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Property Purchase Process | Property Purchase Costs | Mortgage Finance

Taxes


• Transfer taxes:

Payable at a rate of 6% to 7% for resale properties, depending on the region.
• VAT (IVA): For new-build properties, no transfer tax is payable – instead, VAT is payable on the purchase price, charged at 10% for residential property and 21% for land, parking spaces and commercial property. If the new-build property is located in the Canary Islands a regional tax (IGIG) is applicable instead of IVA.

• Title deed tax:

The transfer of the property is taxed at 0.5% of the property price.

• Ithholding tax (retencion):

If you are purchasing a Spanish property from a non-resident, you must pay 5% of the purchase price to the Spanish tax office instead of to the buyer. This withholding tax is designed as an incentive for non-resident vendors to promptly return their tax return to the authorities. There are various situations in which this tax is refunded or exempted entirely; you should seek professional legal advice.


Legal Fees


• Notary & Land registration fees:

These are fixed by law and operate on a sliding scale. This will amount to between 0.5% and 2% of the purchase price. There is a cap on registration fees at €1,900 (£1,500).

• Additional legal representation:

Typically, lawyers’ fees will come to around 1% to 1.5% of the
purchase price (remember to allow for 16% VAT on top of this).

Obtaining an NIE number


Before you can undertake any financial dealings in Spain, such as opening a bank account or buying a property, you will first need to obtain a fiscal number (numero de identificacion de extranjeros or NIE), similar to a National Insurance number in the UK. This applies equally to residents and non-residents. Estate agents are unlikely to take you very seriously until have an NIE, so it’s best to get this sorted early on.

The only way to get one is by going in person to a Foreigners’ Department at a police station in Spain. You will need to bring with you two certified copies of your passport, two passport-sized photographs, details of your occupation, your maiden name (if applicable) and the names of your parents.

Finding the right place


The first step in the purchase process is to consider what kind of property you are looking for, what purpose will it serve and which areas you’re prepared to consider. Other than price, a key question is the issue of how much work you are willing to undertake. At one extreme, you could take on a renovation project requiring a lot of hard work, at the other end of the spectrum you could purchase a modern apartment in a serviced complex with all amenities on site. Ideally you should visit your selected area and meet with estate agents (inmobiliarias) who will show you round a selection of properties which match your criteria. Most Spanish agents in the popular buying areas have English-speaking staff. It’s advisable to use a registered real estate agent (API).
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