PURCHASE PROCESS IN SPAIN

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WHAT TO KNOW WHEN BUYING A PROPERTY IN SPAIN

THE BUYING PROCESS

When you decide to purchase a property in Spain, engaging a reliable estate agent is the first logical step.

He can help you find what best suits your requirements and wishes.

With this, we offer you lawyers/lawyers who will describe to you the basic guidelines you will encounter during the purchase process in Spain.

Or, of course, you can choose a lawyer/lawyer yourself.

FOREWORD
To get your chosen property off the market, it is customary for the buyer to pay a deposit.

This amount varies in proportion to the purchase price of the property but is usually between EUR 3,000 and EUR 10,000.

This amount can be transferred to the third-party account of your legal representative or your estate agent.

ImmoMoment will always have the advance transferred to the legal representative's third-party account.

DUE DILIGENCE
Once the advance is paid, the lawyers/lawyers will request the necessary documentation.

This gives them access to investigate and verify all aspects related to the property in question, such as:

PURCHASE PROCESS WITH A PROPERTY DEVELOPER (NEW CONSTRUCTION)

1. The legal identity of the owner/seller of the property you wish to purchase;

2. That the property under construction is legally registered in the Property Register ('Registro de Propiedad');

3. That the property is free of debts and encumbrances (mortgages, pledges, etc., ...).

It is common for the developer to use financing which can take the form of a mortgage loan on the property.

If the buyer is not interested in taking over part of a mortgage loan, this loan must be cancelled before the final deed is executed.

These costs should be paid by the property developer.

4. That the property has the required and corresponding building permits, that it complies with the local planning laws, that it has the declaration of habitability issued by the municipality.

5. That the architectural specifications and quality provisions are transferred to the buyer and included in the annexes to the purchase agreement.

6. That both bank guarantees and insurances are arranged to safeguard all monies paid to the developer during the construction process.

7. Verification and confirmation of the content of the compulsory "10-year insurance guarantee" (seguro decenal) covering risks related to possible structural defects in the property.

8. Verification and analysis of the sales agreement drawn up by the developer so that the buyer's rights are protected and fully understood by the buyer.

PURCHASE PROCESS RESALE / PURCHASE OF A PROPERTY OTHER THAN A NEW BUILD

1. The legal identity of the owner/seller of the property you wish to buy;

2. That the property is legally registered in the property register;

3. That the property is free from all encumbrances and debts (mortgages,
encumbrances, pledges or debts of any kind);

4. That the property has the required and corresponding building permits
4. That the property has the required and corresponding building permits, complies with local planning laws, has the
That it has the certificate of habitability issued by the municipality.

5. Study, drawing up and signing of all kinds of private agreements (down payment-
5. Study, drafting and signing of all kinds of private agreements (purchase agreement, option agreement, sales agreement) and public, notarial documents and agreements (e.g. final deed of sale) necessary to execute the purchase transaction.

The standard procedure consists of first signing the private purchase agreement, paying 10% of the agreed purchase price, and then signing the final (authentic) deed after a reasonable period has elapsed.

TAXES AND COSTS
The taxes and costs resulting from the execution of the final deed of sale before the notary are as follows:

IN THE CASE OF A FIRST TRANSFER (NEW CONSTRUCTION)
‣ VAT ( IVA )̈: 10% for residential property. (VAT 21% on land, garages and storage areas).
‣ Stamp duty: +/- 1.5%
‣ Notary fees: notary fees are calculated according to a fee schedule agreed with the
authorities and depends on the nature of purchase/sale and the number of pages in the final deed of sale.

Each notary applies the same fee for the same concept.

The fee for the purchase of a typical residential property varies between EUR 500 and EUR 1,800.
‣ Registration costs in the 'Registro de la Propiedad' (property register): the costs applicable when registering in the property register are calculated according to a fee schedule agreed with the authorities. In a normal case, these costs will be around 50% to 70% of the notary's fee.
‣ Legal fees lawyer: 1% of the agreed sales price + 21% VAT

IN THE CASE OF A RESALE

‣ Transfer tax:

Costa Blanca: 10% - Costa Del Sol: 7%

Costa Del Sol previously

8% on amounts up to EUR 400,000, 9% on the amount between EUR 400,000 and EUR 700,000

and 10% on the amount higher than EUR 700,000.
‣ To clarify: for a property with a purchase price of EUR 1 million, the first EUR 400,000 is taxed at 8%, the part of the purchase price between EUR 400,000 and
‣ EUR 700,000 is taxed at 9% and the part above EUR 700,000 is taxed at 10%. In this example, the transfer tax is EUR 32,000 + 27,000 + 30,000 = EUR 89,000

Today, this is only 7% on the Costa Del Sol, whatever the sum of the property.

‣ Notary fees:

Notary fees are calculated according to a fee schedule agreed with the authorities and depends on the nature of purchase/sale and the number of pages in the final deed of sale.

Each notary applies the same fee for the same concept.

In a normal case, these costs will be around 50% to 70% of the notary's fee.
‣ Legal fees: 1% of the agreed sales price + 21% VAT

NOTE: In case of purchase of a property by means of a new mortgage loan, registration and notarial fees apply as well, as this is a separate deed that needs to be registered.

Stamp duty of 1.5% is also applicable on the amount of the mortgage loan.

LAWYER SERVICES
‣ Applying for your NIE number.

The NIE number is a tax identification number for foreigners, intended for Spanish tax authorities.

You need this number to register your purchase in the property register, pay taxes and contract all kinds of utilities (water, electricity, telephone, etc.).
Checking existing debts related to the property in question, such as the IBI (= property tax OV / property tax OZB), monthly charges related to the community of owners, outstanding debts related to utilities and calculation of the applicable municipal tax.

Calculation and withholding of capital gains tax in cases where the seller is a non-resident, which - in accordance with Spanish law - must be deducted from the sale price.
should be deducted from the sale price (3% concept)
Payment of costs, taxes and duties related to the final deed and its registration in the Property Register.

THE PRIVATE PURCHASE CONTRACT
Once the lawyers have done their due diligence and found that everything is in order, the preliminary sales contract can be drawn up and signed 2 to 3 weeks after the down payment.

When this contract is signed, it is customary for the buyer to pay 10% of the agreed sales price in the case of a resale.

In the case of a newly built or yet-to-be-built property, 30% of the sale price is paid.
The preliminary sales contract is a very important step in the purchase process: after negotiations have taken place with the seller's lawyers to defend the buyer's rights and interests, it lays down these specific conditions and requirements of the sale.

POWER OF ATTORNEY

Many choose to grant power of attorney to lawyers in Spain so that they can act for them in the purchase process.

This will allow them to complete formalities and sign documents related to the purchase of the property and any mortgage loan.

The power of attorney is endorsed by a notary in Spain (cost +/- EUR 70.-) or at the Spanish consulate in your home country.
The power of attorney can also be endorsed by a notary in your home country but in this case it needs to be legalised by means of an apostille stamp according to the rules of the Apostille Convention (Apostille of the Hague Convention) to be legally valid in Spain.
Of course, the lawyers will also assist you in this procedure if you opt for granting a power of attorney, in Spain or abroad.

THE FINAL DEED OF SALE

(Authentic Deed)
About 4 to 6 weeks after the signing of the preliminary sales contract, and depending on the conditions agreed with the seller, the final deed of sale will be signed.

This is done either by the buyer with the assistance of the lawyer, or by the lawyer with the power of attorney mentioned above. The signing of the final deed of sale is also the time when the balance of the agreed purchase price must be paid to the seller, and when the buyer becomes the owner of the property and takes possession of it.

UTILITIES, COMMON CHARGES, CLEANING LEVY, MUNICIPAL TAXES
The lawyers/law firm will also arrange for all utilities, (municipal) taxes and other charges directly related to the property to be put into the buyer's name and paid.
It is necessary to open a bank account in Spain to pay these utilities, municipal taxes, cleaning charges, any common charges etc.

The lawyers will also assist you in opening a bank account in Spain and if you wish they will arrange direct debit for all these payments from your Spanish bank account.

OTHER COSTS TO CONSIDER

INCOME TAX FOR NON-RESIDENTS
Regardless of whether you rent out your property or not, you must pay income tax at all times according to the following rules:
‣ If you do not rent out your property, the Spanish tax authorities will assume that you acquire ''notional rental income'', which is subject to non-resident income tax.
The amount is determined by applying an assessment of 1.1% to the cadastral value of the property (=the ''taxable base'') and then applying a tax rate of 19% for EU citizens and 24% for non-EU citizens.

The cadastral value of the property is stated on the IBI (Valuation of Immovable Property) invoice and is generally lower than the purchase price stated in the final purchase deed.
‣ If you rent out your property, the net rental income is the taxable base and the 19% assessment applies to EU citizens and 24% to non-EU citizens.

According to the new law, EU citizens may deduct from the gross rental income the costs incurred while renting out the property: electricity, water, common costs, insurance, interest on the mortgage loan, IBI, cleaning tax, maintenance, cleaning, legal and tax assistance related to income tax return, as well as depreciation of 3% depreciation of the property.

In this case, a certificate of tax residence, issued by the tax authorities of the country where you have your tax domicile, should be attached to the tax declaration (and this for every taxpayer).

WEALTH TAX
This tax applies to tax residents with regard to their worldwide assets, and to non-residents with regard to properties in Spain, if the taxable assets exceed EUR 700,000. If the property in question counts as a principal residence then an additional exemption of EUR 300,000 applies.
The wealth tax is payable on the total value of your taxable assets on 31 December each year.
The progressive assessment varies between 0.2% and 2.5% on taxable assets greater than EUR 10,695,996. This wealth tax should be paid before the end of June in the following year.
‣ Common charges;
‣ Property tax/real estate tax,
cleaning tax;
‣ Electricity, gas, water, telephone, etc;
‣ Home insurance. The owners' association will
insurance for the common parts (building insurance), but we recommend you take your own insurance for house and contents;
‣ A lawyer/law firm will have the relevant specialists to assist you in calculating and paying your annual income tax.

RENTAL
Since the regional laws in force in May 2016, properties rented out for tourist purposes (for stays shorter than 2 months) must be registered with the tourism department of the regional government (Junta de Andalucia).

These properties must meet basic requirements laid down in the regional laws.

Lawyers are at your disposal to carry out this registration procedure with the relevant authorities.

DRAWING UP A WILL IN SPAIN
If you have purchased property in Spain, or you own other assets such as bank accounts, life insurance policies, shares, bonds etc. in Spain, drawing up a will in Spain is strongly recommended. A Spanish will ensures the smooth distribution of your Spanish assets and avoids future formalities, complications, delays and additional costs arising from the settlement of inheritances and estates of your assets located in Spain.

In the will, the testator can choose the law of his/her nationality as the law relating to his/her bequest. This choice allows the testator to freely dispose of his/her Spanish assets according to the rules of the law of his/her nationality. Thus, the testator avoids, at least, the forced regulation under Spanish law. In the will, the testator will designate his/her heirs, specify percentages of allocation and list other specific assets for allocation.

If no Spanish will has been drawn up and a foreign will needs to be legally made in Spain, this will involve time and additional costs. If no will has been made then - for the distribution of the
Spanish assets of the deceased - the inheritance law of the country where the deceased had his/her last habitual residence will apply.
Moreover, the testator can have specific rules drawn up in the will for the distribution of assets to be followed, as well as appoint an executor of the will to oversee its execution. The will may also appoint a guardian for any minor children.

In short, a Spanish will makes inheritance matters regarding Spanish assets faster, easier and less costly.

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