of the autonomous governments has been challenged in the Spanish courts and such challenges have met with some success. However, it is still highly advisable to base one’s purchase tax or stamp duty payment on the lowest official value.

If not, the risk is that the “true” purchase value will be reassessed and you will have a battle to avoid paying an increased amount of tax based on a value considerably higher than the lowest official value. Your independent legal adviser will be able to calculate the amount of tax to be paid long before you commit to the purchase, so that you should know how much tax you will have to pay before proceeding.

Is it wise to buy a property in Spain now?

Spanish Property Market after Brexit – The property market in Spain has fluctuated a lot throughout the past years, however it has been in a recovery phase since its devastating 30% fall between 2008 and 2014. At the moment, buying Spanish property is a good investment.

  1. So, is it wise to buy property in Spain after Brexit? Well, at the beginning of this year 2019, the average property price in Spain has risen up to 6% , making it even a better choice in terms of buying a reselling the property;

At this moment, more into 2019 and going into 2020, the housing market price has relaxed and it has hit a steady point , making it a ‘sustainable’ investment. Having said this, common sense can tell you that house prices in Spain after Brexit will suffer a fluctuation, as big occurrences like this always have an impact on the property market, financial market, currency and more.

What fees do you pay when buying a property?

What tax do non residents pay in Spain?

How much is non resident tax in Spain? – Non-resident taxpayers in Spain are taxed at the rate of 19-24 % on income earned in Spanish territory or income that arises from Spanish sources such as property. Specific rates apply to other kinds of income.

What do I need to know about buying property in Spain?

Are foreigners allowed to buy property in Spain? – Of course! There are no restrictions on buying property in Spain , whether it’s commercial, residential or land. In fact, Spain encourages investment by foreigners , both resident and non-resident. Remember that if you buy a house worth more than €500.