Buyers Guide

What does it cost to buy a property in Spain?

When buying a property in Spain, it is quite different from buying a home in other countries. In Spain, trade costs must be added to the advertised cash price, which is typically between 10-14% of the purchase price.

 

Trade costs is:

1. VAT (new construction / sales tax)
2. Notary
3. Registration fee
4. Lawyer Supply contract (electricity, water and gas if applicable)
5. NIE-number
6. Power of attorney and legalization of these from the Ministry of Foreign Affairs.

In Spain, the seller enters into a sales agreement with the selling estate agent and agree the commission for sale. If another estate agent finds a customer who wants to buy the home, the commission is divided between the seller and the buyer's agent, by agreement.

Selling through multiple estate agents is widely used in different counties and enhances the selling possibilities.

 

NIE number

An NIE number is personal and is assigned to all foreigners in Spain, in order to identify them in relation to the Spanish authorities.
The number must be used for practical tasks, such as buying a home, setting up a bank account, insurance, buying a car, working etc.
An NIE number can be ordered at the Danish Embassy in Denmark, but it takes much longer than getting it in Spain.

 

Notary

After signing the purchase agreement (contrado de compraventa) the property must be transfered to you, at the notary.
A notary costs money, because they check that all stamps are correct and that the correct papers are prestented.

 

Registration fee

This expense is usally paid by the buyer.
The tax is only fixed when the deed has been prestented, but as a rule, approx 0,4% of the purchase price is usually set aside for this, then it can’t go completely wrong.

 

VAT / And trade tax

Project sales such as new construction, ie. where no one has owned the property before, 10% VAT is added to the agreed purchase price.
If the seller is a property developer, also 10% VAT (IVA) is paid plus surcharge of 1,2% in stamp duty.
If you buy a building plot or parking space, the VAT here is different, namely 21%.
If a resale is bought, a dwelling that has been owned before, no VAT is paid but instead an impuesto de transferencia, a trade tax and this is 7%.

 

No survey report or change of ownership insurance

You buy property in Spain as seen, which is called (cuerpo cierto).
You have to use your common sense or pay to get a building expert with you, it does not cost a fortune.
The property is sold with legal electrical installations and energy certificates and it is the owner who must pay for this.

 

Financing

If you need a mortgage to purchase your property in Spain, you have several options.

1. Credit unions
2. Spanish Bank
3. Your own bank back home

Credit unions offers mortgages up to 70 % of the assessment of the property value.

When financing though a Spanish bank, you usually mortgage 50-70%, the loan to value ratio is determined on the basis of the lowest value of the valuation and the purchase price.

Financing via your own bank back home is often also an option.

 

Expenses related to owning a property in Spain

Council tax (IBI): this tax is a local tax on properties in Spain, regardless of whether you are a permanent resident of Spain or not, this must be paid.
IBI is calculated on the basis of the property value, which is determined by the council.

Personal income tax (IRNR): If you own real estate in Spain and do not live there, or have income through renting out the home, the tax is calculated on the basis of the value of the property.
The percentage is either 19 or 24%.

If you do live in Spain, you must pay income tax based on your annual earnings, depending on its size.

Communal charges will be an extra fee if the home is a part of a residential area with common areas and all owners must by law be members of this association. All owners in this association pay for common areas such as pool, elevator, fitness, garden maintenance etc.

 

Utilities

Regardless of whether you buy new construction or resale, a contract must always be entered into with the utility companies like (water, electricity and gas if applicable). This usually costs around 50 euros.

 

Bank account

When buying a property in Spain, it is required that you have a Spanish account where there should be money for utilities etc., as in Spain they immediately shut off water, etc., if there are unpaid bills.

 

Lawyers in Spain

It is always recommended to have legal help when buying property abroad, as this is somewhat different from a sale back home.

A lawyer can help with things like:

1. Is the land and property free of debt and encumbrances
2. Translation of contracts to your language
3. Help to apply for NIE number
4. Obtaining bank guarantees for e.g. prepaid amounts on new construction
5. Investigates whether there is a building permit for the home
6. Assist at the notary in transferring the property to you
7. Advice with wills
8. Deeds
9. Registration of utilities, fixed expenses, etc.

 

Registration of a holiday home for renting

Junta Andalucia’s tourist register is the place to register your home if you want to use it for rental.
There has been a lot of focus on rental in the recent years and rules have also been tightened up a lot.

Among other things on what should be available in the property and various requirements.
At junta Andalucia, the department of holiday rental is called viviendas con fines turisticos, which allows private rentals.

Tax on the profit from rental must be settled, but it is not as before, when it was required that the landlord was registered as self-employed with the Spanish authorities and the rental is not subject to VAT (IVA) .

A requirement for letting is that you are in possession of a commissioning permit (LPO), which can be a problem for homes built without a statutory building permit, this should be investigated whether the documents can be obtained.

Rental of the holiday home in Spain must be declared to the Spanish tax authorities as you are taxed in the country where the property is located.

If you are not permanent resident in Spain, tax is settled on the profit from the letting in the annual tax return.

 

Bonus info for those living in Denmark*

Remember that if you have a holiday home in Spain, you can use your personal tax allowance deduction in the same way as with a holiday home in Denmark.
The property value tax you pay in Spain, you deduct when you pay property value tax in Denmark.
The result is that you pay 1% in property value tax whether you have a holiday home in Denmark or in Spain.