Frequently Asked Questions
Question about buying
Prior to completion non-Spanish buyers will need a Spanish NIE (tax identification number) and a Spanish bank account:
- You are required to obtain a Spanish NIE (Número de Identidad de Extranjero), a tax identification number. The NIE can be obtained and organised through a Power of Attorney if you do not have time to attend an appointment and collect all the required documentation. It is best that you do this at the very beginning of your property search to avoid unnecessary delays or missing out on specific properties further along in the process.
- A bank account in Spain is required to administer all payments. Bear in mind that the Spanish bank will need you to provide documents that certify the origin of the funds you will be using for the purchase, so try to make sure you find out as early as possible about your bank’s exact requirements.
The first step when you find a property that you want to buy is formulating an offer and putting down a good faith deposit. This deposit is normally held by the lawyer and the amount varies depending on the property price as well as other factors. Your Sales Agent can advise you of the exact amount, based on the property of interest.
If your formal offer is accepted a property reservation contract will be sent to the vendor and to the buyer for signing and the property is taken off the market. This is a simple agreement between the Buyer and the Seller in which the Seller agrees to sell the property and the Buyer agrees to buy the property at the price agreed and it will contain all the relevant details such as a description of the property, the payment structure and the completion date. The reservation fee is non-refundable, however it is subject to legal searches, therefore if any property searches were to produce any anomalies (issues with the property or its paper work) a full refund would be available (as per the terms and conditions of the reservation contract).
Once you get to this point we would highly recommend to instruct a law firm to represent you in the purchase. If you do not have a lawyer for your property we will be happy to recommend one to you, as we have experience with many good law firms and can advise accordingly. It is not obligatory by law to seek legal assistance for a property purchase but it is strongly recommended to do so. The fees can vary due to the amount of work required by the solicitor.
Purchasing a property in Spain involves the payment of different taxes, whether the property is newly built, or the property has already been owned by another person, a resale.
ON PURCHASE
- VAT – IVA in Spanish – This tax varies from region to region, between 8% in Murcia Region and 10% in Comunidad Valenciana. When buying a new build property from a developer the VAT is always the 10% of the purchase price (with the exception of the Canary Islands).
- Notary Public’s Fees and Land Registry Fees: the fees vary depending on the purchase price and complexity of the deed.
- Solicitor Fees: It is not obligatory by law to seek legal assistance for a property purchase but it is strongly recommended to do so. The fees can vary due to the amount of work required by the solicitor.
AFTER PURCHASE
- IBI (Impuesto Sobre Bienes Inmuebles): Local taxes are calculated on the cadastral value (valor catastral) of the land assigned by the Spanish Tax Office. It is advisable to ascertain annual local rates for a property before purchase as this differs depending on the region.
- Community Fees: Community fees are only applicable when purchasing an apartment or a terraced house within a community of neighbours. Community fees are paid monthly or quarterly and depend on the expenses of the community (which may include expenses for a concierge service, lift maintenance, cleaning, gardening etc). Your Sales Agent can advise you of the exact fees for a specific property.
- Non-resident Income Tax (IRNR, Impuesto sobre la Renta de No-Residentes): Non-resident income tax in Spain is paid if you are not a tax resident in Spain and applies if you own a property in Spain.
- Not rented out: Although you do not earn an income from the property, in the eyes of the Spanish tax authorities you still derive a benefit from owning a property in Spain and therefore have to pay an imputed annual income tax. The base for the applicable tax rate is generally 2% of the cadastral value of the property. The cadastral value of the property is much lower than the commercial value. The tax rate is 19% for EU residents and 24% for non-EU residents. This tax usually equates to approximately 0.2% of the property value, although it varies depending on the exact circumstances.
- Rent out: the base for the applicable tax rate is the income that you receive from renting out the property. Various costs can be deducted if you are a tax resident in the European Union. For example, possible applicable deductions include costs for property management and the maintenance of the property. If you have no other source of taxable income in Spain the tax rate is 19% for EU residents and 24% for non-EU residents.
- Wealth Tax for Non-residents (Patrimonio): Current legislation prescribes that whoever owns property in Spain (residents and non-residents alike) has to pay an annual wealth tax based on the net value of their assets in Spain after permitted deductions, such as mortgages. The base for the applicable tax is the net value of your property and other assets in Spain (stocks, bank funds, art collection) with a large tax-free allowance. This allowance can vary between regions (e.g. in Alicante it is €600,000 for non-residents) and over that amount progressive rates start at 0.25% on assets up to 167,129€ and rise up to 3.12% on assets over 10,695,996€. For official information from the Spanish government about Wealth Tax check this documentation.
From the moment you pay your reservation deposit our team will be holding your hand. We will explain the buying process to you step by step. Even before you travel home we will have helped you to open a suitable bank account, find a good reputable legal service and arranged for all of the necessary paperwork required to allow your purchase to proceed quickly and smoothly. Our team will then be in contact regularly, to keep you informed of the progress and work with you to plan your first visit to your new home following completion.
We will be here to welcome you into your new home and will help you make it your own. Sunny Fincas has a list of the best tradesmen in the area, all of whom are fully legal and Registered Companies with insurance and guarantees, where necessary. We have excellent relationships with builders, furniture stores, air conditioning companies and satellite television companies. We can also assist in arranging insurance and even alarm fitting for your new home. No task is too small or large, we are here to help. We will ensure your dream of a life in Spain is achieved.
Once you have signed the mortgage offer, the notary and the bank will contact you to set up the date of completion. This process usually takes 2-3 days. If further documentation is required, it can take up to a week or even more if the involved parties don’t provide the requested documents. In total the whole process normally takes between 2-3 weeks to finalize.
AFFORDABILITY CRITERIA
In order for the bank to approve you for a mortgage, they look primarily at two factors: loan to value and debt to income.
Loan To Value (LTV)
For Spanish residents, banks usually offer to lend 80% of the purchase price (excluding fees). There exists an option to get up to a 100% by purchasing a repossessed property through the bank. For Non residents, the maximum loan to value banks offer at the moment is 70% of the purchase price. The percentage can vary depending on the country in which you reside/declare your taxes and your mortgage preferences.
Debt To Income (DTI)
One of the most important elements when applying for a mortgage in Spain is INCOME and DEBT. The relation between these two is important as it gives the bank information on how much you are able to pay per month for a mortgage. The bank will only allow your total debt to represent a certain percentage of your gross income. The percentage will vary on a case to case basis but for residents the banks will usually accept a DTI of 30-35% (up to 40% in special cases). For non-residents the accepted DTI is set to 25-30%, depending on the LTV.
Question about selling
For the seller, we offer a free, no obligation valuation of their home and the most up-to-date and professional marketing approach. We reach out to both local and international sellers through our campaigns and our long established and trusted network. Our dedicated sales representatives are always there in person when showing and viewing our listed properties. We are continuously working hard to be in the top positions on Google search and are proud to be there. This helps immensely to sell your property effectively.
When selling a property in Spain you need to be aware of the payment of various taxes and fees.
- Plusvalia: Plusvalia is paid to the local Town Hall where the property is located. The calculation is based on the increase of the value of the land, known as valor catastral, and the number of years you were the owner. If you wish to avoid surprises try to contact your Town Hall to get a calculation before selling.
- Capital Gains Tax: As a seller, you will pay capital gains tax on your profits from the sale. Capital Gains Tax is 19% for non residents from EU/EEA countries or 24% for non residents from other countries. According to Spanish tax laws, if you’re a resident, you are applied a scale between 19% and 23% and can also get tax relief if you have lived in the property for at least three years before selling it. As a seller, you need to file a tax return taking in account the 3% of purchase price that was initially retained by your buyer and pay the remainder within three months after the sale. If the amount withheld by the buyer exceeds the CGT payable, the seller may claim a refund of the excess amount, so it is important to obtain proof of the original 3% payment from the buyer, in order to file your return and fill the necessary forms.
- Taxes in Your Own Country: Depending upon your nationality, you will probably also have to declare the capital gain that you have made to the tax authorities in your own country and pay whatever tax they assess is due on that gain. However, in many cases you will find that there is a double taxation treaty between your country and Spain with the result that, typically, you will be able to deduct the tax you’ve already paid in Spain from any tax liability ‘back home’.
Energy Certificate: this certificate (CEE) is issued by an architect or technical house engineer. It will vary depending on the square meters of your house but expect something between 100 and 500€.
In order to proceed with the sale of your property, both your lawyer and your estate agent will need to be given a series of documents:
- The title deeds to the property
- Receipts for the local municipal property tax (impuesto sobre bienes inmuebles or IBI)
- Copies of utility bills
- Details of the community statutes
- A list of any items of furniture etc which will be included in the sale
- Your residencia card if you have residency status
Having your documentation in order will help things run faster and more smoothly.
It is not mandatory by Spanish law to seek legal assistance for a property sale but it is strongly recommended to do so. The fees vary due to the complexity and value of the sale and the amount of work required by the solicitor.
Regardless of whether the owner will be able to attend the signing of the deed at the notary’s office, it is highly recommendable to grant a power of attorney for sale and tax representation in the lawyer’s favour. This document will authorise the lawyer to carry out a large number of procedures on your behalf, such as cancelling and transferring utilities contracts, cancelling direct debits, cancelling insurance policies, notifying the Town Hall and the community of property owners of the conveyance, processing the cancellation of your mortgage at the Register, submitting your tax statements, and requesting any return for which you may be eligible.
Although it is the obligation of the new owner to change all utilities into their names, it is advisable to stop the direct debits from your bank in order to ensure that nothing is charged on your account that is not your responsibility.
You may want to cancel your insurance policy in relation to the property. You may be entitled to a refund, depending on the specific terms in your policy.
You may want to close your Spanish bank account – although, even if they are selling their only property in Spain, some people keep the account open and use it when visiting Spain.