Buying Property in Spain
A comprehensive practical guide to buying a property in Spain
7. General taxes and expenses
Probably one of the main concerns when buying a property is budgeting for the taxes and costs of the purchase.We have tried to set out below a complete list of taxes and expenses most commonly related to a purchase transaction in Spain. However,the below list is not exhaustive and you should seek legal advice in this respect.
So how much will the property cost me in addition to the purchase price?
7.1 Taxes
The transfer of freehold properties will normally attract Transfer Tax at the applicable rate which depends on the region where the property is located.
Generally speaking 7%except in some circumstances where a reduced rate may be applicable.
The Transfer Tax known as "Impuesto Sobre Transmisiones Patrimoniales y Actos Juridicos Documentados " (ITPyAJD) is a local Government tax payable by the buyer to the local tax office within 30 working days of completion.The tax base is calculated by applying the relevant percentage to the purchase amount stated in the Title Deed (Escritura).
Filing and logging assessment of this tax is mandatory and without this payment the Title Deed (Escritura)cannot be registered at the Land Registry.
In the case of new residential property transactions,there is a mandatory VAT to be charged normally at the rate of 7%of the purchase price.The purchase of commercial properties and plots of land will normally attract VAT at the rate of 16%.An additional Stamp Duty,normally at the rate of 1%of the purchase price will also be levied by the local Government.
If the seller of a property is a non Spanish resident,then the buyer is liable to withhold 5%of the agreed purchase price and pay it into the Inland Revenue on account of the seller ´s Capital Gain Tax arising out of the transfer.The tax does not amount to an extra expense to the buyer as the 5%is deducted from the total purchase price.
If more than 10 years have elapsed between the seller ´s date of acquisition of the property or the date of the last improvement made to the property and the 31 st December 1996, there will be no capital gains tax and therefore no obligation to withhold and pay the 5%into the Inland Revenue. However,discuss this issue with your solicitor who will advise you accordingly.Be aware that failing to comply with the tax obligations imposed on the buyer,the tax liability will be attached to the property as a charge.
Tax Identification Number (NIE) In Spain every single person is assigned a tax identification number (NIE)which is used to file any tax returns and formal communications to the tax authorities. Foreigners need to obtain an NIE - foreigners identification number, which is obtained from the foreigners department at your local Spanish police station and issued by the Directorate General of the Police. Alternatively,nationals of other EU members states and other states which are part of the European Economic Area may apply to the Tax Office for a tax identification number.Ask your solicitor as to the formalities to obtain this number and the registration procedure before the tax authorities for tax purposes.
Tax Identification Number (NIE) In Spain every single person is assigned a tax identification number (NIE)which is used to file any tax returns and formal communications to the tax authorities. Foreigners need to obtain an NIE - foreigners identification number, which is obtained from the foreigners department at your local Spanish police station and issued by the Directorate General of the Police. Alternatively,nationals of other EU members states and other states which are part of the European Economic Area may apply to the Tax Office for a tax identification number.Ask your solicitor as to the formalities to obtain this number and the registration procedure before the tax authorities for tax purposes.
7.2 The purchase expenses
Notary fee.A fee payable to the Notary
Public for issuing and witnessing the
deed “Escritura ”on completion.The
fee normally amounts to approximately
0.4%of the purchase price.By law
the Notary Public fee is paid by the
seller unless otherwise stated in the
purchase contract.In practice,there
are many regions in Spain where it is
commonly agreed by the parties that
this fee is paid by the buyer.
Land Registry fees.A fee chargeable
on transferring ownership from the
seller to the buyer. Approximately
0.25%of the purchase price.This fee
is paid by the buyer.
ISVTNU (Plusvalia)Tax.A tax that
may arise on the disposal of the property
This is based on the increased value of the
property transferred up to the date of the sale.By law,and
unless the purchase contract provides otherwise,the seller
is liable to pay the tax to the City Hall within 30 working
days of completion.It is not unusual that the seller will
make provision in the contract to make the buyer liable to
pay this tax.
Search fees. These fees are necessary in order to carry out the required investigations on the property. The fee depends on what searches are required to your particular transaction.Land Registry searches, Companies House searches,City Hall searches, Inland Revenue searches or any other searches within Government departments will costs an average of 50 sterling pounds.
Solicitor ’s fee.This will depend on which servces are necessary or required for a particular transaction. Solicitors will normally deal with matters such us preparation of power of attorney,application to obtain foreign identification numbers (NIE),arranging surveys mortgage and other preliminary matters; searches and enquiries before contract;negotiating and concluding private agreement to purchase; investigation of title;completion of the transaction;
filing and lodging relevant taxes;and procedures for the registration of title.
Obtain an estimate of fees from your solicitor at the first meeting.This estimate may be subject to variation if unknown or unforeseen factors later emerge which complicate the transaction or if there are exceptional circumstances requiring extensive research. Charges are normally between 1,500 and 6,000€.
VAT is chargeable on the solicitor ’s fee at the rate of 16%.
There are a number of other expenses that may or may not be applicable to the particular transaction. These include,amongst others,translation of documents, notarized copies of documents,valuation /survey fees,mortgage costs and taxes, mortgage redemption costs, bank guarantee,insurance policies,community fees, electricity and water connection charges. Consult your solicitor as to what expenses may be applicable to your transaction and get a fixed budget.
7.3 Annual taxes
When you own a property,it is important to know what
other taxes and expenses you may be liable to pay
annually so you can fix a yearly budget for your property.
Taxes and expenses may vary from one Spanish region
to another,also some taxes may not be applicable to
some types of properties. Generally speaking,if you are
a non Spanish resident and own an urban property,you
will be subject to the below taxes. Consult your solicitor.
Real Estate Tax/Rates “Impuesto Sobre Bienes Inmuebles (IBI)”.This is an annual local tax,i.e.levied by the local municipal authority (City Hall)which is payable by all property owners/real estate owners.The amount payable is calculated by applying the tax rate set by the Municipal Government to its assigned value according to each municipality.The period for payment varies according to the municipality,but it is usually paid between September and December every year.
If the tax has not been paid on time,the local authority will
charge interest and make a fine for late payment up to the
date of payment.The outstanding fee goes against the
property so make sure that you are properly registered for
the payment.You may find it more convenient to pay this
tax by direct debit.
Rubbish collection tax.Most Spanish Town Halls,charge
a small fee to organize the collection of household
waste. Payment varies from one municipality to another
but often this tax is issued at the same time as the IBI.
Payment is compulsory and failure to pay the tax will
cost you more money.
Income Tax.This tax is payable by a non Spanish resident owner
The tax is based on an estimated income calculated
on a general basis at 2%or 1.1%in some circumstances,
of its municipality of ficial registered value.The municipality
of ficial registered value coincides with the value shown
on Real Estate Tax/Rates receipts as shown above.
The liability takes effect once a year on December 31st at the
rate of 25%of the estimated income.
If you have not owned the property for the entire year,or
if the property has been leased for a period of time,then
you should file the appropriate tax covering the relevant
period.Be aware,that if the property is leased for a period
of time during the current year,the tax for that period is
calculated by applying the current rate of 25%to the
rental amount collected from the tenant. Deductions and
allowances are not available.
Wealth/Property Tax.Non Spanish residents are required to file a return for this tax on property owned in Spain on December 31st of each year.The tax is calculated by applying the tax scale approved by the Government each year,to the value of the property for tax assessment.The value is taken from the highest of the following:
• The value of the property shown on the Real Estate
Tax/Rates receipt.
• The value assessed by the authorities for tax
purposes.
• The purchase deed price (Escritura).
The base taxable is determined by the difference
between that value and the charges or mortgages
affecting the property.
7.4 Property owned by a non resident company
Where the property has been bought via a non Spanish
resident company you should be aware some companies
will attract a special tax payable every December 31 st .
The rate applicable is 3%according to the The City
Hall of ficial registered valuation of the property normally
shown on the Real Estate Tax receipt.
There are a few exemptions applicable to this tax rule.
For instance,companies that are subject to a Treaty as
to the exchange of information,will be exempt from this tax providing that individual shareholders of the company
are Spanish domiciled or domiciled in States with similar
Treaty rules.
This tax rule is mainly designed for those off-shore
company structures that are set up to hold ownership
of a Spanish property therefore avoiding other taxes
that may be applicable if the property were owned by
individuals.
For tax planning on ownership and company structure,it
is important to consult a specialist solicitor with knowledge
of taxation and company matters in Spain as the subject
is quite complicated.
7.5 Yearly costs
Community fees.If you own a property which is part of a complex,you will share the use of the common areas which form part of the community of owners. Mainly, common areas and elements will include the pool,the lift shafts,gardens,street lights,building corridors, development boundaries,roof,foundations,entrance areas,parking zones,tennis court,etc.
Each owner will be responsible for their own home as
well as paying their share of those common expenses.
The fee will depend upon the budget agreed for those
costs required to keep the building and common areas
in good order and condition. Normally,a percentage is
allocated to each property according to its building size.
Therefore,the owner of a property of 200 m2 will pay
more fees than the owner of a property of 150 m2 in the
same development.The fees are paid regardless of the
time that you use the property and other areas.
Utility services. Obviously,you will be responsible for
paying other services that you may use in the property
such us water,electricity,telephone,gas,etc. The amount
will vary with usage.
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