Property purchase

The Process of Buying a House in Spain

At the legal level, buying a property consists of a stipulated process and compliance with a series of requirements established by Spanish regulations. In this post we will see exactly that. Below you will find a brief summary of the process of buying a home in Spain: what are the steps to follow, the requirements of mandatory compliance, and what taxes we will find along the way.

We can divide the purchase process into two different parts:

First phase

This phase of more prior character encompasses the control of the property, the prior agreement and the mortgage.

  • Measures of ownership. It mainly consists in reviewing the property verifying its registry, owners / owners, verifying details such as location and size, and ensuring that it is a property free of debt.
  • Reservation and advance contract. Through this contract, both buyer and seller express their explicit intention that the sale will occur. This contract is called the Arras Contract in Spain. There is the realization of an initial payment.
  • Mortgage. Here we are facing a long process, so it is advisable to start it as soon as possible. We must collect all the documents required by the bank, receive approval for the mortgage, and sign the Arras Contract.

Second stage

This second phase has to do with everything related to the transfer of ownership of services and various utilities, as well as the registration of it.

  • In the event that a loan (mortgage) is granted, we will face the evaluation phase of it. The bank receives the prior agreement, will send an appraiser to evaluate the property, and once the estimate has been established, the financial institution will sign the mortgage favorably.
    Closing. Here, the transfer of the property is certified before a notary.
  • Both parties provide the requested documents (identification document, property title, payment, etc.); and finally the contract is signed and authorized by the notary.
  • Registry. Once the verification that the taxes have been paid, proceeds to the transfer of profits. After registration in the Property Registry, the buyer becomes definitively the owner of the property.

 

Taxes associated with the sale of properties in Spain

We find mainly 4 different taxes that can be associated to the sale of real estate, which will become 5 in the case that the interested party is a foreign person.

ITP

The property transfer tax is a tax related to the transfer of property. Determine the exact type will depend on the location of the house, since it varies according to the autonomous community, but always ranges between 5% and 10%. As for the term, it must be paid in the period between the purchase and 30 days after it.

Tax on Documented Legal Acts

This tax is only applicable to homes. Again, it is around 0.75% and 1.5% depending on the region. Usually paid with the ITP.

Capital gain

It is a local tax borne by the seller. He goes to the Town Hall in question and sends the form, to later receive via e-mail the amount he owes for the surplus value. What does this amount depend on? Basically the number of years the house has, and the cadastral value of it.

IBI

The real estate tax is a property tax issued by the municipal entity in which the property is located. It is usually between 0.5% and 1.1% of the property’s cadastral value.

 

What taxes should a non-resident foreigner pay when buying a home in Spain?

Mainly it is a tax, which will differ depending on whether we are residents of the European Union or not.

In the first place we find the non-resident tax for own use. The income is calculated based on the cadastral value of the property, and is between 1.1% and 2% of the value of the property. In the case of being a resident of the European Union, it is equivalent to 19% of this income, while it constitutes 24% for non-residents.

The declared income, without any deduction in taxes, is the amount collected from the tenant of the dwelling.

If you have any doubt about the process of buying and selling real estate in Spain, the related taxes and how to manage your particular case, do not hesitate to contact us so that we can offer you legal advice.

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