Frequently Asked Questions on Property Purchase In Spain
Q. What Taxes do I have to pay when I purchase my spanish property?
A. When buying a house in Spain it is important to estimate the taxes you will have to pay, not only when you actually purchase your Spanish property, but also local taxes and housing rates which are paid on a yearly basis by all home owners in Spain. Spanish housing yearly rates depend on the value of the house and the area it is in, but here is a rough guide to all the tax expenses you will need to take into account when deciding what house to buy:
TAXES PAYABLE AT THE TIME OF THE PURCHASE
Re-sale purchase tax:
House buyers of re-sale property (as opposed to brand new) are required to pay the Impuesto de Transferencia de Propiedad - Transfer Tax - which is 7%
New Properties purchase tax:
buyers of brand new houses in Spain are liable to pay, since 1st of July 2010, 8% IVA (VAT) if the house is finished or is being built at the time of the purchase, plus an extra 1% stamp duty. However, if you buy land in Spain, commercial premises or parking spaces in garages, then the VAT payable rises to 18%.
Increased patrimony tax payable to Spanish Treasury:
When a property sale in Spain takes place, a capital gains tax must be paid by the seller. According to Spanish fiscal law, the buyer withholds 3% of the total purchase price to make sure that the seller does not take the money and run.This amount represents a capital gains tax on the profit made by the seller at the time of the sale. That is the difference between the current (official) sale price and the price paid by seller when he/she originally purchased the property + the value of any reforms and improvements carried out since then.
Q. What other general taxes are there in Spain?
Annual real estate tax
Community fees
IBI or Council Tax
Property Income Tax
Q. What is an NIE number
An NIE number (Número de Identificación de Extranjeros) is required for all official papers like medical visits, when registering a car or buying a Spanish property. You will get your NIE from the national police station (Policía Nacional) after you filled in the application form.
Q. What do you mean by Residency?
A. If you wish to spend more than six months in Spain you need to apply for a 'residencia' to become a resident. Being a resident doesn't restrict movements in any way and it has many advantages, such as lower taxes. If you don't become a resident you must appoint a fiscal representative. Laws are currently changing and it appears that residencia will be abolished in the foreseeable future
Q. What is Fiscal Representation
A. It's highly advisable for any person who has a property in Spain but doesn't live there all the time to nominate a fiscal representative. This is a person to whom the tax authorities can send all correspondence relating to your affairs in Spain, secure in the knowledge that it will arrive. The fiscal representative must be resident in Spain, but it's for you to choose whom to appoint. It can be a friend, neighbour, lawyer or tax adviser.
Q. How Do Mortgages Work In Spain?
A. Applying for a mortgage is a straightforward process, as in the UK. A number of documents must be furnished to the Spanish bank in order to accommodate a smooth transaction. Please note that originals of everything will need to be shown and copies will be taken at the bank. e.g.
passport or driving licence:
if employed: past three months' payslips,
latest P60s
if self-employed: last three years audited accounts, tax returns and accountant's reference.
To get a mortgage in Spain you have to be 25 years or older, in full time stable employment or you have been self-employed for a minimum of three years. You also need your passport or your residence permit and you will be asked for your NIE number.
Q. What is an Escritura?
A. This is the same as we call Title Deeds in the UK
Q. What is a Notary?
A. When you buy a Spanish Property you need a notary because no Spanish property sale is valid without the presence of a notary. The notary does not give you legal advice like your Spanish property agent or your Spanish lawyer but he is an independent public official who neither works for the vendor nor the buyer. His principal role is to guarantee the legality of the sale and to deal with certain administration tasks
Q. What is a Finca?
A. A finca is a property on a plot of land or an estate outside of or in-between towns and villages. Properties advertised as fincas can run from tumbledown farmhouses to lavish modern villas. An advantage is that fincas generally come with a substantial amount of land, which may include olive groves and fruit orchards.