BUYING, SELLING & OWNING PROPERTY IN SPAIN / LEGAL ISSUES / CONVEYANCING IN SPAIN
Basic requirements for foreign buyers:
Habitual Residence in Spain; Legally, you are considered a resident in Spain when you spend more than 183 days per year in Spanish territory, or if the main core or basis of your activities or economic interests are based in Spain.
N.I.E. In Spain each person (being resident or not) must be assigned a fiscal identification number that must be used for income tax declarations and in any communication addressed to the Tributary Administration.
A NIE is a legal requirement for the purchase of property.
Nowadays obtaining the NIE takes between 3 or 4 weeks; you should apply for it as soon as possible if you are intending to make a purchase. We advise that you visit a Notary in order to obtain a notarised photocopy of your passport, something that is necessary when requesting a NIE. You can also go directly to a police station and have it verified there.
It is also possible to apply for the NIE in the Spanish embassy of your native country, and doing so it normally very straightforward.
All non-European citizens will also have to justify their entry to Spain, which means that when passing through customs a document must be sealed.
1. Choice of the property.
We advise that you visit well reputed real estate agencies.
2. Private Contract.
Once the property has been chosen, the buyer can contact an attorney, potentially one specializing in conveyance for peace of mind if you consider it necessary. However, we advise you to request Prestige Real Estate SL to provide you with all kind of legal and juridical information, such as property deed, registrar document, I.B.I. etc.
3. Purchasing a property:
A property can be purchased:
a) Directly through a public deed granted by a notary.
b) By means of private purchase contract (deposit); this contract is drawn up by both parties. Normally there is no changing hands of property immediately, and the buyer transfers an agreed amount of money to the seller as a deposit.
There are two types of deposit contracts: penitential or confirmatory deposit.
The first case is commonly known as “arras” on Section 1454 of the Spanish civil code, which means that parties agree that if the purchase and sale deed were not signed because of the buyer, he or she would lose the deposited amount of money. On the contrary, if it is the seller’s fault, he or she will have to return the money received plus a a second amount equal to the one received as a penalty.
The second case: in terms of the confirmatory case the contract has to be drawn up by both parties unless they have reached a penalty agreement between themselves.
c) There also exists the possibility of offering purchase option. This prevents the seller from selling to other interested parties for a period of time, but it has fiscal implications:
TVA TAXABLE PERSONS (*TVA = IVA in Spain)
When the grantor of the purchase option is a businessman (TVA taxable person) and grants it against payment, the purchase option is considered as provision of services, so a general VAT rate is charged (21 % in 2017). Moreover, if a public deed is granted and should be formally registered, the purchase option would be charged a Stamp Duty (Impuesto de Actos Jurídicos Documentados) which is equal to 1.5 % in Catalunya’s territory.
NON-TAXABLE TVA PERSONS
Granting of the right of purchase would be taxable for the grantee (the person who acquires the right), as it is charged a 10 % Property Transfer Tax (Impuesto de Transmisiones Patrimoniales) within Catalunya’s territory. For this type of transfers, tax base will be equal to the amount of money paid as first option or, in other case, equal to 5 % of tax base to which purchase contract settlement given that a purchase rate would represent less than 5 % above mentioned.
4. Inscription in the Property Register
In Spain it is essential to register a purchase in the Property Register, since it is of public domain, and from the moment of registration, this purchase title has juridical effects on third parties. This information is of great importance because if a property is not registered in this public establishment, it can be seized or be subject to a penalty. For example, if a property is still listed under the name of the seller, then the new buyer could later on become deprived of his asset if it is subjected to the seller’s debts (notwithstanding juridical actions that could protect the buyer).
Registration takes approximately one month.
In order to issue the Deed, we need to provide the following documents:
• Buyer’s NIE
• Receipt of the IBI (tax charging real estate property)
• Certificate of the owners’ community charges specifying that all community and maintenance fees have been paid, and adding details about maintenance works that should be done in the property (It has to be explained if such tasks have already been stipulated by the owner’s community, and if so, the corresponding part should be paid by the seller).
• Receipt of payment or subrogation agreement if there is a mortgage
• The payment has to be verified, which means that there must be written proof of the amounts of money already paid: transfer slip or cheque with source account information.
• Recent water, gas and electricity bills need to be provided in order to change the name of the account holder.
• Local property certificate (Cédula de habitabilidad). This is a document from the local government that certifies that the property has met the requirements to be habitable
• Energy efficiency certificate.
Note: From 1/6/2013 it is compulsory that all properties have a CEE – Certificado de Eficiencia Energética, which shows the property’s energy efficiency rating. The purpose of this document is to give buyers an idea of the property’s potential running costs.
Generally, the basic expenses in a purchase are the following:
• Value-Added Tax (IVA): In Spain, if the seller is a business, the operation of dealing is submitted to the Value-added tax. Currently TVA represents 10 % up to a price of 1 millon and 11 % from 1 millon upwards when purchasing properties in new openings, and 21 % when purchasing plots and commercial premises.
• If this Tax is not applicable or if the seller is not a business (he is an individual), then the dealing (of housing, plot or commercial premise) will be subject to the Property Transfer Tax (Impuesto de Transmisiones Patrimoniales), which is established nowadays at 10% in Catalunya’s territory.
• Notary fees: These are established depending on the value of the building, and are applied according to duties previously established.
• Property Transfer Tax: Nowadays the tax rate is 10% on the price that appears in the public deed.
• Stamp Duty (Impuesto de Actos Jurídicos Documentados): Once the VAT has been paid in conformity with the previously explained impositions, the buyer must also pay a stamp duty, the rate of which in Catalonia represents 1.5 % of the sale price.
• Municipal Tax on increase on the value of urban plots (known as Plus Valia Bonus): As its own name explains, it is a Tax that it is paid at municipal level and requested by the Town Hall or local authority where the asset is located. This Tax considers the increase of the value of land over time. To calculate this tax, the number of years passed between the date when the seller acquired the asset and the date of the current transfer are taken into account. To make such calculations, the value of the land that appears in the receipt of the IBI is taken into account, and then each local authority requires an specific payment according to specific local rules.
• Record of the Property Fees: The Property record receives duties for the inscription of the Deed of dealing, duties that change in accordance with the value of the property.
• Attorney fees: The common procedure (generally follow, although is not binding) that lawyers’ offices dedicating to real estate dealings earn between 0.5 % to 1.5 % of real purchase price. However, as there is not any established rule, this procedure may change depending on criteria of each office.
This document is purely informative; under no circumstances has a binding effect and it must be reviewed periodically according to changes in tax policies.