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Preview the Expense Entailed in your Property Purchase

Upon purchasing a property in Spain you shall incur in extra expense, these being:

  1. Property transmission tax
  2. Notary fees
  3. Registry fees
  4. Legal fees

Below you may find the definition as well as information on each of the expenses listed above:

Property transmission tax

Upon purchasing a property in Spain you will become liable for transmission tax “impuesto de transmisiones patrimoniales” at 7% or stamp duty “actos jurídicos documentados” at 1,2%, the tax rate applicable to a property purchase will vary depending on weather the property you are buying is a new-build straight from the eveloper/constructor, in which case you would be taxed at 1,2% of the sale/purchase price, or if it is a resale, in which case you would be taxed at 7% of the sale/purchase price.

The reason for this is that upon purchasing a new-build property you are already paying IVA (this would be the equivalent of the U.K. VAT) but a resale on the contrary, does not carry the IVA tax, thus, the tax rate is higher.

Many property buyers are tempted to under declare when drawing up the official public sale/purchase deeds in order to minimise their tax; this is highly unadvisable, not is it only illegal, but when your deeds arrive at the registry office the value of the property is checked and if the price you have stated you paid for the property is proved to be less than the minimum value, you would be facing a complimentary tax payment calculated by the Spanish tax authorities, this complimentary tax is known as “complementaria”.

Also, you must think that in future, if you decide to resell the property, upon the sale of your property you shall be taxed on the profit you have made, be this, we intend to point out that if you under declare your purchase you would reflect a great profit upon the sale and would be liable for a larger tax payment.

For the reasons above we strongly suggest that the full sale/purchase price is declared.

Notary fess

The Notary Public is an official organ whose duty is to draw up and sign off all official deeds, weather these be property purchase deeds, new build declare deeds, or otherwise. You may find that notary fees will vary depending on the notary office you use, although in general for a property purchase up to 500,000.00€ you would incur a notary fee of approximately 1,000€, for a property of higher value the notary will rise and should be consulted before the notary is appointed.

Generally it is the purchasers that choose which notary is to be appointed as it is they who shall be paying the fees, although if no mutual agreement is reached as to which notary will be appointed, the closest notary public office to the property, object of the transmission, will be used.

Registry fees

The property registry, known as “registro de la propiedad” will charge you for the registry of your property deeds, each property has their corresponding registry office and registration number.

Every time a property is modified or sold it must be registered at the property registry office, later, at any time, you are able to apply for a land registry certificate to your property, known as “nota simple” this certificate will reflect the names of the owners of the property, a full description, the registration details and if there are any mortgages, debts, liens or charges against it.

As the fee charged by the registry is not a tax as such, but rather an administrative fee you shall find the bill will vary according to the locality, type and value of the property you are registering.

Legal fees

These would be the fees you pay to your lawyer/legal advisor in charge of your property conveyance.

It most important that a lawyer/legal advisor is appointed for this task in order to ascertain that the property your are going to purchase is safe, meaning that there are no encumbrances on it, that it is correctly registered at the land registry office with the corresponding square metres, that all utilities are correctly supplied, that all taxes are paid up to date, that there is nothing detrimental in the contract for you, that the deeds are correctly drawn up and translated to you for your understanding, that the deeds are correctly registered, taxes correctly paid and utility changed over.

The above are only a few of very important tasks your lawyer/legal advisor will carry out for you.

Having gone through the expenses entailed in the purchase of your property in Spain, we think it is also important for you to be aware of other expenses your property will produce on an annual basis, these are:

  1. “IBI”
  2. “Recogida de residuos solidos” or “Basura”
  3. Tax

IBI (Impuesto de Bienes Inmuebles)

IBI Would be the equivalent of the UK local rates, and is paid by every property owner in Spain, whether these be residents or not, you shall receive a bill once a year either from the Town Hall corresponding to the location of the property or SUMA which is an official office appointed by the government to process tax payments.

Your IBI bill will vary in accordance to the location, type and value of your property, it is a good idea to ask how much a property’s IBI is before purchasing in order to preview your annual property expense, as if this bill is not paid within the time frame given you would incur in a fine.

Recogida de residuos sólidos

This would be your rubbish collection fee, the bill will be issued once a year either by the Town Hall corresponding to the location of the property or SUMA which is an official office appointed by the government to process tax payments.

The amount payable on your rubbish collection fees will vary in accordance to the location of the property, it is a good idea to ask how much a property’s rubbish collection fees is before purchasing in order to preview your annual property expense, as if this bill is not paid within the time frame given you would incur in a fine.

Tax

Depending on your personal fiscal residency situation you shall be liable for non-resident tax or not.

If you do your tax return in Spain you are not required to pay a non-resident tax for your property as you would be considered to this effect as a fiscal resident; on the contrary if you do not do your tax return in Spain and/or deal with your tax return in a foreign country, such as the UK for example, you shall be required to pay an annual tax for your property, the tax form applicable to this case is known as “modelo 210” , the tax you are liable for will vary according to the value of your property, and must be paid to “Hacienda Publica” the Spanish Tax Authorities.

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