Taxes related to buying real estate in Spain
Foreign citizens buying a house in Spain must pay attention to the taxes to be paid and the annual levies. During the sale of a property, it is necessary to know that the following property taxes will apply: the notary fees, the land registration tax, the property transfer tax and the value added tax (VAT), applicable in the case of properties bought from a real estate developer.
The taxes imposed on the sale of properties in Spain will vary greatly not only based on the region in which the property is located, but also on the specific situation of a property. For instance, the taxes can differ if the property is old or new, if the property has had a previous owner, if it is sold through bank or whether the direct seller is the construction company that build a construction project (a district of houses, an apartment building or another type of dwelling).
The tax rates can also be influenced by the valuation price at which the property is sold on the Spanish market. One of the common taxes applicable in this case is the capital gains tax and you can find out in-depth information on the manner in which this tax is applied from our property lawyers in Spain. The transaction itself can include the following taxes:
- the transfer tax – it varies based on the region where the property is located and in Spanish regions such as Ceuta and Melilla it is applied at the rate of 3.1%, while in Valencia, Catalonia or Galicia it can increase up to 10.1%;
- the capital gains tax applicable to the sale of a Spanish property is charged at a rate of 19% for Spanish citizens, citizens of the European Union (EU) and those of the European Economic Area (EEA);
- the residents of countries outside these structures are charged with a capital gains tax applied at a rate of 24%;
- newly built properties in Spain are imposed with the value added tax, charged at the standard rate of 10%;
- newly built properties that are bought here are also charged with the stamp duty, imposed at a rate of 1.5%, payable by the buyer;
- the transfer tax on a resale of a property can also vary based on the region and the valuation price of the property and it may range from 8% to 10%.
Required documents for selling a Spanish property
When selling a property in Spain, the seller will need to provide the following: the passport, the residency certificate or the NIE, the original title certificate of the estate you are selling, the last invoices for water, electricity etc., the keys, the energy performance deed, the community receipts payments and the tax receipts.
It must be noted that the energy performance deed, or the energy performance certificate, represents a necessary legal document that must be presented when selling a property in Spain, as per the European directives on energy and other environmental matters. The document must be issued by a qualified technician in Spain, but those who want to purchase a property should be aware that the document is not necessary in given situations.
For instance, the owner of a property in Spain does not need to provide the energy performance certificate if the property has a useful surface of less than 50 square meters or in the case of properties that are not used for more than four months a year. Our property lawyers in Spain can further advise you with regards to this regulation.
Some of the documents need to be notarized and, depending on the region of Spain in which the property is located, the costs can be distributed between the two parties and, following the Spanish law, the proportion should be: 25% paid by the buyer and 75% by the seller. If you want further details or you wish counselling in selling or buying a property, you can ask our property lawyers in Spain.
Sale of a property by residents in Spain
The gain from selling an estate by a Spanish resident is taxed on the actual sale which must be declared in the annual tax return. You can be granted the rollover relief which is available when the sale’s proceeds are being reinvested (within two years after the sale), in the new residence of the taxpayer.
He/she must have lived for three years in the premises of the property prior to selling it and sell it for a number of reasons (change of job, divorce, marriage etc). The absolute relief is granted when the seller is over 65 of age and has lived there for minimum three years.
Rules for non-residents in Spain
For complying with the EU rules of non-discrimination, in 2007, capital gains tax rules have been modified for both residents and non-residents. When a property is sold by a non-resident in this country, the buyer has to withhold 3% of the purchase price and then pay it to the authorities in charge of the Spanish tax as an advance of capital gains tax on behalf of the seller. For a foreigner, the tax may also be due in the country of origin. Our property lawyer in Spain can offer more details on this issue.
Buying a property in Spain
A property lawyer in Spain can help you before the actual property purchase by making sure that the contracts signed with the landlord are accurate and the characteristics of the building are the same as those in the title deed. Any property needs to be registered with the Spanish Land Registry and also at the Cadaster.
After the registration, a title deed is issued in the name of the new owner. In case of property sales, the new owner must register himself as the proprietor in order to have ownership rights over the property. A lawyer can help you make this ownership transfer. As the new owner you will also need to observe the tax rules for property and/or for income from rental activities.
What are the elements of a property sale contract in Spain?
Regardless of the type of property that you want to purchase in Spain – residential or commercial, and regardless of the type of c
ontract (the Spanish law prescribes several types of contracts, which will be presented here), all contracts have to contain mandatory elements in order to be considered legally valid.
If you are interested in signing a sale agreement, you can rely on our property lawyers in Spain for advice on such elements and other provisions that you should be aware of, but as a general rule, all contracts should contain the elements that are listed in the section below:
- the object of the agreement – the property that is about to be sold;
- details regarding the seller and the buyer (individuals, companies, identification data, etc.);
- the price at which the property is valued and which will be paid by the new owner;
- the initial deposit that will be offered by the buyer – depending on the contract, the rate can range between 5% to 10% (this rates are generally applied for individual contracts, as, for contracts where the parties are commercial entities and the object of the sale is a commercial property, the rates are higher);
- information on the property – the square meters, the division of the property (in meters and rooms and information on the land, if the property is a house).
Depending on the type of contract, the provisions can vary; they can also be added depending on the wishes of both parties. For instance, one can include in the final sale agreement information regarding the date when the buyer is obligated to pay the entire sum or the date from which the property is free to be used and the new owners can move in.
Our real estate lawyers in Spain can provide additional information on other types of clauses that can be included in the sale contract. Please mind that in Spain one can sign various types of sale contracts and they are divided between temporary contracts, concluded in the initial stages of the purchase, and final contracts, which is the sale contract and which has a permanent character.
In this sense, we want to present the fact that both parties can enter various private contracts before signing the public contract, which is the public deeds document that is signed in front of the notary public and with the certification of the public notary. However, please be aware that private contracts are just as legally binding as the public contracts and not respecting the obligations mentioned in the contract will have the legal consequences that are listed in the said contract.
If you need advice on this matter, please do not hesitate to address to our real estate lawyers in Spain, who are qualified to explain the differences between the types of contracts that can be signed here, as well as the legal implications of such documents. You can also read more on this subject in this article.
Property inheritance in Spain
The inheritance law in Spain does not differentiate between foreign owners or inheritors and native ones. The laws governing the will in which the property is passed on can determine the manner in which real estate property is distributed among the heirs. This means that foreigners can draw up wills that will be enforceable in Spain according to the laws of his/her country. However, the foreign jurisdiction can refer the inheritance issues back to Spain.
Legal beneficiaries in Spain include children and their descendants, parents, widows. Beneficiaries are usually granted the same portion of the inheritance. Different rules apply to widows according to their legal relationship to the deceased individual and you may request legal advice on this legal aspect from our team of lawyers in Spain.
The Spanish property law
The Spanish property law governs all actions related to the sale or purchase of property and/or land as well as renting and dividing property for joined ownership purposes. The team of lawyers at our law firm in Spain specializes in all areas of property law and our lawyers can also help you with commercial law issues.
We can help you clarify any disputes that arise in the following areas: property litigation claims, the division of joint ownership, forced sales, the termination of sale/purchase agreements or the disputes between landlords and tenants and many others. The court hearings will be carried out in Spanish.
As mentioned earlier in this article, properties in Spain have to be registered with the Spanish Land Registry. The Spanish Land Registry has as a main function the registration of properties and property deeds, cadaster matters and any other legal documents related to real estate and land in Spain. The institution has a national jurisdiction, as it is in the case of other EU countries, where local Land Registries have been set up. Currently, the interests of EU Land Registries are promoted and sustained by the European Land Registry Association.
The Spanish Law of Urban Leasing
The legislation on renting real estate property in Spain (La Ley de Arrendamientos Urbanos) was first enabled in 1964 and last amended in 2011. The new law creates a balance between landlords and tenants by allowing them to renew rental contracts on an indefinite period of time, but also helps landlords to protect themselves against tenants failing to pay their rent. Landlords also have the right to raise rents in accordance to current market prices, while tenants benefit from more secure conditions as landlords are required to review lease contracts every year.
Our Spanish lawyers can provide with you details about the rights of tenants and landlords under the actual Real Estate Law.
Solutions for solving property disputes in Spain
Court litigation for property disputes is subject to a statute of limitations. In Spain, there are several time-frames within which an individual can initiate legal action: 30 years for real estate disputes and 20 years for mortgage disputes. Any legal disputes that arise from purchase agreements and can evolve to property litigation cases have a statute of limitations of 15 years.
Alternative dispute resolution methods in Spain include negotiation, mediation and arbitration. One of our lawyers in Spain can help you with court representation or either one of these alternative methods. More details on the procedures related to due diligence in Spain applicable when purchase a real estate property can be offered by our team of Spanish lawyers.
What types of property contracts can one sign in Spain?
There is a great variety of contracts that are created to establish specific obligations between the parties that are involved in the sale of a property. As presented earlier in this article, we have mentioned that the parties can sign private contracts or public contracts. Although both of them are legally binding, there are few important details, which will be presented here by our real estate lawyers in Spain.
For instance, the private contracts have as main parties only the seller and the buyer. Such contracts can’t be registered with the Land Register without the participation of the notary public and they are only legally binding for the buyer and the seller; this type of contract will not create any legal consequences for a third party that can be involved in the transaction, such as a creditor.
One of the private contracts that buyers and sellers can sign is the option contract, in which the seller agrees to pay a sum of approximately 5% of the price at which the property is sold, while the seller assures the buyer that he or she will sell the property to the buyer at the agreed price if the buyer will purchase the property by the timeframe that is established by the seller.
The consequences of this type of contract are the following: either the buyer purchases the property in the timeframe established in the contract and then the two parties move to the next phase, as the seller has a guarantee that the buyer will actually purchase the property, either the buyer will not complete the additional purchase steps in due time, and from there, the seller will no longer have any obligations towards the buyer.
The buyer will lose the 5% sum of money and the seller will no longer have any obligations towards the person with whom the contract was signed, as the buyer is in breach of contract. This means that the seller will be able to sell it to another party. Our property lawyers in Spain can present more information on this type of contract
Our Spanish law firm will help, through its property lawyer in Spain, with legal representation and legal assistance when purchasing a real estate property. You can rely on our team for advice on how to sign a real estate sale contract and on the legislation in the field.
Our lawyers in Malaga can help you acquire a property for residential or commercial purposes. If you want to purchase a commercial property, you must know that there are many properties available for sale throughout the entire country.
For instance, one can purchase a café in Cadiz that is available for sale at the price of EUR 58,000. In Lanzarote, a property operating as a bar is available for sale at a price of EUR 100,000.
If you are interested in the same service in the city of Madrid, we invite you to contact our lawyers in Madrid, who can intermediate the sale of a property.
Please mind that currently, the price of an apartment can be of EUR 220,000 – EUR 450,000, depending on the size, the quality of the property and the region where it is located. Exclusive apartments can have a price of over EUR 1 million.
Regardless of the type of property you want to acquire, please refer to our team of property lawyers in Spain for legal advice on the procedures that must be concluded as a seller/buyer of a property.
Our lawyers can represent foreign clients that want to relocate to Spain or foreigners who already live here and who no longer want to rent a property, but rather become owners.