on the sale and purchase of properties
1. Select a Real Estate Agent who is a reliable professional and will guide you in the search of a property and the legal aspects involved in the transaction.
- The Real Estate Tax (I.B.I.), a local tax that is paid yearly.
- The Community fees (Cuota de Comunidad)
- Town Council (planning costs, levies, taxes and/or expenses involved, as well as building limitations and liabilities)
- Verification of whatever land or lots that might be affected by an expropriation procedure or under a planning procedure.
- A few weeks prior to the granting of the Title Deed before a Spanish Notary Public, it is generally signed either a private purchase/sale agreement an option to purchase or an engagement and deposit agreement and pay of 10% to 20% out of the purchase price. This agreement contains the essential data concerning the transaction, such as the purchase price and the deadline set for the granting of the Title Deed. Between the date of the agreement and the date of the Title Deed, both parties will have time to settle any tax and other pending invoices and to exhibit receipts of those payments. It is important to take into account that these kinds of documents have a statement in which the vendor is obliged to give twice the amount received as deposit in case he/she rejects the sale, and the buyer will be penalized with the loss of the deposit paid, in case he rejects the purchase (engagement and deposit commitment: contrato de compromiso o arras, in Spanish).
- On the date of the granting of the Title Deed, the vendor and the purchaser and/or their representatives provided with a proper Power of Attorney must appear before a Spanish Notary Public. Upon the granting of the Title Deed to the property, the agreed purchase price will be paid and possession delivered to the purchaser.
- The Municipal Plusvalía (IMIVTU) (a local tax that is levied on the appreciation of urban residential land). The accurate tax amount that ought to be borne by the vendor is provided by the City Council. The amount of this tax maybe significant depending on the period of time that the property has been sold and the local tax regulations which vary from one Town to another.
- Moreover, the vendor must pay Spanish Income Tax (Non residents income tax) on the proceeds of the sale (i.e. the difference between the price that was declared in the previous Title Deed received when he purchased the property and the price that is declared in the current Title Deed that he granted upon selling that property). Under current laws, a vendor, who is not an official resident of Spain, would have to pay the 35% tax rate on the proceeds of a property sale. Upon the signing of the Title Deed before a Notary, the purchaser will withhold 5% of the declared purchase price to make sure that the Income Tax levied on the proceeds of the sale will be paid by the vendor; this 5% amount must be paid of non residents individuals is to the Spanish Tax Office within 30 days. Thereafter, either the vendors lawyer or your Lawyer will file a tax statement and the vendor will either receive this 5% amount or pay any difference, if ever the final tax amount is higher than the 5% paid on account which happens most of the cases. A vendor, who is an official resident of Spain, will pay a global rate of 15% for Income Tax arising from the capital gains obtained from the sale (I.R.P.F.), this may vary depending on the personal income status of the vendor.
- The expenses that must be supported by the purchaser.
- A 7% Stamp Duty (T.P.O.) (6% in certain autonomous communities) will be paid on the declared purchase price. On the contrary, in the event of a property purchase from a developer, the current V.A.T. rate will be paid, normally the 7% VAT on lodgings and buildings and 16% for pending spaces and any other real estate facility except for rural properties. Stamp duty tax (AJD) is payable (+ 1%) in case of new buildings sold by Promoters, when VAT is to be applied.
- Notary fees, which vary depending on the amount involved (usually between 400 1.200.- euros)
- Lawyer fees, may vary, as well depending on the amount of the transaction and the time devoted to the client, and in the case of negotiations with the other party/ies involved. You may expect between 1% to 1,5% of the total investment.