Fincas and Country property - Málaga Property

» Agreeing the sale  » The Escitura Publica  » Impuesto sobre Bienes Inmuebles
» Cadastral certificate » Taxes and Fees  » Who Pays?  » How much to declare?

Purchasing a property in Spain need not be as daunting as it may, at first, appear. It is important however to follow some basic guidelines.

Use a Spanish lawyer – it is essential to choose a Spanish lawyer that deals with the area that you intend buying in. It is also vital that they speak good English so that any queries and discussions can take place without the need for translations.

If you have not yet appointed a Spanish lawyer, Torcal Estates can recommend a number of very competent firms who have offices in the local area. Each of the lawyers and secretaries speak good English and we have found them to be efficient and knowledgeable.

Before you can complete the purchase of a property, you will need to obtain a NIE, which is an identification document and a bank account with a Spanish bank. Both of these can be obtained relatively easily, although it is advisable to ask your lawyer to help you with the paperwork.

Agreeing the sale

Once you have found your new home and agreed the price, you will need to pay a holding deposit (normally 3.000euros) to the vendor’s lawyer to ensure that the property is taken off the market immediately (normally this will be for a period of 15-30 days).

You will then need (with the help of your lawyer) to draw up the private contract that confirms the basis of the sale. This contract can include any conditions that are agreed within the purchase such as the inclusion of fixtures and fittings or the date by which completion must take place.

Until such time as this contract is signed and exchanged, the property can still be sold to another party and the buyer can withdraw (with the probability of losing the initial deposit).

At the point where the contract is signed and exchanged you will be required to pay 10% of the purchase price (minus any initial deposit) to the vendor’s lawyer.

It is advisable to arrange the transfer of funds from the UK in plenty of time for payments to be made. It has been known that the banks can “lose” money for a few days, which can add to the stress levels, unnecessarily. You will be much more comfortable if you know that the money is sitting in your Spanish bank in preparation for payment.

The balance of the purchase price will need to be paid at completion (normally when the title documents are signed at the Notary’s office). You will know this date in advance and therefore monies should be made available in plenty of time to reduce the risk of delays.

Your lawyer will guide you through the details of your purchase in more detail, however there are a number of documents that you will need to be aware of to help you understand the progress of your purchase.

Each of the following documents needs to be in order before you complete the purchase of your new home:

The Escitura Publica

This is the property owners’ title deed. It is registered at the Property Register (Registro de la Propiedad) and is the only guarantee of title here in Spain. Included within the title deed will be a brief description of the property, the details of the owners and any details of charges that affect the property such as mortgages, rights of way, water wells etc and court embargos.

Impuesto sobre Bienes Inmuebles

This is a receipt of the owners’ annual property tax that is known as IBI. This receipt is very important for two reasons;

• The first is that it will provide proof that there are no outstanding taxes unpaid for the property. Ideally you should insist on seeing the last 5 years receipts to ensure that all taxes have been paid.
  
  
• The second reason is that this receipt will show the property’s Cadastral Reference and also the assessed value of the property (Valor Catastral) that then dictates certain levels of tax liable.

Cadastral certificate

The Catastro is the second system used to identify the exact boundaries and the location of the property. It is similar to the Land Registry in the UK. This certificate will come in two parts – the first being a description in words of the property and the second is a graphic representation either by way of a plan or aerial photograph. This document effectively proves the legality of a property.

Taxes and Fees

There are a number of fees and taxes which will be payable on any property that you purchase in Spain.

These will vary for each individual and property however the general likelihood is that 10% of the purchase price will be needed to cover all costs.

There are two taxes to pay – the first is the Andalucian transfer tax (known as Impuesto de Tranmissiones Partrimoniales). This is charged on all private re-sale properties and equates to 7% of the declared value within the contract.

If you purchase a brand new home directly from a property developer the tax will be the same as the 7% charged on re-sale properties although it will be known as IVA (the same as VAT in the UK) as it is referred to as a business transaction rather than a transfer between two private individuals.

The second tax levied is the document tax, which is charged at 1%.

Notary fees are fixed with an official scale of charges. The fees will vary according to the amount of land, the size of the property and the price at which the property is being sold. Generally speaking the fees vary between 350euros and 600euros.

The property Register will be updated with the new buyers details once the transfer has gone through and the charges for this will be similar to the costs for the notary.

Who Pays?

Unusually, there is no Spanish law that states that any one party has to pay the taxes due on any property transactions.

Traditionally the seller will pay the Notary fees and the Capital Gains Tax (Plus Valia) due.

Normally the buyer will pay the transfer tax and any document fees as mentioned above.

Spanish consumer regulations advise that this split between the buyers is the normal way in which fees and taxes should be paid however there are instances where the seller will insist that the buyer pays all fees and taxes.

How much to declare?

It has long been common practice in Spain to under-declare the value of the house that you are buying in order to minimise the transfer tax. This also helps the seller to avoid Capital Gains tax.

Over recent years Spanish lawyers have started to advise all clients to declare the agreed price (or very close to it) as the Spanish tax inspectors have been investigating more and more sales where they feel that values have been under-declared.

If you are buying a property and the seller insists on reducing the declared value of the property there is a possibility that the tax authorities will impose a fine once the sale has been completed.

In addition when you come to sell the property the Capital Gains Tax will be charged on the profit that you have made since buying the property (the difference between your declared buying price and your declared selling price) and you may therefore be exposing yourself to a greater tax liability in the future.