Buying a property in spain

Concerning property

Once you have found a suitable property there are a number of questions that must be answered.In Spain it is of vital importance to make absolutely sure that the seller is also the sole legal owner, and that there are no mortgage or other debts outstanding on the house or the ground. It is therefore important to ascertain whether the house is freehold or leasehold, and who precisely owns the ground and the buildings.
Furthermore it is important to study the Local Authority zoning plan at the Town Hall (Ayuntamiento) to find out what restrictions have been stipulated about on your property, and certainly also to find out how the surroundings of your house may be developed in the future.. For example, are there plans to situate a park in the area, or to start a discotheque? What kinds of facilities does the area offer? Consider such things as supermarkets, restaurants, medical facilities, recreational facilities, and sports accommodation.
Other important questions could be:
What is the state of completion of the building at handover? Is it, for example, a shell without fitted bathroom, kitchen and such like, or completely ready for occupation?
Is there an owners' association and are there compulsory service charges? If there are service charges: what services are provided? And what further services are available if desired? (Examples: security, cleaning, supervision, letting).
 
 

Purchasing procedure
 
It may be possible for you, in the first instance, to rent the property of your choice. But take care that the property doesn't get pinched from under your nose.
Purchasing procedure: Once you have found the right property you will have to reach agreement on the purchase conditions. If necessary you can call in the help of a legal advisor. They can also investigate whether the seller is indeed the owner, and whether there are any debts outstanding on the house or ground.
Contrato privado: This is a private contract between purchaser and seller/estate agent. This step can sometimes be skipped. Such a contract is prepared, e.g. if a deposit is to be paid.
Escritura: A legal contract. This document is prepared and held on file by the solicitor. There are different types of 'escrituras' depending on the sort of transaction involved (sale and purchase of existing property; construction of new building; separation of individual and communal ownership, e.g. of an apartment).
Payment: The remaining part of the purchase price, after payment of the deposit and possible mortgage amount, must be settled by means of a Banker's cheque, Bank draft, or a Bank transfer. After the money has been paid you will receive, from the solicitor, an official copy of the 'escritura' which shows that you are the new owner of the property. The duties and taxes must be paid within 30 days of completion.
Registration of property: After the contract has been signed, the original is sent to the Land Registry (registro de la propriedad) and registered there. Only when the 'escritura' has been registered do you become the legal owner.

Financing

Additional costs

On top of the purchase price, you will be faced with purchase costs such as legal fees, taxes and duties. (These purchase costs amount to about 10% of the purchase price.)
Make sure that you know about possible further costs such as those related to the development of infrastructure (gas/water/electricity/drains), and about the other standard charges such as wealth tax and local taxes (for refuse collection and such like).
Bear in mind that if you sell your property you will be taxed on any increase in value. Also consider what you will need to insure and the costs of insurance.

Taxes

When you purchase property in Spain or have income in Spain, whether you are resident or non-resident, you are faced with Spanish taxes. Taxes are levied by three levels of government:
1.     The National Government (Ministerio de Economia y Hacienda)
2.     Regional or provincial authorities
3.     The Local Authority.  

It makes a difference (for example, for tax and mortgage) whether you are planning to go to live in Spain permanently or to buy a holiday home. The general rule is that you are a resident if you have a residence permit. If you don't have a permit, but reside in Spain for more than 183 days per calendar year you will be considered to be 'resident for tax purposes'.

As purchaser and owner of property in Spain you can be faced with the following taxes, among others:

1. Wealth tax (Impuesto sobre el patrimonio). Tax returns must be made both by residents (total assets) and by non-residents (assets in Spain). As well as declaring the registered value of the property, you must also declare your average bank balance, the value of Life Insurance policies, shares and bonds, and the value of luxury cars and yachts. A standard tariff has been set for house contents.
2. VAT (IVA). This is a tax that is decreed on the purchase or construction of property if bought from someone who sells the property in a professional capacity or from someone who commissions the building of the house by a project developer or building contractor. Depending on the situation, this tax is charged at a rate of 7% or 16%
3. Transfer tax (ITP: Impuesto de Tranmisiones Patrimoniales).This is charged at 6% and applies when the house is purchased from a private individual.
4. Property tax: The basic rate is 0.4% of the registered value for a 'finca urbana' (an estate in an urban area) and 0.3% for a 'finca rustica' (an estate in the country). Local Authorities have the right to increase these percentages within specified limits.
5. Plusvalia. This is the tax that is layed down over the increase in value of the ground that has been built upon (so not on the buildings). This is ordained by the Local Authority whenever the ownership of the property changes. In principle, this tax is paid by the seller, unless specifically agreed otherwise. It is important to make firm agreements about the payment of this tax.
6. Capital gains tax. When the property is sold, this tax must be paid over the increase in value of the property. Certain items can be deducted, such as: IVA, ITP, 75% Plusvalia, legal fees, and costs of home improvements (but only if supported by 'declation de obra nueva'). This tax is adjusted constantly, and therefore you should keep an eye on it.
7. Building tax (Impuesto sobre Construcciones, Instalaciones y Obras).This local tax is levied over all building work for which a building permit is required. The basic rate is 2%, but it can be increased depending on the number of residents of the municipality. The percentage is calculated over the actual building costs, and is paid by whoever applies for the building permit.
8. Declaration 'Obra Nueva'. When a new building is handed over after completion, one must register it. A legal contract (escritura) is prepared for the newly built house, and this is registered at the Land Registry. The tax is 0.5% of the registered value of the property.
9. Income tax (Impuesto sobre la renta de las personas fisicas). If you are considered to be resident for tax purposes you fall under the Spanish income tax law(s). You are considered to be resident for tax purposes if: (1) you have been physically present in Spain for a period of at least 183 days in a particular year (if you contest this you must be able to prove that you were living in another country for at least 183 days in that year); (2) your spouse or children, who are financially dependent on you, are resident in Spain; (3) your life is centred in Spain.
10. Local taxes (Tasas): These local charges differ from Local Authority to Local Authority. They are imposed on the issuing of permits, technical advice and guidance, refuse collection, drains, and so forth. The Local Authority can also charge for services provided on demand (Precios Publicos), such as collecting bulky refuse, parking permits, and cleansing private roads. In addition, an extra tax can be layed down over increases in the value of the property resulting from improvements to the infrastructure (Contribuciosnes Especiales).