In Spain there are no restrictions on the right of owning property, so if a non-resident person intends to acquire a property in Spain, he or she will hold the property with the same rights as a Spanish citizen.
The steps to purchase a property in Spain, just for information and subject to a detailed study of the case, are as listed below:
1. Obtaining a Foreign Identification Number (NIE).
To receive a NIE, a personal identification number, which will appear on all documents that are issued or processed, you must provide the following documents:
- Printed-standard application (EX15), duly completed and signed.
- Original and photocopy of the passport or identity document
- Communication of economic, professional or social causes that justify the application.
Applications for NIE may be submitted in Spain to “Oficina de Extranjeros” or “Comisaría General de Extranjería”, by the applicant personally or through a representative with sufficient power to do so, or in Spanish embassies or consular offices located in the country of residence of the applicant.
All non-EU foreign public documents must first be legalized and, if necessary, must be translated into Spanish or a co-official language of the territory where the application is being filed.
2. Opening a bank account.
The purchaser must, after obtaining the NIE, open a bank account in Spanish territory. The bank account is required for a media accreditation acquirer payment on the purchase of a property, as well as for paying subsequent taxes and expenses. To open the current account, the bank will ask the buyer for his or her NIE, a valid passport and an official document from the country of origin properly translated into Spanish, which will justify the source of their income and creditworthiness.
3. Drawing up a Purchase Contract
A Purchase Contract is a private contract through which both parties, once the property has been chosen, agree the future sale, and exchange a sum of money as a deposit. This is typically around 10% of the final agreed price for the property.
The contract determines the deadline date for the notarization, the purchase price, the distribution of costs and taxes between buyer and seller, and any consequences of failure to complete the purchase and of a breach of contract. All of this is in response to regulations in Article 1.454 and ff of the Spanish Civil Code.
4. Exchange of Contracts.
On the day agreed, the buyer and seller appear before the notary to certify the transmission and acquisition of property through the granting of the public deed. For this document, the seller must provide the buyer with the documents listed in the legislation, among which are: the title, the certificate of occupancy, the building’s certificate of energy efficiency and the certificate of payment of their tax obligations.
The documents shall contain personal information of the buyer and seller, a description of the property, state of charge, the price, payment, and other terms and conditions as the parties deem appropriate.
Typically, the seller will receive at the event the entire amount of the sale. Payment shall be made by check drawn from a bank account of the non-resident ownership of the buyer. If the buyer does not have the full amount of the property to be acquired, the purchase may be made by bank financing through a mortgage application. Such credit shall be granted by the financial institution after examining the debtor’s ability to repay. In case of bank financing, a representative of the Bank will also come to the execution of the public deed to sign the mortgage credit.
5. Paying taxes and expenses.
The transaction involves the payment of taxes and expenses related to the same, these are as follows:
- The purchase of a new property will be taxed and subject to Value Added Tax (IVA). The applicable tax rate is determined by the nature of the goods being bought and sold and, if a property is sold, the tax rate of 10% will apply. In addition to the IVA, Transfer Tax and Stamp Duty must be paid. These taxes vary between 1 and 1.5% of the final cost of the property, with Catalonia currently at 1.5%.
- The second or subsequent transfer of a property will incur transfer tax and stamp duty of 10% in Catalonia. This varies depending on the autonomous community in which you are buying.
To be paid for by the BUYER:
- Notary fees are calculated based on a tariff and are in proportion to the value of the property.
- Fees Registering Property: The Land Registry charge rates for registration of title. These fees vary, also depending on the value of the property.
To be paid by the SELLER:
- Municipal Tax on the Increase in Value of Urban Land (Plusvalía). This municipal tax is levied on the increased value of land and has a different rate of tax for each municipality.
6. Entry in the Registry of Property.
Once you have satisfied the payment of taxes on the transfer of the property, you must register the title in the Land Registry in the appropriate location of the property acquired. Registration will take legal effect against third parties and provide greater legal certainty to the buyer. As the Land Registry can only access notarial or judicial decisions, it is therefore essential to give the corresponding deed to the notary, as referenced above.
7. Notice to the General Directorate of Land Registry.
The cadastral statement is the instrument by which the Cadastre is informed that there has been a change in the property that affects its cadastral description. The grantors of the deed of sale are required to submit the relevant cadastral statement by the model 901-N. The deadline to file is 2 months from the day of the exchange of contracts and must be reported to the Management Unit or Local Cadastral or Delegation of Finance where appropriate.
Other items you might be interested in the process of acquiring a property in Spain:
A) Taxes and recurring costs of ownership of a property.
- Property Tax (IBI): The property tax is a local tax levied on the basis of property value. It draws on the assessed value of the property, which does not correspond to the purchase price, but a lower value provided by the City.
- Income Tax Non-resident (IRNR): In the case of the acquirer of the property residing outside the Spanish territory, it must pay the Income Tax of Individuals, charging the estate income derived from the property of the estate.
- Owners Maintenance Fees: Depending on the community, these are paid once or twice a year or even every three months. The amount depends on the amount of community owners and public areas.
- Expenditure on housing supply: These are the running costs of a building and are usually bi-monthly. The most common are electricity, water and gas.
B) Residence in Spain for investors at or above 500,000 euros income.
Non-residents in Spain intending to enter Spanish territory in order to make a significant capital investment may apply for a residence permit, or if appropriate, a residence for investors. The granting of the residence permit would be sufficient for investors to reside in Spain for at least one year.
If you want to obtain a residence visa, the applicant must supply the certificate or certificates from the Land Registry corresponding to the property or properties acquired to a value equal to or greater than 500,000 euros. The initial residence for investors will run for two years. Once this deadline passes, those foreign investors who are interested in residing in Spain for a longer period may apply for a renewal of the residence permit for investors for the same period of two years.
C) Acquisition by corporation.
The buyer can purchase the property through the establishment of a Spanish corporation. The constitution will be made by public deed before a notary, which will later be entered in the Commercial Register and will then proceed to obtain a Tax Identification Number (NIF) and the subsequent liquidation of taxes and expenses.
The non-resident who has acquired a property in Spain is recommended to give testament to a Spanish Notary relating to properties located in Spain. This would facilitate the paperwork on the transfer of ownership at the time of his death.
The information and opinions contained in this information notice do not constitute any legal advice.