BUYING PROCESS
Buying property in Spain needs deep analysis of some aspects of purchase. The final decision is a result of the analysis of the purchase procedure, legal, administrative and tax requirements and prospective mortgage loan conditions. Please find below a practical guide that will help you choose the best buying option and reduce the costs.
Key Elements of Property Purchase in Spain
REQUIRED DOCUMENTS
- Passport or an ID card
- Confirmation letter for opening bank account in a Spanish bank
- “N.I.E.” Spanish tax identification number
N.I.E. Number
N.I.E. (Número de Identidad de Extranjero) is a tax identification number. It is required from foreigners who want to buy property in Spain. It is required to receive title deed or to deal with financial, administrative, professional and social matters. N.I.E. number is required for signing electricity and water connection agreements, registration of your car, etc.
The N.I.E. number is necessary during the signing of the final purchase agreement. It is not required for the reservation form or preliminary agreement.
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NIE can be issued by the Spanish police. One has to print and complete 2 documents before visiting the Foreigners Affairs Department of the Spanish Police:
The documents have to be completed in Spanish. The fee is payable in a bank, based on the second form. Besides the above-mentioned documents one has to present a passport or an ID card to the police.
One has to enclose 2 passport copies (ID card) and 2 passport-size photos. The waiting period for N.I.E. number is around 3-4 weeks.
If you reserve your property at SUN & BLUE, we can smoothly help you comply with formalities connected with the opening of a bank account and the issuance of N.I.E. number.
PROPERTY PURCHASE PROCEDURE – 3 STAGES
Property purchase process in Spain, both in primary market and in secondary market, is no different from procedures used in other European countries. Property purchase by a natural person is based on a simple and clear procedure.
STAGE 1: Signing a Reservation Document
Based on the reservation document the property is withdrawn from market and we can start other purchase-related procedures. The client is assured that the property will not be pitched to other potential buyers. The reservation is usually limited to 14 days. During that period the solicitor checks in detail the legal status of property. To reserve a property, one has to pay a deposit of 3000 to 6 000 euro. The deposit is transferrable to the owner’s bank account.
Clients who do not take out a mortgage can move on to the notary deed after signing the reservation document.
STAGE 2: Preliminary Contract of Purchase
The Contract contains key conditions of purchase. We determine the date of the notary deed which is usually signed within 30 to 90 days after entering into the Preliminary Contract of Purchase. In the case of primary market property, the preliminary contract additionally states a schedule of payments (connected with the periods of completion of stages of construction works).
In case of the preliminary developer contract, the date on the notary deed is connected with the date of completion of construction works.
By signing the preliminary contract the buyer has to pay earnest money (seňal). It amounts to 10-25% of the price of a property (in the case of the preliminary developer contract, the earnest money can be higher and can amount to 30-40%). If the buyer backs out of the deal, the prepaid earnest money is retained by the property owner/developer. If the seller fails to close the deal, double of the amount has to be paid to the buyer.
STAGE 3: Notary Deed
Notary deed is drawn up in Spanish and its reading takes place before a Spanish notary public. A translator can be present, if required by the client.
Upon signing the deed, the buyer hands the seller the remainder of the agreed price in the form of a check. A bank check guarantees the safety of the purchase. The check is issued by the buyer’s bank. Before that, the buyer has to transfer the required amount of money into his/her Spanish bank account.
Sometimes the buyer cannot be present during the signing of the notary deed and during other purchase-related procedures. If this is the case, he/she has to appoint a representative who will sign the purchase contract and act on his/her behalf in other purchase-related procedures (under the Power of Attorney).
PURCHASE OF PROPERTY AS A LEGAL PERSON, OFFSHORE COMPANY, FOUNDATION
Purchase of property as a legal person, offshore company or foundation is a different matter. We do process these type of transactions. However, they require additional documentation and an individual approach. Please contact us and tell us about your situation. We will optimize the purchase process for you in cooperation with best Spanish tax consultancy firms.
PURCHASE PROPERTY ON CREDIT
A non-resident can get a mortgage from a Spanish bank for the purchase of a property in Spain. The mortgage procedure is simple and logical. A non-resident has to submit the following documentation to the bank:
- Earnings statement from the last 6-12 months
- Tax return for the last year
- Bank statement for the last 6 months
- Documents certifying the division of marital property, divorce, etc.
The above-mentioned documents have to be certified and translated into Spanish by a certified translator. Additionally, the buyer has to present his/her ID card (passport) and NIE number at the bank.
A mortgage loan in Spain can be lent up to 70% of a property’s value. The maximum credit period (it depends on a bank) is 35 years. In the recent years lending interest rate in Spain was reported at 3-4% on a yearly basis. All banks charge commission; its average value ranges between 1.5-2%. Additionally, banks require home loan insurance and life insurance. Insurance cost can be included in the borrower’s loan.
In the case of a loan, an own contribution has to be paid into a private bank account linked with an auxiliary mortgage account. An own contribution has to be paid not later than 1 day before signing the notary deed.
Sun & Blue can help you through the process of obtaining a mortgage loan. We can negotiate on your behalf the conditions, including the amount of margin, commission and insurance. With our assistance you will be able to compare the loan conditions and independently choose the best option.
TAXES AND PURCHASE COSTS
Similarly to other European countries Spanish law specifies additional purchase costs. These include taxes, notary’s fees and Land Registry fees.
Additional purchase costs depend on:
- whether we buy a newly-built property (primary market) or a second-hand property (secondary market)
- whether we buy with our own capital or mortgage
- the Autonomous Community the property is located in.
Spain is divided into 17 Autonomous Communities (Comunidades Autónomas). Additionally, two Spanish cities in North Africa (Ceuta and Melilla) are autonomous cities. Autonomous Communities have high tax autonomy. Each Community determines their own taxes on the property market (table 3).
Additional costs for the primary market include:
- IVA (Impuesto sobre el Valor Añadido) – goods and services tax (equivalent of VAT), which is at the rate of 10% of the value of the property bought from a developer (at the Canary Islands IVA was reduced to 7%).
- AJD (Impuesto de actos Juridicos Documentados) – tax on civil law transactions. Depending on the province, it ranges from 0.5-1.5% of the property price listed in the title deed.
- If we buy the property with a mortgage we will have to pay AJD again for Land Registry entry (el AJD de la hipoteca). The amount of the second AJD ranges from 0.5-1.5% of the value of a mortgage loan. Taxes should be paid together with making the payment to the seller on the day of signing the deed.
- Notary fees – flat rate notary fee is specified in the official notary fees pricelist. The final fee depends on the value of the property, number of copies of notary deeds, whether we buy a parking space, storage room, etc. It usually ranges from 450-800 euro. The buyer has the right to choose a notary public.
- Land registry fees – flat rate notary fee is specified in the official notary fees pricelist and is binding across the whole Spain. Stamp duty is paid with fiscal stamps (aranceles). The price is higher if we require an additional copy. The total Land registry fee ranges from 250-500 euro.
- Solicitor – a solicitor is not legally required but the majority of our clients choose this option. A solicitor analyzes the developer’s documents, checks the legal status of the property, assists in contacts with the tax administration, etc. The cost of legal service amounts to 1% of the price of property plus VAT.
Additional costs for the secondary market include:
- ITP (Impuesto sobre Transmisiones Patrimoniales) – Transfer Tax which depends on the autonomous community in which the acquired property lies, being, in most communities between 4 to 10% of the property value (table 3). The lowest ITP is in the Basque Country (4%). In Andalusia and in the Balearic Islands it amounts to 8%. The highest ITP is in Catalonia, Cantabria, Galicia and Communidad Valenciana (10%).
- AJD (Impuesto de actos Juridicos Documentados) – tax on civil law transactions paid only when the property is bought with a mortgage loan. In this case it is a tax on the entry in the Land and Mortgage Register. Depending on the province, it ranges from 0.5-1.5% of the value of a mortgage loan. If the purchase is financed with your own capital, there is no need to pay AJD tax.
- Notary fees and Land Registry fees are the same as in the case of the primary market.
- Solicitor – a solicitor is not legally required but the majority of our clients choose this option. Legal service includes the preparation of the following documents required to buy a property in the secondary market:
- Nota simple (an excerpt from the Land Registry)
- Escritura (a notary deed certifying ownership rights and naming the owner)
- Primera ocupación (a document certifying the legitimacy of construction works and residence permit)
- IBI (an official proof of payment of the annual property tax by the seller)
- Certificado de la Comunidad – an official proof that the property owner does not fall behind with the payment of Homeowners Association fees
- Impuesto de basura (an official proof of payment of waste charge).
- The cost of legal service amounts to 1% of the price of property plus VAT.
TABLE 1: ADDITIONAL PROPERTY PURCHASE COSTS IN SPAIN
| Primary market without a mortgage loan |
Secondary market without w mortgage loan |
Primary market on credit |
Secondary market on credit |
|
|---|---|---|---|---|
| IVA (VAT tax) |
10% of property price |
10% of property price |
||
| ITP (Transfer Tax) |
4-10% of property price |
4-10% of property price |
||
| AJD (civil law transaction tax) |
0.5-1.5 % of property price |
0.5-1.5% of property price |
||
| AJD (civil law transaction tax on entry in Land and |
0.5-1.5% of mortgage amount |
0.5-1.5% of mortgage amount |
||
| Notary fees | 450-850€ | 450-850€ | 450-850€ | 450-850€ |
| Entry in Land Register |
224-500€ | 224-500€ | 224-500€ | 224-500€ |
| Solicitor | 1% of property price + VAT |
1% of property price +VAT |
1% of property price +VAT |
1% of property price +VAT |
| Property valuation | 200-500€ | |||
| Bank commission fee |
1.5-2% of mortgage amount |
1.5-2% of mortgage amount |
||
| Additional costs in total |
12-13% of property price |
6-11% of property price |
14-16% of property price |
9-15% of property price |
TABLE 2: ADDITIONAL PROPERTY PURCHASE COSTS IN ANDALUSIA (COSTA DEL SOL) approximately
| Â | Primary market without mortgage loan |
Secondary market without mortgage loan |
Primary market on credit |
Secondary market on credit |
|---|---|---|---|---|
| IVA (VAT tax) |
10% of property price |
 | 10% of property price |
 |
| ITP (Transfer Tax) |
 | 7% of property price |
 | 7% of property price* |
| AJD (civil law transaction tax) |
1.2% of property price |
 | 1.2% of property price |
 |
| AJD (civil law transaction tax on entry in Land and Mortgage Register) |
 |  | 1.2% of mortgage amount |
1.2% of mortgage amount |
| Notary fees | approx. 850€ | approx. 850€ | approx. 850€ | approx. 850€ |
| Entry in Land Register |
from 500€ | from 500€ | from 500€ | from 500€ |
| Solicitor | 1% of property price + VAT |
1% of property price + VAT |
1% of property price + VAT |
1% of property price + VAT |
| Property valuation |  |  | 300- 500€ | 300-500€ |
| Bank commission fee |
 |  | 1.5-2% of mortgage amount |
1.5-2% of mortgage amount |
| Additional costs in totalapproximately |
12,5% of property price |
8.5% of property price |
16% of property price |
12,5% of property price |
| E.g.: Additional costs for apartment valued at 150 000€ |
18 750 € | 12 750 € | 24 000 € | 18 750 € |
TABLE 2: ADDITIONAL PROPERTY PURCHASE COSTS IN ANDALUSIA (COSTA DEL SOL)
| Â | Primary market without mortgage loan |
Secondary market without mortgage loan |
Primary market on credit |
Secondary market on credit |
|---|---|---|---|---|
| IVA (VAT tax) |
10% of property price |
 | 10% of property price |
 |
| ITP (Transfer Tax) |
 | 7% of property price |
 | 7% of property price* |
| AJD (civil law transaction tax) |
1.2% of property price |
 | 1.2% of property price |
 |
| AJD (civil law transaction tax on entry in Land and Mortgage Register) |
 |  | 1.2% of mortgage amount |
1.2% of mortgage amount |
| Notary fees | approx. 850€ | approx. 850€ | approx. 850€ | approx. 850€ |
| Entry in Land Register |
224-500€ | 224-500€ | 224-500€ | 224-500€ |
| Solicitor | 1% of property price + VAT |
1% of property price + VAT |
1% of property price + VAT |
1% of property price + VAT |
| Property valuation |  |  | 200-500€ | 200-500€ |
| Bank commission fee |
 |  | 1.5-2% of mortgage amount |
1.5-2% of mortgage amount |
| Additional costs in total |
12,5% of property price |
8.5% of property price |
16% of property price |
12,5% of property price |
| E.g.: Additional costs for apartment valued at 150 000€ |
18 750 € | 12 750 € | 24 000 € | 18 750 € |
TABLE 3: TAX RATES FOR PARTICULAR AUTONOMOUS COMMUNITIES IN SPAIN - COMPARISON OF THE PRIMARY AND SECONDARY MARKET
| No.: | Autonomous Community |
Primary Market | Secondary Market | |||
|---|---|---|---|---|---|---|
| AJD Obra nueva |
IVA VAT tax |
AJD De la hipoteca |
ITP Transfer Tax |
AJD De la hipoteca |
||
| 1 | Andalusia | 1.50% | 10.00% | 1.50% | 8% | 1.50% |
| 2 | Aragón | 1.50% | 10.00% | 1.50% | 8% | 1.50% |
| 3 | Asturias | 1.20% | 10.00% | 1.20% | 8% | 1.20% |
| 4 | Balearic Islands | 1.20% | 10.00% | 1.20% | 8% | 1.20% |
| 5 | Canary Islands | 1.00% | 7.00% | 0.75% | 6.5% | 0.75% |
| 6 | Cantabria | 1.50% | 10.00% | 1.50% | 10% | 1.50% |
| 7 | Castilla-La Mancha |
1.50% | 10.00% | 1.50% | 9% | 1.50% |
| 8 | Castile and León | 1.50% | 10.00% | 1.50% | 8% | 1.50% |
| 9 | Catalonia | 1.50% | 1.50% | 10% | 1.50% | |
| 10 | Ceuta | 0.50% | 10.00% | 0.50% | 6% | 0.50% |
| 11 | Community of Madrid |
0.75% | 10.00% | 0.75% | 6% | 0.75% |
| 12 | Valencian Community |
1.50% | 10.00% | 1.50% | 10% | 1.50% |
| 13 | Extremadura | 1.50% | 10.00% | 1.50% | 8% | 1.50% |
| 14 | Galicia | 1.50% | 10.00% | 1.50% | 10% | 1.50% |
| 15 | La Rioja | 1.00% | 1.00% | 7% | 1.00% | |
| 16 | Melilla | 0.50% | 10.00% | 0.50% | 6% | 0.50% |
| 17 | Murcia | 1.50% | 10.00% | 1.50% | 8% | 1.50% |
| 18 | Navarra | 0.50% | 10.00% | 0.50% | 6% | 0.50% |
| 19 | PaÃs Vasco | 0.50% | 10.00% | 0.50% | 4% | 0.50% |