For most of us, buying a property abroad means confirmation that we have found our place in the sun, and also that we can now afford to make a nest where we want. This is a very important, serious and happy moment.
Sharing with you the joy of this new stage of your life, we especially want to help you correctly and safely carry out the operation of buying a house or apartment in Spain. In this article, we have tried to describe in detail all the main points of this operation, so that you can make an action plan in advance and know all the "how" and "why" from the very beginning.
The good news is that:
1. In Spain, a citizen of any country has the right to buy real estate without any problems or legal restrictions.
2. The purchase process is so well-developed and legally transparent that you have practically nothing to fear. Now in detail and in order.
1.1 RESERVATION OF PROPERTY.
The first step is to confirm your intention to buy the chosen property, which requires that it be taken off the market. Once the terms of the future purchase have been discussed with the seller, a Property Reservation Agreement is signed to protect the interests of both parties. This document requires, among other things, the payment of a deposit by the buyer, which is usually between €3,000 and €6,000, and is later replaced by a Private Contract for the Sale and Purchase of the Property.
This deposit is fully refunded to the client if a subsequent legal review of the documents by specialists confirms the presence of a serious reason to cancel this transaction.
It should be noted here that the buyer's cooperation with a reputable law firm is highly recommended to protect, first of all, the interests of the buyer himself, and to ensure a successful completion of the transaction. It is the lawyer who will study all the necessary documentation concerning your future home, and he will also correctly draw up both the Reservation Agreement and subsequent contracts. As a rule, legal services for supporting a real estate transaction amount to 1% of its total cost.
The process of studying documentation.
Once the property you like is properly reserved in your name, the attorney will begin the necessary due diligence on all legal documentation. This check will help eliminate the possibility that any licenses are missing or improperly executed, or that any debts, liens or tax liens exist.
The lawyer will also have to make sure that the property has the appropriate Title Deed and that the seller actually has the necessary rights to carry out the transaction. In the case of new real estate, it will be necessary to check that the developer of the property has all the necessary licenses and guarantees, and that the construction was carried out in accordance with all existing regulations and meets the project approved by the authorities. In the case of a plot of land, the lawyer will take care to ensure that the declared plot area and its location are adequate.
A law firm, having completed the process of studying the documentation, should provide you with a detailed written report on every legal aspect concerning your future purchase. In addition, the firm or private attorney guarantees the security of the transaction with its own license.
1.2. PRIVATE CONTRACT (CONTRATO PRIVADO).
Once the property documents have been checked and the lawyer is absolutely sure that the property is as advertised and is being sold on good terms for you, a Private Contract is signed by both parties to the transaction. This contains all the details of your agreement, the terms of payment and the final date by which you have agreed to close the deal. All terms are negotiated individually by the parties.
At this stage, the buyer pays the seller a certain percentage of the property price, minus the deposit already paid when reserving it. This is usually 10% of the amount.
1.3. COMPLETION OF THE TRANSACTION (SIGNING THE NOTARIZED SALE AND PURCHASE AGREEMENT)
The final part of the real estate purchase transaction is the signing of the Purchase and Sale Agreement or Escritura Publica (in Spanish) by both parties in the presence of a notary. It is at the notary's office that the funds are transferred to the seller in the form of guaranteed bank checks.
A notary is an official, legally established person whose role is to identify the seller and the buyer, to check that the necessary documents are complete, and that the seller has been paid in full for the amount specified in the Agreement. Spain, like Russia, for example, is part of the so-called Latin Notary system, so there is much in common between the two countries in this final stage of the purchase process.
If you are unable to be present at the notary when signing the transaction, your law firm (or your attorney) will perform all legally required procedures on your behalf based on a notarized power of attorney. In fact, it is a very common practice to execute this Power of Attorney from the very beginning of the property purchase or sale procedure in order to promptly perform the required formalities on your behalf and in your interests.
a) Obtaining rights to own property
The buyer assumes ownership rights immediately after signing the notarial deed of sale and receives the keys to his property.
b) Notarial purchase and sale agreement and registration of property rights.
Registration of property rights includes the payment of property taxes and related fees, as well as obtaining a stamp from the Property Registry on the original Notarial Deed of Sale, which finally guarantees the full transfer of property ownership rights from the seller to the buyer.
This procedure is a very important stage and is carried out immediately after the transaction is completed. It usually takes from two to three months, after which the original deed, already with the Register seal, is returned to the notary office. The notary will notify us when the documents can be picked up from his office.
2. BASIC NECESSARY FORMALITIES.
There are a number of basic formalities that need to be completed in order to successfully complete your transaction in Spain.
2.1. REGISTRATION OF A NOTARIAL POWER OF ATTORNEY.
In order to become your official representative in Spain, a law firm or your private lawyer must have a corresponding notarized Power of Attorney signed by you.
With this Power of Attorney, you can draw up contracts on your behalf and in your name, the Notarial Deed itself, as well as request, receive and sign all documents related to the process of purchasing real estate. You can draw up this Power of Attorney both in Spain and in another country.
2.2. N.I.E. (SPANISH FOREIGNER IDENTIFICATION NUMBER)
N.I.E. is the Foreigner's Identification Number (ID) in Spain, which must be requested at the police station. Without this number, it is impossible to buy a property in Spain, or make any other major purchase (for example, a car), or to draw up contracts for water and electricity. Obtaining the N.I.E. takes a certain amount of time, so it is very important to order it in time, that is, at the very beginning of the property purchase process.
2.3. SPANISH BANK ACCOUNT.
The owner of the property must have a bank account in Spain, in order to pay the necessary bills for the house or apartment from it, among other things. As a rule, to open an account, you need your passport, a certificate from your place of work, tax returns for the last 2 years (NDFL-2 or NDFL-3) or other documents confirming your financial solvency / income. From this account, monthly quotas for a mortgage loan are paid, if you have one. Opening an account is one of the formalities that is performed by your lawyer on the basis of a previously issued notarized Power of Attorney.
3. TAXES IN SPAIN RELATED TO THE PURCHASE OF PROPERTY.
Purchasing real estate in Spain involves, for both residents and non-residents of the country, the fulfillment of a number of tax obligations.
3.1. TAXES ON THE TRANSFER OF OWNERSHIP RIGHTS AND THE DOCUMENTATION OF THESE OPERATIONS (ITP-AJD) AND/OR IVA (VAT):
a) New property:
IVA (VAT) is charged on the purchase of new properties or building plots (that have not previously changed hands). It currently amounts to 10% of the purchase price and 21% for building plots. This tax must be paid on every purchase.
In addition, upon signing the notarial Purchase and Sale Agreement, a Stamp Duty (AJD Tax) of 1.5% is paid for the transfer of ownership.
b) Secondary real estate:
If the property has ever been transferred to other hands at least once before (for example, sold), instead of the IVA tax, another tax is charged - ITP (for the transfer of ownership). Its size is from 8 to 10% of the transaction value.
Remember that the total costs of a real estate transaction are usually an additional 8 to 12% of the purchase price of the property (excluding the cost of mortgage expenses. Mortgage expenses increase the buyer's total costs by another 2 to 3%).
3.2. ANNUAL PROPERTY TAX (IBI):
The IBI tax is paid annually to the relevant municipality, in a single payment, between September 15 and November 15 (this is the usual deadline for paying this tax, which may vary slightly depending on each individual municipality).
3.3. PROPERTY INCOME TAX (IRNR):
All property owners in Spain are required to file tax returns. To do this, every non-resident foreigner must have an official tax representative who will calculate this tax, prepare the return and pay it on time. The tax office sets an annual tax percentage depending on the property prices. The tax representative is usually a lawyer or an accountant.
If you decide to rent out your property, you will not have to pay non-resident tax for the periods when the property is rented out, so you will need to file your tax return differently, taking these circumstances into account. You will have to pay tax on the income received from the rental. Your lawyer will advise you on all these issues.
