What you should observe in order to buy a home in Spain is explained by Dr. Reiners, Spanish and German lawyer with offices in Marbella, Cologne and Mallorca.
Who plays with the idea of buying a property in Spain, will not do so until he is convinced of the house and its location. Therefore, it might be interesting to first sign an option contract. In combination with a rental agreement you will then have the possibility to reflect on your purchase decision. The option contract in notarial form can be registered at the Land Registry.
In any case, when buying a house in Spain you should not renounce of using a Spanish notary public. Certainly, the formalization of the Title Deed before a notary is not compulsory according to Spanish law. However, the ownership position of the buyer will only be protected by registering his Title Deed at the Land Registry and only deeds in notarial form can be registered.
The property, benefits and burdens to rise in a plot will be transmitted to the buyer mostly when signing the notarial deed against payment of the purchase price by means of a banker’s draft.
The lawyer acts as a link between the seller, notary and land registry officials. He examines the condition and the charges of the object for purchase and sale; he represents the buyer in the negotiation of the private written sales contract, the preparation of the notary deed, as well as the tax and land registry matters of the transaction.
If the seller is a developer, you have to pay VAT. The VAT rate is 8% when buying a house or an apartment. The real estate tax excludes VAT and always accrues between private persons. The real estate tax is 7 or 8% depending on the purchase price. Furthermore, if VAT is applicable on the transaction, the buyer has to pay a stamp duty tax of 1% also. A capital gain causes an income tax obligation for the seller. The capital gain tax for non residents is 18% as a fixed rate. Last but not least, the increase of the value of urban land is subject to a municipality tax which has to be paid by the seller.