If you are non-resident in Spain and looking to purchase a residential property, you will need to be aware of the documents you will need before you can make the purchase, the taxes you will pay on your purchase and the annual taxes that you will become liable for as a spanish home owner.
National Identification Number (NIE)
In order to acquire a property in Spain it is compulsory to have a National Identification Number (NIE), which is a unique personal number. The most efficient way to apply for an NIE is through a Spanish Lawyer or “Gestoria”, via a Power of Attorney.
We can recommend a number of English speaking Spanish Lawyers who offer this service.
A Power of Attorney is signed in front on a Notary and gives the lawyer the power to represent you in as many capacities as you require. Alternatively, if you are not in Spain you can sign a Power of Attorney in a Notary office in your home country and have it ratified by the FCO or Embassy.
You can also apply for an NIE number in person at the Spanish embassy in the UK.
Spanish Bank Account
Having a bank account in Spain is essential for a property purchase. Opening a new account is free and takes about 45 minutes. The bank will require a passport for each name on the account and proof of address.
There are a number of different types of account available from the Banks, each with different monthly or annual fees.
On line banking is simple and easy to use. Many of the banks now have Apps or Websites available to use in English and we can recommend banks with English speaking staff in their branches.
Taxes/Fees to be Paid when purchasing a Property in Spain:
When you purchase a property in Spain you need to budget for a range of additional purchase costs, which include taxes as well as fees for the completion of the transaction.
In general, you will need to account for between 12% and 14% of the purchase price to be paid in cash at the point of completion.
These additional charges break down as follows:
All taxes and expenses associated with the purchase of a home must be paid in Spain. These include ITP (Transmission Tax) which is paid on second hand (or resale) properties, and IVA (or VAT) which is paid on newly built properties.
The transmission tax (ITP) levied on the purchase of a second-hand (or resale) home varies depending on the Autonomous Community that the property is located in. In the region of Valencia the rate is 10%, however in the region of Murcia it is only 8%.
Brand New Properties have a higher taxation rate of 12%, which is made up of 10% IVA Tax plus 2% Stamp Duty.
The sale contract must be notarised to be considered legal. Notary fees vary as the notary charges a set fee for each page of the document produced, but in general you can expect these fees to be in the region of 600€ to 800€.
Land Registry Fees
Again these fees vary between properties, but you can expect to pay between 400€ and 600€.
Many Spanish Solicitors or “Abagados” now offer fixed fee services but in general you can expect to pay around 0.9 to 1.1% of the purchase price.
We can recommend a choice of excellent English speaking solicitors.
If you require a mortgage then you must also pay additional “arrangement” fees.
Typically these fees will include:
- Valuation Fee
- Land Registry Fee (to check the current status on the property)
- Notary Fee
- Mortgage Opening/Arrangement Fee
- Mortgage Insurance Fee
There are two banks that have reduced their fees to a minimum:
La Caixa Bank are offering a “no fee” mortgage but have very strict criteria.
Banco Sabadell however will only charge the buyer the valuation fee, and a mortgage arrangement fee. The other banks will still charge all the above listed fees.
Utility Connection Fees
If you purchase a brand new or bank repossessed property you will have to pay connection costs for the utilities, including the installation of a meter. These costs do vary between suppliers, but you could expect to pay around 200€ per utility connection.
Annual Property Taxes in Spain:
Once you own a Spanish property, you have to pay two separate annual property taxes:
IBI or SUMA - Impuesto Sobre Bienes Inmuebles
This tax is levied by the local Municipality (or town hall) and can be thought of as the equivalent of “Council Tax” in the UK. It is used to provide services in the local area including rubbish collection.
The amount varies between localities, but it is collected annually on a date specified by the local town hall, and is based on the property’s CADASTRAL value as calculated by the government. It is normally only a few hundred euros per year.
Non-Resident Income Tax (IRNR)
In Spain, there is a Non-Resident Income Tax (IRNR), often called “Wealth Tax”. This is a direct tax levied on property owners who do not permanently reside in Spain, and use the property as a second, or holiday home.
The Non Resident Tax declaration is made in December and is approximately the same amount as the IBI or Council tax charged, normally a few hundred euros each year.
If you want to use your holiday home for holiday rentals, you would be expected to pay Spanish taxes on the rental income and NOT IRNR. You would need to submit a quarterly tax return to validate the tax required to be paid in this instance.