The purchase of a property is usually a long and tedious process, but this effect is multiplied if we decide to buy a property in a foreign country. Deciding in which area you want to make the purchase, investigating how the market works, knowing what type of property you want to invest in, all this is a difficult process if you do not know the place, so it is advisable to ask for support in the country of destination. For this reason, Orience offers a help service to any interested person in buy a property in Spain, to guide the investment based on their interests.
However, although the purchase process can be a bit confusing, there are a series of actions to proceed with.
Step 1 Obtain your NIE (Número de Extranjero) or Tax Identification Number
You will need this number in order for you and your spouse to buy a property and pay the necessary taxes in Spain. You can obtain it in Spain or at a Spanish consulate in your home country.
Step 2 contracting legal services
Orience has a legal team specialized in real estate law, indispensable for a secure purchase.
Step 3 Open a bank account
With your NIE and other documents, you can open a bank account in Spain. This will also facilitate other financial transactions you may have regarding the purchase of the property.
Step 4 Due DIligence, Contrato de Arras and acquisition of the property
Once the search, visit and analysis of the different options has been completed, it is time to make the decision and make an offer for a property.
Before, it is necessary that the buyer performs due diligence. This step should be carried out by a law firm specializing in real estate law, as it should check the size and location of the property, verify the property registry and make sure that the property is free of debts or any other encumbrances.
Once the due diligence process has been carried out, a formal monetary offer must be made to the seller of the property, normally accompanied by a sufficient monetary amount to help demonstrate a firm interest in acquiring the property (typically around 3000 to 5000 Euros).
If the seller accepts the offer, this is formalized with both parties signing a document, and a period of time is given, usually about 10 days to sign a deposit contract and make the initial payment, which is usually 10% of the total amount of the property. This document must be drafted and supervised by lawyers specialized in real estate matters, since it is where the conditions of the acquisition of the property will be established.
Step 5 Transfer of ownership of the services and various utilities, registration
Within a period of time, normally 90 days, the transfer of ownership is executed and notarized. Both the buyer and the seller must provide the necessary documents, after which the contract is signed and notarized.
Once the taxes have been paid and verified, full payment is transferred to the seller. The property is then registered in the Land Registry and the buyer is now the legal owner of the property.
Taxes associated with the sale of real estate property
There are five different taxes associated with the sale of real estate in Spain.
ITP (Impuesto sobre Transmisiones Patrimoniales y actos Jurídicos Documentales) or the Transfer Tax
ITP is a tax that is paid when a person acquires a property and is paid to the Autonomous Community in which the property is located. Each Autonomous Community has its own tax rates, generally between 6% and 10% of the value of the property. Each Autonomous Community also provides tax valuations for real estate. The tax value may not coincide with the real value of the property.
ITP must be paid within 30 days of the purchase of the property.
Stamp Duty Tax (Impuesto sobre Actos Jurídicos Documentados)
This tax only applies to mortgages and depends on two factors. Firstly, it depends on the autonomous community in which the loan is processed and, secondly, on the value or amount of the mortgage. The percentage applied is between 0.75% and 1.5% of the mortgage liability, depending on the autonomous community. It is usually paid with the ITP.
Capital gains tax
The capital gains tax is the local tax payable by the seller and is based on the cadastral value of the property and the number of years of existence of the property.
IBI (Real Estate Property Tax)
The IBI is the real estate tax that is paid to the municipal entity in which the property is located and is paid by the owner of the property each year. It is usually between 0.5% and 1.1% of the cadastral value of the property.
Non-resident tax
This tax is only for non-resident foreigners. It is calculated according to the cadastral value of the property and ranges between 1.1% and 2% of the value of the property. In the case of a resident of the European Union, it is equivalent to 19% of this income and 24% for non-residents.
Issues subsequent to the signing of the title deed
As we have already mentioned, after the signing of the transfer of the property before the notary, there are a series of formal obligations on the part of the new owner, such as the payment of taxes and the registration of the property in the Land Registry.
In addition, it is highly recommended that the buyer insures the property. A building insurance policy is often a requirement of mortgage providers. Contents insurance is not legally required, but it is a wise investment if the property is to be rented out or the owner spends a lot of time away from home.
Utilities and telecommunications
The former owner may already have a system in place and the buyer may simply take over the payments. If not, the buyer must apply for utilities, such as water and electricity, and Internet connection.