THE BUYING PROCESS
01.
The initial thing to do
Our recommendation is to start by doing your research and finding a real estate agent you can trust who works at a high professional level. Hiring a broker when you plan to buy a property is normally without any costs, that is because the broker will receive a commission from the seller when a deal is being made. He helps you plan your purchasing power including setting your budget and calculating what taxes and fees you can expect when buying a property. With the right realtor in place, you can benefit from his experience and knowledge of the market, in which areas to look at and to get help throughout the buying process including searching for relevant properties, double-checking crucial things about the selected properties, negotiating about the price, introduce you to his business contacts that he collaborates with such as lawyers, financial contacts etc. and get recommendations for which contracts you need after the purchase such as insurance, electricity, alarms etc.
START SEARCHING FOR PROPERTIES
When it comes to the property market in Marbella and the surrounding area, it is an open market, which means that almost all estate agents have access to all properties available on the market. Work closely with your real estate agent and use his experience and market knowledge when searching for and choosing properties. Our suggestion, if you do not find the exact property you are looking for is to select at least 5-10 properties that you like and that match your budget and preferences before moving on to the next step.
02.
Visit Marbella and do property viewings
Now is the time to visit the area on site and start viewing the properties that have been selected. The realtor will organize and schedule the viewings for you, and he will attend the viewings to guide and support you. Keep in mind that it normally takes longer than expected to do viewings, especially if the properties are not in the same area. Our strongest recommendations are to book no more than 3-5 viewings per day in order to have the focus and energy up to really take in the properties when you do the viewings. If you have the time, ask your agent to take a short drive around the area and its surroundings to make sure it is an area you will be comfortable living in.
03.
IMPORTANT THINGS TO PREPARE BEFORE YOU CAN BUY A PROPERTY
Applying for the n.i.e number
There are several things that are important to prepare before you can buy a property in Spain. The first thing to mention is to apply for a N.I.E number, it is an identification number for foreigners, which is a mandatory document that you must have in order to be able to open a Spanish bank account, buy a property, buy a car, sign a telephone contract or if you plan to work in Spain. You can apply for it before you travel, by visiting a Spanish consulate. If you are already in Spain, you can apply for it at a police station or through a legal administrator. To apply for it, you need to bring some other documents such as your passport and a photocopy of your passport.
Opening a spanish bank account
When it is time for you to open a Spanish bank account, do a thorough research where you compare the condition of the different banks. Conditions can vary widely and doing a careful and thorough investigation can end up saving you thousands of euros.
When you have selected which bank you wish to open a bank account with, we advise you to book a appointment at their nearest bank office. There are several documents that is absolutely essential to bring to the meeting in order to open a bank account. Two things that must be brought to the meeting are, your N.I.E document and your passport. Other documents that are necessary and help you when trying to open an account are to bring a copy of your passport and proof of your funds/tax declarations. Some banks may ask for additional documentation such as proof of address (tenancy agreement, recently paid utility bills, etc.). The banks may also ask you to officially translate the documents into Spanish, to save time, ask about this already when you first contact the bank. Normally opening an account is free, but in most cases, they charge you an annual administration fee (which will be paid monthly, up to €10 per month) to keep the account active.
A recommendation is to have all necessary papers in order before making any viewings. It is also a good idea to check your legal, financial, and fiscal status to make sure you can start negotiating when you stumble upon your ideal property.s
Find a good solicitor and tax advisor
A solicitor and tax advisor will be able to help you in the negotiation stage and with your future tax preparations. When choosing one, choose one that is reliable and speaks a language that you are comfortable with. This will save you headaches in the future.
PROPERTY MORTGAGE
Both foreigners and residents can apply for a mortgage in Spain. The procedure is the same, but the conditions will be slightly different from each other. Keep in mind that it can take up to 2 months to get an approval for a mortgage application.
Standard conditions for foreigners
- Mortgage amount: up to 70% of the purchase price.
- Interest rate: Euribor + 1-1,8%.
- Payment terms: 15 to 30 years.
- Early payment fee: If you choose to repay the mortgage in advance, an early payment fee of 0,25%-0,50% is added.
- Opening fee: It is not unnormal that a bank charge you with an opening fee of 1-2% of the mortgage amount.
- Requirements: Some banks require you to take out property and life insurance to secure their assets.
- Second mortgage: No, normally the bank only allows mortgage to buy one property.
- Other requirements: The normal procedure is that the bank require you to do a separate evaluation through a partner preferred by them.
- Mortgage limits: The bank uses a standard limit when it comes to how much you can borrow to buy a property, the annual cost of interest and mortgage payment fees cannot exceed more than 35% of your annual total net income.
- Interest rate offers: Some banks offer a lower interest rate in the first year, in some cases up to 2% lower than the standard rate.
- Interest rate restrictions: Some banks do not offer fixed interest rates if your main income is in a currency other than euros.
Standard conditions for residents
- Mortgage amount: up to 80% of the purchase price.
- Interest rate: Euribor + 1-1,8%.
- Payment terms: 15 to 30 years.
- Early payment fee: If you choose to repay the mortgage in advance, an early payment fee of 0,25%-0,50% is added.
- Opening fee: It is not unnormal that a bank charge you with an opening fee of 1-2% of the mortgage amount.
- Requirements: Some banks require that you take out property and life insurance to secure their assets.
- Second mortgage: Yes, normally the bank allows mortgage to buy one another property, if it is categorized as a holiday home you can borrow up to 70% of the purchase price, if it is categorized as an investment you can borrow up to 50% of the purchase price.
- Other requirements: The normal procedure is that the bank require you to do a separate evaluation through a partner preferred by them.
- Mortgage limits: The bank uses a standard limit when it comes to how much you can borrow to buy a property, the annual cost of interest and mortgage payment fees cannot exceed more than 35% of your annual total net income
- Interest rate offers: Some banks offer a lower interest rate in the first year, in some cases up to 2% lower than the standard rate.
04.
Start negotiating on properties
Once you have your N.I.E number in place and you have opened a bank account, you are ready to start negotiating to buy a property. There are a few things we want to inform you about to be as prepared as possible.
Make offers on properties
Some people find it is difficult to know at what level to make their initial offer. Our recommendation is to use your broker as your adviser and to discuss, plan and establish an offer plan together with him. When it is time to make the initial offer, make sure you have checked every detail about the purchase and the property such as the payment terms, whether the furniture is included, the condition of the property and the financial situation of the urbanization. If the purchase is to be accompanied by one or more clauses, it is important that these conditions appear in the original offer.
Request a technical due diligence
In some cases, it may be valuable to request a technical due diligence of the property. Either you request this before submitting an offer or you present it as one of your clauses when you forward your initial offer. In this report, you will get important insights into what risks there are with the property, such as cosmetic problems. To name a few parts that the technician must check, electricity, water, gas, boiler, and plumbing.
05.
Time to sign contracts
If the seller chooses to accept your offer, it is time for the legal phase of the buying process. There are several stages involving contracts that must be signed when buying a property. The first contract to be signed is the reservation contract, it helps you to remove the property from the market, the second to be signed is the purchase contract which “locks” the deal itself and the last contract to be signed is the official deed at the notary’s office.
Step 1: Reservation contract with deposit payment
The reservation contract is a document signed by the buyer and seller that will mark the property as reserved for an agreed time. The time period is normally set to 1-2 weeks but can also be set for a longer period. Upon signing this agreement, the buyer pays a deposit, this amount is varying from €6.000 up to 1% of the purchase price. This fee is paid for the property to be taken off the market during the time agreed upon by the buyer and seller. If the buyer decides to go ahead with purchasing the property, this amount will be deducted from the amount that will be paid in step 2.
Step 2: Private purchase contract with 10% payment
The private purchase contract shall be signed by both parties and means that the buyer pays 10% of the property price minus the deposit already paid in step 1. In some cases, both the buyer and the seller can agree to skip step 1 and jump directly to step 2. The private purchase contract can be signed with different terms, the typical private purchase contract is normally signed with a mutual penalty of 10%. If the buyer does not fulfill his obligations to buy the property, he loses the 10% already paid and if the seller decides not to sell the property, he will have to pay back the 10% already paid plus an additional 10% in penalty.
Once the contract is signed, it is time to start researching which utility contracts you need, such as water, electricity, and gas. Sometimes it is easier and better to take over the contracts from previous owners, ask your lawyer to check with the seller what suppliers and terms they have. Then it is up to you to decide what is best for you.
STEP 3: COMPLETION DATE AT THE NOTARY’S OFFICE
The final step in the buying process is when the closing date occurs and when all parties, the seller, the buyer, and their legal representatives meet and sign the deed at the notary’s office. The moment both parties sign the documents, the remaining purchase price is transferred to the seller and an immediate transfer of possession and full responsibility for the property passes to the buyer.
When the contract is signed at the notary’s office and all taxes are paid, the deed is registered with the Land Registry. It can take up to 3 months before it is registered.
06.
Other things to be aware of when purchasing a property
Register your property
When the purchase is completed and all taxes are paid, it is time to register the property at the local land registry. It will guarantee your rights over the property. The documentation required to complete the registration is your N.I.E, an authorized copy of your passport, proof of ITP tax payment and a copy of the seller’s recent tax payment. Your legal representative can help you make this registration.
The costs of owning a property
If you own a property in Spain there are certain expenses that you can expect to have, some of these are paid monthly, some are paid quarterly and some are paid annually.
- Community fee: This fee varies depending on the urbanization, it is the annual costs of maintaining the urbanization divided by 12 months. It is usually paid quarterly.
- Garbage fee: It is paid annually and reflect the cost of individual garbage collection.
- IBI Tax fee: This is the annual property tax. It is based on the cadastral value, it varies between regions and whether the owner is resident or not.
- Maintenance costs: All types of maintenance costs such as utility bills, cleaning, repair, and remodeling of the property. The larger the property, the greater the maintenance costs.
Personal income tax
For foreign owners who are not resident in Spain, an income tax must be paid based on whether they rent out the property or not.
- If you do not rent out your property and have no source of income within Spain: Then you pay an income tax based on the property value. The tax rate is fixed at 25% of 2% of the property’s valor cadastral, which is the real estate value of the property. Example: Your property in valued €500.000, 2% (Tax base) of €500.000 = €10.000, Tax (25%) = €2.500.
- If you rent out your property (EU and EEA citizens): Then you pay 19% of the total net income you have from renting out your property. Net income is the income you have after deducting the expenses you had during the period you rented out the property, such as electricity, water, gas, community fee etc.
- If you rent out your property (Non-EU and EEA citizens): Then you pay 24% of the total income you have of renting out your property. Non-EU or EEA citizens are not allowed to deduct expenses that you have had during the period that you have rent out the property, such as electricity, water, gas, community fee etc.
For resident owners, an income tax is paid based on their annual income. The rate varies depending on the region you live in and how much you earn each year.
The golden visa
Spain has opened an opportunity for non-EU citizens to obtain a VISA. If you invest at least €500.000 in a real estate property located on Spanish territory, you can obtain a VISA for you and your family. There are some requirements that must be met alongside the investment.
- You cannot have any criminal history.
- You will need to demonstrate that you have sufficient financial resources to live in Spain.
A VISA allows the individual and his family to work and live in Spain for 2 years. A VISA can be renewed if you still own the property and can demonstrate that they still have sufficient financial resources to live on. For those who want more information about the Golden VISA, we recommend that contact a representative agent or advisor.
THE SALES PROCESS
01.
FIND A RELIABLE AND DRIVEN REAL ESTATE AGENT
Choosing a reliable, hard-working, and highly driven agent with long sales experience, broad market knowledge and high awareness of online marketing is perhaps the absolute key to achieving a successful sale. The agent’s job, in addition to contributing his experience and knowledge, is to support you throughout the entire sales process, including giving you good advice and useful insights as well as introducing you to his professional network that will help you feel safe and calm about your sale.
Start by searching for different agencies on the internet, we suggest that you select 2-5 agencies that you then contact to book a personal meeting. During the meeting you ask all relevant questions about how they work, what experience and knowledge they have and what marketing and online tools they will use to achieve a successful sale of your property. Check that everything feels correct and feel free to ask for recommendations from people you know who have hired the broker. Along the Costa del Sol there are more than 10.000 real estate agents and due to a lack of education and training requirements, there are unfortunately many agents who can be perceived as unscrupulous and who do not meet the high level of professionalism that you should be able to expect when it comes to selling properties.
When the agent presents how much your property is worth, ask how he came up with that figure. A serious estate agent would base the calculation on their experience, knowledge, and current market statistics. Relevant information to be able to make a correct valuation of the property should be the property’s dimensions in m2, plot dimensions, its location, its condition, whether it has a view or not and the quality of materials that have been used in connection with the construction of the property.
Ask the broker what costs and taxes you should expect during and after the sale. The costs you can expect in the event of a sale are, fees to the broker, fees to the lawyer and two different types of taxes. The first is called Plus Valia and is based on the increase in land value during the time you have owned the property. The second is income tax, which is based on the profit you make when you sell the property.
A significant difference between the agencies is how their working methods look when it comes to marketing the property. There are several well-known online marketing platforms that are designed to drive leads into the agency. The downside is that the visibility on these platforms drives additional costs for the agency, but the upside is that they help you reach a significantly larger audience and thus also attract more customers, which will ultimately increase your chances of reaching a successful sale. Some agencies still choose to only market the property on their website, which in the vast majority of cases will result in the property taking longer to sell and in the worst case being unsold. A professional agency makes sure to stay up-to-date with the very latest technology to thereby increase their chances of reaching a successful sale. To name a few of these platforms, Idealista, Fotocasa and Kyero.
02.
PLAN AND PREPARING BEFORE THE SALE
Carefully preparing how you present your property, both in online marketing and when the agent holds their showings, is extremely important and in many cases absolutely essential to achieving a successful sale.
The way the Spanish market works is that you set an “asking price” that is slightly above what you are normally willing to accept to close a deal. In most cases, you can expect to receive offers that are below the asking price. When it comes to the valuation of the property, it is important to have realistic expectations. Be careful when comparing your property to other properties on the market, the online “asking price” can sometimes be quite a lot higher than the actual sales price ultimately agreed upon by seller and buyer.
PRESENT THE PROPERTY IN THE BEST POSSIBLE WAY
A property that is well staged increases the chances of being sold significantly. On the contrary, a poorly presented property makes it much more difficult to sell or even get realistic offers. Less is better, it usually works when it comes to property showings and makes ordinary people appreciate seeing a property with less stuff lying around the property. Personal belongings, pictures and ornaments should be removed before holding a showing. We recommend that you hire a professional cleaning company to make the property look as good as possible. Ask your agent about his recommendation on staging your property before you hold the showings.
03.
THE LISTING AGREEMENT
Once you have made your choice of which agent will represent you in your upcoming sale, the agent will prepare and send you a listing agreement for both of you to sign. The contract contains all the important details that you have both agreed on, such as listing price, contract period, commission terms and how the agent will be paid when the property is sold etc.
LISTING AGREEMENT WITH NON-EXCLUSIVITY
Costa del Sol has an open real estate market, which means that the seller can, if he does choose not to have an exclusive contract with the broker, list his property with as many brokers as he wishes. The agent who ultimately sells the property is the agent who is entitled to receive the commission you have agreed upon. It is more common to sign a non-exclusive agreement than signing an exclusive agreement but both ways have their pros and cons. If you choose to sign a non-exclusive contract the pros are that it opens up to hire more agencies which can increase your chances of selling your property but there is no guarantee that it will doing this. The cons would be that you probably will have your property shown as duplicated on the platforms, presented in several different ways with different marketing materials which can make it a bit confusing for potential clients. Choosing to work with multiple agencies can also cause some agents to lose their commitment when they know you have reduced their chances of selling the property.
One thing we recommend you do is to be involved in the development of the marketing material, which includes, among other things, being involved in determining images and giving good input in the preparation of the text to be used. By being involved, your chances of getting a successful sale are likely to increase.
LISTING AGREEMENT WITH EXCLUSIVITY
Signing an exclusivity listing contract with a selected agent means that this agent will be your primary source for selling your property. He will most likely put extra energy into creating a good and elaborate marketing material that should increase the chances of attracting buyers and thus also increase your chances of achieving a sale of the property. Another big advantage with this contract is that you only have one agent to communicate with and that it minimizes the risks of possible misunderstandings in connection with the advertising, as you do not have several agencies presenting the property in several different portals with different marketing materials. The downside is that if you choose to sign a contract with an agent who is not as good as you initially thought he would be, you are locked in with that agent until the contract expires. If you choose to sign an exclusive agreement with an agent, our strongest recommendation is not to sign the agreement with a term of more than 3 months. This will push the agent to work hard to sell the property, not lose pace and also opens up to signing more agencies after 3 months if you are not happy with the agents work and his results.
The verdict is that there are always pros and cons to the two different listing contracts, so we cannot justify one over the other. It all ends up being up to you as the seller which option might be the best one for you.
04.
THE MARKETING OF THE PROPERTY
We would say that the marketing of the property is one of the most important parts of the sales process in order to succeed with the sale of your property. Therefore, it is essential to have a good strategy from the start for how the property is to be marked. All costs connected to the marketing are normally paid by the real estate agency. Therefore, you will notice that many agencies work in different ways when it comes to marketing. If you sign an exclusive listing agreement with a selected agent, it is more likely that he will put more effort and invest more money into marketing the property. In addition to displaying the property on the agency’s website, there are several platforms that can be used to increase the chances of selling your property. To name a few of them, Idealista, Fotocasa and Kyero etc. In addition to these portals, it is also common for the agent to also market the property through their own social media channels.
05.
THE AGENT HOLDS SHOWINGS OF THE PROPERTY
When it is time to start showing the property, it is important that the property is in good condition and that it is as clean as possible. Another important part to increase the chances to make of making the showings as successful as possible is that you as the seller and property owner share useful and important information about the property that can be valuable and interesting to potential buyers. By sharing this information, the agent can use the information during their showings to increase interest in the property. When it comes to showings, it is important to be flexible, because you never know when the right buyer will show up. Many showings are often booked the day before or even the day the potential buyer requests to see the property. Our recommendation is not to attend the showings, in most cases buyers find it a disturbing element if the owner is present during the showing.
06.
THE NEGOTIATION WITH A POTENTIAL BUYER
After the agent has held a few showings, some buyers may start sending offers to the agent. He will present the offers to you and discuss whether you should consider them or not. Sometimes the first offer can be the best offer you will get but it all depends on the level of interest and if there is more than one potential buyer involved in the negotiations. The agent will advise you with his insights on how to evaluate the offers and whether the offers is too low or not. The buyer may choose to include any conditions that certain things need to be done to the property before a final purchase is completed, it is important to understand and evaluate these conditions, how much cost you can expect if you choose to accept them. Use your agent to evaluate the terms requested, so as not to be disappointed if the cost of meeting the terms ends up being higher than you initially expected.
07.
RESERVATION CONTRACT WITH DEPOSIT
Once you have accepted an offer, the agent will prepare a private reservation contract to be signed. In this document, all the terms agreed upon during the negotiation will be presented. Our recommendation is to hire a lawyer to begin representing you and to review the contract to ensure everything is correct. The agent and lawyer will from now on communicate and work together to organize the rest of the sales process. The reservation contract must be signed by both buyer and seller and will mark the property as reserved for an agreed period. The normal time period is 1-2 weeks, but it can even be for a longer time. Upon signing this agreement, the buyer pays a deposit, this amount varies from €6.000 up to 1% of the purchase price. This fee is paid for the property to be taken off the market for the time agreed upon by the buyer and seller. If the buyer decides to go ahead with purchasing the property, this amount is deducted from the amount that will be paid upon signing the purchase agreement.
Once the contract has been signed and a deposit has been paid, the buyer’s lawyer will carry out due diligence which includes checking the property’s financial reporting and the condition of the property and urbanization. If any negative results appear, the buyer has the right to cancel the deal and refund the money without any penalties.
08.
PRIVATE PURCHASE CONTRACT
Once the buyer’s lawyer has done his due diligence and no major issues have been identified, the lawyer gives green light to move forward with the process. Now is the time to sign the private purchase contract. At the signing of the contract, both parties first agree on a specific date on which ownership is to be transferred and secondly, the buyer pays 10% of the purchase price. Normally, the reservation fee and 10% contractual fee are non-refundable. It is good to know that the private agreement is a binding agreement for both parties, which means that you cannot terminate the agreement without incurring any financial penalties.
09.
CLOSING THE SALE BY SIGNING THE DEEDS AT NOTARY’S OFFICE
Once the private purchase contract is signed, it is time for the lawyers to make an appointment at the notary’s office to sign the final and closing agreement. At the notary’s office both parties and their representatives attend, and the deed is signed. At the same time, a full transfer of the purchase price minus 10% is made and the lawyer ensures that the exact amount has been transferred securely. In connection with full payment for the property, the seller pays commissions to his agent and lawyer. Ownership of the property is transferred to the buyer with all that this entails.
ESSENTIAL INFORMATION WHEN RENTING OUT YOUR PROPERTY
01.
SHORT-TERM RENTAL
When it comes to renting out a property in Spain, there are two licenses that you need to be aware of. The first is called the “tourist license” and is applied by the local townhall. To be eligible to apply for the “tourist license”, you must hold the second license, known as the “license of first occupancy, abbreviated LPO”. When a construction project is completed, the construction company applies for an LPO, which is issued by the townhall. Properties built before 1979 lack an LPO as the requirement to apply for a license after the completion of a project did not exist at that time. If you buy a property built after 1979 and there is no LPO, you should be aware that you will probably have problems applying for a “tourist license” to rent out your property.
The law on short-term rentals is broad and comprehensive. Our recommendation is to go through all the details of the law.
02.
LONG-TERM RENTAL
If you only want to rent out your property on a long-term basis, you do not need a tourist license. It is a must that you rent out the property more than 12 months to call it a long-term rental.
OTHER ESSENTIAL THINGS TO BE AWARE OF IF YOU ARE THINKING OF RENTING OUT YOUR PROPERTY
- Be careful when choosing tenants, not all possible tenants will preserve your residence as if it were their own.
- When renting out your property long-term, you should know that there is a law in Spain called “right of occupancy”, which protects the tenants. Our recommendation is to double check what risks exist if the tenants in the future do not want to leave the property after the lease expires.
TAXES AND COSTS
01.
TAXES AND FEES RELATED TO PURCHASING A PROPERTY
AMOUNT OF COSTS YOU CAN EXPECT TO HAVE
When you see an advertisement for a property in Spain and look at the “asking price” that is presented, it is necessary to be aware that in addition to the purchase price, you will have to pay an additional 10-13% of the purchase price to cover all the fees and taxes that you will charged for when you buy a property in Spain.
DIFFERENCES BETWEEN REGIONS AND IF THE PROPERTY IS BRAND-NEW OR NOT
The tax percentage you pay when you buy a property can vary depending on the region and whether you are buying a brand new property from the developer or a resale home from a previous owner.
The tax differs between regions and due to our main focus on sales in Andalusia, the following tax rates are linked to the Andalusian market.
Brand new properties purchased by the developer are subject to VAT (10%) and stamp duty (1.2%) in addition to the purchase price.
Resale properties are subject to transfer tax (7%) in addition to the purchase price.
It is important to know that if you buy a company with a single asset, a property, the purchase will be applied with these taxes.
OTHER TAXES AND FEES WHICH APPLIES FOR BOTH BRAND NEW AND RESALE PROPERTIES
- Lawyers fee: The standard fee is 1% + VAT of the purchase amount.
- Notary and registration fees: It depend on several factors, but our recommendation is to calculate around 0.25% of the purchase price, if the purchase price is higher than €1M the percentage may be lower.
- Bank account fee: The bank charges you to issue the payments when you buy a property. The amount varies between banks.
- Mortgage fees: When you finance a property with a mortgage, many banks normally have an opening fee of 1-2% of the total mortgage amount.
- Technical due diligence: The size of the property and if the property is older or not will affect the price of the technical due diligence. Standard fees are from €300 to €2.000.
- Property valuation: The size of this cost depends on the price of the property. Standard fees are from €500 to €2.000.
02.
TAXES AND COSTS RELATED TO OWNING A PROPERTY
WHEN OWNING A PROPERTY IN SPAIN, THESE TAXES AND COSTS ARE NORMAL TO HAVE
- IBI tax: It is a property tax that is paid annually. It varies from a few hundred euros to as much as several thousand euros. The tax is linked to the property’s cadastral value, the higher the property’s value, the higher IBI tax must be paid.
- Garbage tax: It is an annually fee for garbage and varies between properties. Standard fees vary from €70 to €250.
- Community fees: These are normally paid monthly or quarterly and reflect the maintenance costs of the urbanization. Standard fees vary from €150 to €1000 per month depending on the size of the property.
- Utility costs: There are some utility costs for electricity, water, gas, alarms etc. Standard costs vary from €100 to €1.000 or more depending on the size of the property and how the property is used.
03.
TAXES RELATED TO PURCHASING A PLOT
The tax applied when you buy a plot of land varies with several factors. Firstly, it depends on whether you plan to buy the property privately or through a company. Second, it depends on whether the seller is a private owner or a company. In this case, we focus on what taxes there are if you want to buy it for yourself as a private person.
- Purchase from a private person: Transfer tax of 7% of the purchase price.
- Purchase from a company: VAT of 21% + Stamp duty of 1.2% of the purchase price is added.
04.
TAXES AND FEES RELATED TO SELLING A PROPERTY
When selling a property in Spain there are two different taxes and two different fees to be aware of. The first tax is named Plus Valia, and it is based on the land value that has increased over time and the second is a straight income tax. The income tax for non-residents is a fixed rate of 19-24% of the total net income depending on if you are an EU citizen or not. If you are a resident your tax is based on your total income. The two fees you normally pay when you sell a property are 1% to the Lawyer that represent you and between 4-8% to the selected agency. Both are deductible from the selling price before you count how much you have earned in profit.
05.
TAXES AND COSTS RELATED TO RENTING OUT YOUR PROPERTY
PERSONAL INCOME TAX
For foreign owners who are not resident in Spain, they must pay an income tax based on whether they rent out the property or not.
- If you do not rent out your property and have no source of income within Spain: Then you pay an income tax based on the property value. The tax rate is fixed at 25% of 2% of the property’s valor cadastral, which is the real estate value of the property. Example: Your property in valued at €500.000, 2% (Tax base) of €500.000 = €10.000, Tax (25%) = €2.500.
- If you rent out your property (EU and EEA citizens): Then you pay 19% of the total net income you have from renting out your property. Net income is the income you have after deducting expenses you have had during the period you rented out the property, such as electricity, water, gas, community fees etc.
- If you rent out your property (Non-EU and EEA citizens): Then you pay 24% of the total income you have from renting out your property. Non-EU or EEA citizens are not allowed to deduct any expenses that you have had during the period you have rented out the property, such as electricity, water, gas, community fee etc.
For resident owners, they pay an income tax based on their annual income. The amount varies depending on the region you live in and how much you earn each year.
06.
TAXES AND COSTS RELATED TO RENTING A PROPERTY
There are no additional taxes when you rent a property. The price you see in the advertisement is the price you pay for your stay. Some internet websites charge an additional cost for cleaning the property after the rental period has expired. The fees to the real estate agent are normally paid by the property owner.
If the price to rent a property is high and you want that particular property, it is not uncommon to make an offer below the asking price to the owner and see if he accepts it or not. When making the offer, present yourself in the best way possible with your strongest references. It increases your chances of getting the owner to accept your offer.
If you need to rent a property long-term, you can expect the owner to ask for financial statements and references such as tax returns, bank statements, letters of recommendation etc.