How to buy

We have spent many years building strong relationships with Spanish Banks and have established a process which if followed, results in you being able to purchase a Spanish Bank Repossessed property direct from the Repossessing Bank, at a large savings and in some rare cases with up to a 100% Mortgage – Subject to Property & Status. For non-repossessed properties please read on below. Currently available are 70% for non-residents and 80% residential.

PLEASE NOTE: 100% Mortgages relate to certain bank repossessed properties & we will notify you of any changes upon enquiry, some also require a Bank Viewing Form to be completed – here is an example.

Direct

Normally Bank Repossessed Properties are purchased direct from the Banks by Large Institutions and Financial Organisations such as Hedge Funds. We offer the chance for the private Client to buy a Spanish Repossessed Property Direct from the Bank.

Participation

The Banks do not release full information on the properties normally until the day of viewing, so buying a Repossession from a Bank requires physical participation rather than arm-chair shopping.

NEW BUILD FROM A DEVELOPER (OR BANK)

VAT & Stamp Duty (IVA & Actos Jurídicos Documentados – AJD)

These taxes apply for residential properties being sold for the first time (never previously occupied), or for commercial properties and plots of land. This is a national tax, so VAT is the same wherever the property is located (with the exception of the Canaries, which have their own version of VAT).

At present VAT (known as IVA in Spain) is 10% on the purchase price of residential properties (villa, apartment, etc), and 21% for commercial properties and plots of land.

The Stamp duty (known as AJD) is 1% of the price of the purchase, but might go up in some regions, so be sure to check on the latest rate. Both VAT and Stamp Duty are paid by the buyer, and if any deposit is paid before completion of the sale, such deposit will be subject to VAT at the moment of payment of this deposit. In this scenario there is no transfer tax to pay.

RESALE FROM A PRIVATE INDIVIDUAL

Transfer Tax (Impuesto sobre Transmisiones Patrimoniales – ITP)

This tax applies if the property is deemed to be a second or posterior transfer (i.e. not the first time a newly built home is bought), and is paid by the buyer. If any deposit is paid before completion of the sale it is not subject to ITP pro rata. However the full amount of ITP still has to be paid upon completion. In this scenario there is no VAT to pay, and stamp duty is already included in this tax.

The Transfer Tax rate is ceded to the autonomous regions, who can choose to apply the general rate, or their own rate.

The general (national) rule of ITP is 7%, but many of the autonomous regions have applied higher local rates. The rate you pay depends upon the autonomous region where you buy. In Andalucia it is 8%.

Income Tax Provision When Buying From Non-residents

If the seller is not a Spanish resident, the buyer has to withhold 3% of the purchase price and pay it to the tax authorities (application form 211). If this is not done the property will be considered by the tax authorities as the asset backing the capital gains tax liability of the seller. This condition is very unlikely to apply when purchasing from a developer.

Costs that affect both new build and resale property purchases

Legal Fees

You are strongly advised to hire a lawyer to help you during the buying process. Your lawyer drafts and reviews contracts on your behalf and can explain all the legal and administrative issues you face. Your lawyer should also carry out any necessary due diligence (checking ownership claim of the seller, charges on the property, permits, etc.) and arrange all the required documents to complete the process (property registration, tax payments, etc.).

A lawyer – Abogado in Spanish – will charge you according to the service you require. This will vary according to the complexity of the purchase. Many charge around 1.5% of the purchase price in legal fees.

Mortgage costs

If you choose to buy with a mortgage then this will incur several additional costs. First there will be the property valuation that the mortgage provider will require before granting the mortgage. This is paid for the by the buyer and can cost around 500 Euros. Then there will be the costs of the mortgage itself. This varies according to the provider, and even according to the particular branch. However there is usually some kind of opening fee of around 1% of the value of the mortgage. Finally a mortgage will increase the Notary expenses. (Many Banks will waive this fee is you are buying a Repossession)

Notary Expenses

Notary expenses are nearly always paid by the buyer and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate Notary fees as being 1-2% of the purchase price declared in the deeds of sale.

Property Registry Inscription Fees

Expenses related to inscribing the sale with the land registry are also nearly always paid by the buyer, and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate 1% of the purchase price declared in the deeds, though once again it depends upon the property and the area, and the fee could be considerably lower.

Plusvalía Municipal Tax

This is normally paid by the vendor, but it can become a problem for the buyer if the vendor fails to pay it. Buyers have to be particularly careful with this tax when the vendor does not live in Spain.

Costs of owning property in Spain

There will of course be costs associated with owning a property in Spain. Some of these will be maintenance costs, such as cleaning, repairing, reforming, utility bills, rubbish collection, and so on. These will be determined by the size and type of the property you buy. Obviously a large villa with a garden and pool will require much more effort and cost to maintain than a small apartment.

Apart from the general maintenance costs referred to above, there are a number of costs in the form of taxes and fees that property owners in Spain face.

Property Ownership Tax (Impuesto Sobre Bienes Inmuebles – IBI)

A local tax on the ownership of property in Spain, irrespective of whether the owner is a resident or not. Calculated on the basis of the valor catastral (an administrative value that is usually lower than the market value, sometimes considerably so) set by the town hall the tax rate goes from 0.4% – 1.1% of the valor catastral depending on the Spanish region.

Annual Wealth Tax (Impuesto Sobre Patrimonio)

This tax has been changed several times in recent years.

Personal Income Tax (Impuesto sobre la Renta de No Residentes – IRNR)

Non-residents who own property in Spain have to pay an annual income tax that varies according to whether the property is rented out or not.

Not rented out

Non-resident property owners who do not rent out their property and who do not have any other source of income in Spain pay income tax based on the value of their property. The tax rate is fixed as 25% of 2% of the valor catastral of the property.

The tax on a property with a valor catastral of 700,000 Euros would be as follows:

Property value for tax purposes = 700,000 Euros

Taxable base (2%) = 14,000 Euros

Tax (25%) = 3,500 Euros

Rented out

If non-residents rent out their property and receive an income in exchange, they are obliged by law to declare this income and pay taxes on it. The taxable base and the tax rate will be determined by the laws as they apply to each person’s particular circumstances (taking into account the double taxation treaty – if any – between Spain and the country of origin of the non-resident). In many cases non-residents simply pay a flat rate of 25% of the gross income they earn from their property in Spain.

Residents in Spain will have to pay the income tax based on their income earned during the year. The tax rate depends on the level of income.

Community Fees

Owners of property that is part of any development, building, or complex in which common zones are shared with other owners are by law obliged to be members of the community of owners, know as the Comunidad de Propietarios. This will entail paying community fees for the upkeep of the common areas, and any other services that the community vote for. The fees will vary according to the magnitude of the common areas, the costs of maintaining them, and the services that the community vote for. A budget for annual community expenses is approved by majority vote of all owners (or representatives) who are present at the annual general meeting of the Comunidad de Propietarios.

Insurance

Household insurance will vary according to the circumstances of the owner and the type of property. However it should be born in mind as a cost that all property owners will face.