Buyer Guide

BUYING, SELLING AND OWNING PROPERTY IN SPAIN.

Legal issues


Basic notions for foreign people

  • HABITUAL RESIDENCE IN SPAIN. Someone is legally considered a habitual resident in Spain when the person stays within Spanish territory for more than 183 days per year or if the main core or basis of his/her activities or economic interests are in Spain in a direct or indirect way.

  • N.I.E. In Spain each person (resident or not) is assigned a fiscal identification number that must be recorded in income tax declarations and in any communications addressed to the Tributary Administration.  This is a compulsory part of the purchasing procedure.

Nowadays obtaining the NIE takes between 3 or 4 weeks. You must apply for it as soon as possible. We advise you to visit a notary in order to obtain an attested photocopy of your passport, which is required in order to request the corresponding NIE. You can also go directly to a police station.

It is also possible to apply for the NIE in the Spanish embassy of your native country and the process is generally easier.
All non-European citizens will have to justify their crossing of the border, namely, in the frontier position the document should be rubber-stamped.


PROCESS

1. Choice of the property
We advise you to visit reputable real estate agencies.


2. Private Contract
After the property has been chosen: In addition providing advice, BARLEIGH ELLIS - PHRURUS S.L.U - will also apply for all the juridical information (property deed, registrar document, I.B.I. etc). However, if necessary, the buyer can contact a specialized real estate attorney in order to have complete peace for complete peace of mind tranquility if he/she considers it necessary.


3. The property can be acquired
a) Directly through public deed granted by a notary.
b) By means of private buy and sell (deposit); this contract is ruled by the will of the parties. Normally there is no transmission of the possession and the buyer delivers a sum of money on account. There are two types of deposit contract: penitential or confirmatory deposit.The first case is known as the arras of 1454 of the civil code, which means that the parties agree that if the buy and sell deed is not carried out due to fault of the buyer, he or she will lose the delivered sum of money and if it is the seller’s fault, he or she will have to return the money received and will have to pay to the buyer an additional amount, as penalty, equal to the one received.In the confirmatory case, the contract has to be executed by both parties unless the buyer and seller have agreed on a penalty between themselves.
c) There is also the possibility of a call option. In this case, the seller cannot, during the period of the option, sell to third parties; it has a fiscal incidence since the price of the option pays 1 %.


4. Inscription in the Record of the Property
In Spain, it is essential to record the title of the property of the building in the Record of the Property, since it is public, and from the moment of its registration, has juridical effects opposite to third persons. This information is extremely important because if we do not register our property in the Record, seizures or other types of charges can relapse into the above mentioned property, being the said property still addressed to the seller, and later the buyer might become deprived of his/her asset, on having had been executed due to debts of the seller (without prejudice of the juridical actions that later could protect the buyer).
The term of inscription is one month.
In the moment of issuing the deed we need to have:
  • Buyer’s NIE
  • Receipt of the IBI
  • Certificate of the owners’ community if it is the case issued less than eight days before, specifying has paid all his/her fees with the community and if there are pending works to carry out (if they have been agreed by the Board 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 proved which means that the amounts of money given on account must have a slip of transfer or check with origin of the account
  • To have the last receipts of water, electricity to be able to carry out the change of titleholder.
  • Local property certificate Cedula de Habitabilidad. This is a document from the local government that certifies that the property has met the requirements to be officially lived in.
Note: From 1/6/2013 it is compulsory that all properties have a CEE – Certificado de Eficiencia Energética, which details the property’s energy efficiency rating. The purpose of this document is to show a buyer the property’s potential running costs.
 

5. Costs
Generally, the inherent expenses in a purchase are the following:
  • Value-added tax: In Spain, if the seller is a businessman, the operation of dealing is submitted to the Value-added tax. In the dealings of housings of new construction, nowadays it is applied a limited type of 10% on the price of the said housing. The Value-added tax regarding dealings of lots and premises is 21%. If this Tax is not applicable or if the seller is not a businessman (he/she is an individual), then the dealing (of housing, lot or premises) will have to pay for Tax on Patrimonial Transmissions which is presently established at 10%.

  • Notary fees: They are established in proportion to the value of the building, and are applied according to duties previously established.

  • Tax on Patrimonial Transmissions: The current tax rate is 10% on the price that appears in the public deed.

  • Transfer Tax and stamp duty: If I.V.A. has been paid in accordance with the explained in the previous point in reference to this tax, the buyer must pay an additional Transfer Tax and stamp duty, whose current rate in Catalonia is 1,5 % of the dealing price.

  • Municipal Tax on the Increase of the Value of the Areas of Urban Nature (known as Plus Valia Bonus): It is a tax that that is paid at municipal level, namely in the Town Hall where the asset is placed. This tax burdens the increase of the value of the land. For its calculation, the number of years passed between the date in which the seller acquired the asset, and the date of the current transmission are taken into account. It is based on the value of the land that appears in the receipt of the real estate tax. Every Town Hall then applied their own scales later. In accordance with current laws, the above mentioned tax must be paid by the seller in Catalonia.

  • Record of the Property Fees: The Record of the Property receives duties for the inscription of the deed of dealing, duties that change by virtue of the value of the property.



6. Taxes and annual payments for the ownership of the property
After seeing the steps and payments that are necessary for the acquisition of the property, the non-resident owner will have to pay three types of annual taxes. Just for reference, the above mentioned taxes are:
a) Tax on Real Estate: It is a municipal Tax (to be paid to the Town Hall where the asset is located). Both residents and non-residents must pay it. It is calculated based on the value that the Town Hall assigns to the property (property value), and each Town hall applies its own particular coefficient.
b) Income tax for Non-Residents: Depending on the destination of the building, the revenues submitted to charge are the following:
  • Revenues imputed of urban real estate from OWNER’S USE: The performance to declare will be the sum of applying 1,1% to the property value that appears in the receipt of Tax on Real estate (I.B.I.), if this value has been checked before January 1st, 1994 (something that is common in the vast majority of cases); Otherwise it is necessary to apply 2%. On the resulting quantity, the tax rate of 24% must be applied, which will give the quota to pay.
  • Revenues obtained from HIRED real estate: The performance to declaring is the complete amount paid by the lessee, without deducting any expense. The above mentioned quantity is burdened by 24%.

c) Tax on the Heritage of Non-Residents: Suppressed.



7. Earnings derived from the sale of Real estate in Spain
Normally, the profit will be decided by the difference between the values of acquisition and of transmission.
The value of acquisition will be calculated by taking the real amount for which the building object of the transmission was acquired as a base, to which the amount of the expenses and taxes inherent in the acquisition will be added, excluding the interests, that had been paid for the current person who undertakes the transmission. Depending on the year of acquisition, this value will be corrected by means of the application of a few updated coefficients that are established every year in the Law of General Budgets of the State.
The value of transmission will be the amount appearing in the public deed of sale, from which it is necessary to deduct the amount of the expenses and taxes inherent in the transmission that have been paid by current seller (for example, fees of the real estate agency). By virtue of the date of acquisition, several reductions in the Tax on the Heritage can be applied (if the property that is now transmitted was acquired before 31.12.96).
The fee that burdens the benefit calculated, as previously explained, is 19%.
But for years 2012 and 2013 and follow the imposition is 21%.


8. Retention on account of the benefit for the sale of a building
When the seller is a natural or juridical non-resident person in Spain, the buyer, independently from being a resident or not, will have to withhold 3 % of the price that appears in the public deed of dealing, and will have to deposit it, in the term of one month (from the date of issuing the above mentioned Deed) into the Tributary Agency.
This retention has for the seller the character of payment on account of the tax that he should pay for the benefit obtained on having sold his/her building. Therefore, the buyer will have to deliver the 211 Form, to the seller. This form proves that 3% has really been deposited in the Tributary Agency and therefore the seller can deduce the above mentioned quantity from the amount that he should pay for the benefit obtained in the sale of the building if the quantity retained and deposited in the Tributary Agency (3%) is superior to the quantity that should be deposited with a view to the obtained profit.
This document is purely informative; under no circumstance is it binding and subjected to review specially in its fiscal paragraph having into account the changes in this matter.

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