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Legal Information:


With over 38 years of operating a Construction and Real Estate company in Spain we are pleased to offer this practical, unbiased guide to purchasing and selling property in this country.
BANKS The first thing that you will need is a Spanish bank account for the receiving and transferring of funds for purchasing the property and afterwards paying rates and bills, usually via direct debit. Spanish banks are able to offer mortgages to foreigners, lending between 50-80% for up to 40 years with competitive interest rates. You may already have preference for a bank that you would like to use, if not we can introduce you to one and arrange an appointment to discuss your requirements.

TAX NUMBER (NIE) You will be required to obtain a tax identification number before purchasing, this we can apply for on your behalf.

BEFORE YOU PURCHASE YOUR PROPERTY Before purchasing a property it is important to check the following legal points, our company can undertake the task of obtaining the certificates and information for you:

Public Title Deed (Escritura Pública) - This is the most important document and will contain details of the property, owner, etc. It is also important to check:

The owner is up-to-date with all tax payments. One can either ask for proof by obtaining copies of the last receipts of payment or obtain a certificate from the local Town Hall.

The property is free from all pending financial obligations such as mortgages, court orders etc. This information can be obtained from the local Land Registry (Registro de la Propiedad).

All payments due to the Owners Association are up to date.

The local planning regulations, especially if you are purchasing a property outside the urban centre or an existing urbanization.

Although not obligatory it is generally advised to contract the services of a lawyer or solicitor to take you through the whole purchasing process. It is best using a lawyer that is familiar with not only property dealings in Spain but also the region in which one is buying. Upon request we can supply details of several lawyers that can communicate with you in your native language.

PURCHASING YOUR PROPERTY

Buying/Selling Contract (Contrato de Compra-venta) – This is an agreement between the buyer and seller where the conditions of the purchase are stated and where the purchaser agrees upon signing to make a down payment or deposit (arras).

The deposit acts as a guarantee that the sale will be completed within a stated time.

Completion Upon Signing Of Public Title Deed Contract ((Escritura Pública) – Completion takes place in front of a Notary who witnesses the signing of the Public Title Deed Contract, final payment is made at the same time. This document is then registered in the local Land Registry where the purchaser appears as the new owner. It is important to pay attention to the clause that states who is paying for the costs and taxes resulting from the purchase and the obligations of both parties. It is usual for the purchaser to pay the Notary fees, Registry fees, VAT (on a new property) or Transfer Tax also known as Stamp Duty (on a re-sale property), and the cost for the changing of the name for the utility services. The seller is responsible for paying the Municipal Capital Gains Tax (Plus Valia) plus a 3% retention if non-resident. Below we give more details on the purchase expenses and declared values.

PURCHASE COSTS BREAKDOWN

Normally payable by the purchaser-

Notary and registration fees.

Cost of registration with utility service companies.

Plus

In the case of a NEW BUILD 8% Value Added Tax (IVA) plus a 0.5% documentation fee or Stamp Duty (Impuesto Sobre Actos Jurídicos Documentados) has to be paid. If however a new construction is for business purposes then the Value Added Tax will be charged at 18%.

BUILDING PLOTS are VAT rated at 21% if purchasing from a company or 8% if buying from an individual.

A CONSTRUCTION ON A BUILDING PLOT would carry a 8% Value Added Tax plus New Works Tax (Obra Nueva) of approximately 1%.

In the case of a RE-SALE property a Transfer Tax (Impuesto de Transmisiones Patrimoniales) has to be paid. This is set by each autonomous region but where there is no specified rate it is charged at 8%.

In the case where a MORTGAGE LOAN is taken there will be the mortgage loan inscription fee for registration in the Land Registry plus an opening and study commission. The mortgage bank will also require that a Property Insurance policy is taken out.

Normally payable by the vendor -

The expenses incurred upon selling the property would depend on:

How long one has owned the property.

Whether one is resident in Spain.

The law states that the vendor is liable to pay the Municipal Gains Tax (Plusvalia) to the Town Hall and this is calculated as follows:

The difference between the rateable value of just the plot on which the property is standing at the time of buying and that at the time of selling. This tax is calculated by the local Town Hall

As a non-resident one needs to pay 3% retention (can be upto 5% in some areas) on the declared value at the time of the sale which is on account of the Capital Gains Tax which is 19%. It is applicable if you are a non-resident and owned the property for less time than stipulated by the law at that point in time.

It is possible to claim a rebate of this 3% retention tax by presenting the previous 4 years Income Tax declarations (Renta), upon which one should receive a rebate of the approximate amount less tax already paid, less accountant’s fees.

As a foreign resident one must pay Capital Gains Tax up to a maximum of 21% of the profit made on a sale. This is not paid at the time of the sale but included in ones next tax return.
If the property sold is a main residence and the money is re-invested within 2 years in another property that is also destined as a main residence one is exempt from paying Capital Gains tax.
Also foreign residents over 65 are exempt if it is the main residence that is sold and they have lived in it for more than 3 years. Residents and non-residents who purchased the property they are now selling before December 1986 are also excempt from the capital gains tax.

This guide has been compiled as accurately as possible but we are not to be held responsible for any inaccuracies, omissions or changes in law.