I.B.I . (Impuesto Bienes Inmuebles)

This is an annual real estate tax levied by the local town hall and is usually 0.85% of the catastral value (Valor Catastral). This value is the assessed value for tax purposes and is important because other taxes are based on it as well. When you buy, you want to see the seller’s last receipt for the IBI payment. This contains the value and the exact amount of the tax.

Rubbish collection & water rates (Basura) (Agua)

The rubbish collection rate is applied by the Town Hall according to the property and payable every 6 months. For an apartment in Marbella rubbish collection is approximately €162 and a villa approximately €242 per year. Water consumption is calculated by the water meter consumption in cubic meters and is payable every 3 months. Payment can be made directly at the Town Hall or by bank with direct debit instructions.

Property Income Tax

This is an annual tax due to be paid the year following the tax year in question.

Any potential earnings on the property you wish to buy, say from renting a frontline golf apartment, will not be taken into account by Spanish banks.

Non-Residents (IRNR)

Non-residents must pay Income Tax (IRNR) on income received through the ownership of property in Spain. There are two forms of taxation applicable depending on the source:

A. Actual income gained on property rentals: 24% on returns less deductibles
B. Deemed income. The Spanish tax agency attributes to you an imaginary income each year of 2% of the catastral value of your property. It then charges you the income tax rate of 24% on this imaginary income. You can also think of it as one half of one per cent of the catastral value.
If your catastral value was sharply increased after 1994, your imaginary income is only 1,1 per cent.

Community Fees

These are fees paid to the Community of Owners for services and maintenance of communal areas, when the property is located in a development or condominium apartment building.

These communities are subject to Spanish law of Horizontal Division. All property owners of the block form the Community of Property Owners. They are responsible for their individual parts and common areas of the block. They all participate in the expenses of the community on a pro-rata basis. Every apartment of the block has a share in the communal areas, usually proportionate to the size of the owner's property.

A budget for the annual community expenses is presented at the annual general meeting of the homeowners, and they or their authorized representatives must approve the budget by majority vote of those present at the meeting. Expenses can vary substantially according to the services provided, and normally include salary and social security of the hall porter, common garden maintenance, lift maintenance, repairs to common elements, rubbish collection, water for watering community gardens, electricity for lighting communal areas, insurance, security, and administration fees. The President of the community must, by law, own a property within the complex itself and is chosen by way of vote by the co-owners. The President should have no remuneration for this role.

Next Article - Mortgages

In very general terms you will need to consider adding approx 11.5% to the property purchase price to cover the purchase costs however this is variable dependent on the type of property purchased, its value and the complexity of the transaction.

Transfer Tax (ITP)

When purchasing a resale property there is an 8% transfer tax payable by the buyer (currently reduced to 7%, 2022), known in Spain as Impuesto de Transferencia de Propiedad (ITP), upto €400,000 then up to €700,000 9% and 10% above this amount. For off-plan purchases the tax is still 10% but is referred too as IVA (VAT) plus an additional 1.5% transfer tax.

If the property in question is a garage/storage or a plot of land then the tax rate is 21% and an additional 1.5% transfer tax.

Notary Fees, Land Registry, Stamp Duty
Notary fees can cost up to approximately €1.750 although the cost increases according to the number of pages or complexity of the title deed (e.g. transcription of statutes, payment in stages, property partially finished, etc.). As an example, an apartment costing €300,000 couldcost around €546 in notary fees, whilst a property costing €600,000 could cost around €678 in notary fees. Any higher than this amount, the fees go up marginally.

The property registry inscription fees also depend on the complexity of the transaction. For example, fees for an apartment costing €600.000 to be registered in the name of one person and purchased without a mortgage loan, could cost around €300. For an apartment with the same sales price to be registered in the name of 2 persons and purchased with a mortgage loan, could cost around €800.

Lawyers Fees
Lawyer's fees are generally 1% + IVA of the selling price but will depend on the lawyer own fee structure and the price of the property.

Municipal Added Value Tax (Plus Valia)
This is an “added value” tax based upon the increase of the Town Hall index value of the land only, from the prior (vendor's) purchase to the present sale. It is usually not a significant amount with respect to apartments or townhouses – less than €1000 for the most part for an apartment or townhouse which last changed hands five or six years ago – but can be more in the case of villas with a large tract of land.

This tax corresponds, by its nature, to the vendor who is responsible for its payment, unless otherwise negotiated. As there are several variable factors used in calculating this tax, especially the length of time of ownership of the property, the amount payable can vary substantially and should be verified before proceeding with the purchase.

Next Article - Property Ownership Costs

Completion - Preparing for signing

Whichever type of property you decide to purchase, the Escritura (title deed) should only be signed once your lawyer has carried out all relevant checks to confirm ownership of the property, that’s its free of debts, etc.

Your lawyer will have agreed a payment method and structure with the vendor before completing at the notary. Bank-guaranteed cheques issued by a branch on the Costa del Sol are the preferred method, though it should also be possible to transfer funds to the notary's escrow account.

You will require certain necessary documents with you when you go to the signing including an N.I.E number, your lawyer will inform you of everything you will need to take to the Notary.

Though it is always best to attend the signing in person, a power of attorney can be granted to your lawyer to represent yourself. The easiest way to grant power of attorney is to sign one before a notary in Spain, though at greater expense one can also be arranged through the Spanish consulates in the UK or through a British notary. All involved parties, the vendors, buyers and mortgage lenders, have to be present represented by powers of attorney at the signing of the escritura.

When can you sign the title deeds?

When buying a resale property you or your representing party will sign the deeds before notary at the pre agreed date as discussed with the vendor. The time period between acceptance of the offer and signing of the title deeds varies. As a rule of thumb, it is between 1 and 3 months after signing a private contract.

When buying a newly built property from a developer you are not obliged to sign the escritura (title deeds) until the developer is able to produce the ‘Certificado de Final de Obras’ signed by the architect.

Notary

In Spain you cannot inscribe your title in property, unless a Spanish notary witnesses the deeds of sale. According to Spanish law a notary's signature is required to raise a private contract into public deeds that can be inscribed in the land register. Until signed by a notary, you are not the owner of the property according to property register.

In theory a private contract between buyer and seller is fully binding on both parties however, it is crucial to inscribe the title in the property register, as it is the only truly secure form of property ownership in Spain.

The notary will confirm the identity and other personal details of all buyers and sellers present or represented, and then read the deeds out loud. The title deeds will be in Spanish so you need to be sure the deeds are correct before you sign them by having a translator present or relying on your lawyer. Some notaries will refuse to sign the deeds unless it is proven that the buyer understands what he or she is signing.

If there are no objections to the content of the deeds the notary will commence the signing stage, followed by outstanding payments by the buyer prior to the keys being handed over.

After signing the deeds you will now be the proud owner of a property in Spain.

You will be given a Copia Simple (copy of the deeds) to take away after the signing. The Copia Simple allows you to set up utility contracts and pay taxes. A few weeks later your lawyer will be able to collect the original deeds signed by the notary (Copia Autorizada), which are needed to inscribe your title in the property register.

Next Article - Purchase Costs & Taxes

Offer and Acceptance

Once you have found your ideal property you will need to make an offer and once accepted you must secure it through an agreement that is legally binding between buyer and seller.

The first step is to  give an offer of purchase through your agent. This written offer states the conditions you are willing to offer for the purchase, the sales price, when you plan to complete, any special conditions required (for example: inclusion of furniture, subject to you getting a mortgage, etc).

On written acceptance of the offer, the property is taken off the market. It is advisable that this offer is in writing and will also require a small deposit normally set between €3,000 and €6,000 to demonstrate to the owner your intent to purchase is serious.  This deposit is normally held by your lawyer until the private contract is signed.

Anti Money Laundering

In order to comply with strict anti money laundering laws you will be required to provide to your lawyer and estate agent the following information:

• Passport copy for all purchasers
• Full main residencial address
• Utility bill dated within last 3 months
• Description of source of wealth for the purchase
• KYC - Know your client form

Searches and Private Contract

With your offer now accepted, your lawyer will check the land registry to make sure the property is properly registered and that there are no liens or encumbrances. The lawyer will arrange the payment structure with the vendors representative prior to going to notary and prepare a private contract that will bind both parties.

Upon signing the private contract, a payment on account of the purchase price will be required according to the terms of the sale and the date of completion. The payment would be approx 10% of the agreed purchase (less the orginal deposit already paid) price which would be set against the agreed sales price.

The private contract will state the date by which the sale must be completed. It is very important that the purchaser be fully aware of the implications of failing to meet this completion date. Invariably the result will be the total loss of the deposit. If, on the other hand, the seller fails to meet his obligations under the contract by the given date, then the deposit will be refunded and damages may be sought in relation to losses incurred.

Eventually the lawyer will prepare the public deeds for signature in front of a Spanish Notary, when the balance of the purchase price is paid and vacant possession of the unencumbered property is granted, thereby completing the sale.

A purchaser will also be required to apply for an NIE (Numero de Identificacion de Extranjeros) which is simply an official identification number for non Spanish nationals. The application must be made prior to signing and taking position of a property. Your lawyer can arrange this for you.

It is also important to open a Spanish bank account prior to purchase in order that your lawyer can set up standing orders for future payments of the property utilities and taxes.

Mortgages
If the buyer requires a mortgage to purchase a property, an official valuation must been conducted. Most property assessors charge around 280€ to perform an official valuation.

As part of the Spanish mortgage application process the lender will require copy of a Nota Simple that confirms that the property is free of any other unexpected debts which your solicitor will request from the Land Registry as part of the purchase process.

The mortgage must be registered with the land registry. This slightly increases the land registry fees when buying a property. The fee for registering a Spanish mortgage is approximately the same as the fee for registering the property.

If you are considering taking a mortgage its wise to shop around and speak to an independent mortgage consultant before making a decision. We can recommend a suitable professional to help you. Obtain a no obligation quote

Overall lending will depend on your income levels, age and residency. Spanish residents are generally granted a higher loan percentage.

The actual level of financed granted by the bank will be based on the lower of the purchase value or the valuation.

eks later your lawyer will be able to collect the original deeds signed by the notary (Copia Autorizada), which are needed to inscribe your title in the property register.

Next Article - Completion