Formalities

1. What do you need to buy a house in Spain as a non-resident?

If you have already decided to buy a house in Spain but you are not currently residing in the country you should keep in mind that you will need the following requirements to access the house:

•  Obtain the NIE (Foreigner Identification Number). It is a personal and unique number, essential to carry out any transaction in the country. This document is not essential to start the study with financial institutions.
•  Open a bank account in Spain. It is not mandatory, but it is advisable to deposit funds, receive or send transfers, etc. These accounts can carry a series of expenses, so it is convenient to compare between different banks to choose the option that suits us.
• Seek specialized advice from a lawyer who operates in Spain and can help you and even represent you at times that are necessary.
• Carry out a contract of earnest, where a part of the price is paid that is on account of the final price that is paid when the transfer of the property is made before a notary.

2. Summary of tax and general obligations to buy, sell, rent a property in Spain

(Information provided for guidance only)

1. 
   

   Buying

   1. Main fees and taxes

      •  First conveyance of a property, garage or storeroom: VAT(1) at 10% is payable if the deed of sale is signed at the same time as the dwelling’s and includes no more than 2 garages and 1 storeroom),
        plus 1.5% of Stamp Duty (AJD).
      • First conveyance of garages and storerooms: 21% VAT payable if deeds are executed separately from the apartment plus 1.5% of AJD(2).
      •  Second conveyance of a property, garages and storage rooms: The Transfer Tax (ITP)(3) on a private sale is:
        • Up to € 400,000 (8%)
        • € 400,000 – € 599,999 (9%)
        • € 600,000 – € 999,999 (10%)
        • Over € 1,000,000 (11%).
        if the transaction is carried out between individuals.
        Paid parking spaces:
        • Up to €30,000 (8%)
        • More than €30,000 (9%)

        A waiver of the ITP is permitted, if both the seller and the purchaser are subject to VAT. If the seller and the buyer are both companies, the transaction is subject to 21% VAT plus 1,5% AJD.

   2. Additional purchase expenses

      • Important: check that the seller has paid the local taxes (IBI Property Tax and Garbage Tax). If not
        paid the buyer is responsible and the amount owed should be deducted from the purchase price.
      •  If the seller of the property is non-resident in Spain, the buyer of the dwelling must withhold 3% of the price of the property and will have to pay it directly to the Tax Authorities within a month from
        the date of sale. A tax non-resident needs a Certificate of Registration in the Central Register of Foreigners and an NIE(5), identification number for foreigners. Or they can name a legal
        representative in Spain.
      • Le non-résident fiscal devra être en possession du NIE (5).
      • Notary expenses: these depend on the type of Title Deed, on the amount of the transaction and if there is a mortgage, etc. The purchase and sale process must be notarized, which entails a series of expenses for their work. These fees depend on each professional, varying approximately between 0.2% and 0.5% of the value of the property in question. On the other hand, the copy of the deed also entails an additional expense.
      • Land Register expenses: somewhat less than the notary fees.
      • Mortgage Costs: only official property valuation document (price depends on value and size of the property; can range from 300€ to 3000 € ). All other costs concerning the mortgage itself are now carried by the lending bank, and not by the customer.
      • Capital Gains Tax (Plusvalía(6)): according to the law, the seller has to pay this tax, unless agreed otherwise. This is a tax that is based on the increased value of the asset from the last property
        transaction and thus has to be paid at the time of conveyance. Should the seller not be a resident in Spain, then the purchaser is liable to pay this tax.
      • Legal expenses: around 0,5 -1% of the value of the transaction plus applicable VAT at the current rate.
      • Real Estate Agency Fees: between 3 to 5% + VAT, normally paid by the seller.
2. 
   

   Selling

   1. Main fees and taxes

When selling a property you are taxed on the difference between the cost of acquisition and the selling price.

• 1. • If the seller is Spanish: he/she should declare the sale in his annual tax declaration, including the sale price, deducting costs of acquisition and reforms if he/she can prove their payment. The
       remaining profit is entered in the capital gains tax section at the applicable rate (currently is 19%) . The seller must also pay municipal capital gains.
     • If the seller is a foreigner who is resident in Spain for tax purposes: the fiscal implications are the same as for a Spanish seller.
     • If the seller is a Spanish company: taxes payable are 25% on the profits obtained as part of the company’s annual results, depending on the condition of the property and the activity that the
       company exercises.
     • When the seller is Spanish, or is a foreigner who is resident in Spain for tax purposes, over the age of 65 years and has lived in the property for more than 3 years (principal residence): he/she is
       not subject to capital gains tax.
     • If the seller is a foreigner who is a non-resident in Spain for tax purposes: a withholding of 3% on the price that appears in the Deed of Sale is payable to the tax authorities. The Capital GainsTax has
       to be declared within 90 days following execution of the Deed of Sale (currently 19%), deducting any withholdings, which may have been applied. If a loss is incurred on the sale you can request a refund on the withholding tax.

  2. Additional charges on the sale

     • Capital Gains: according to the law this applies to the seller. Usually sellers include a covenant whereby the buyers accept to pay this tax, although the Town Hall will always file a claim against the
       seller in case of non-payment.
     • Legal fees: about 0,5-1% of the value of the transaction, negotiable.
     • Real Estate Agency Fees: The amount previously agreed with the Real Estate Agency, usually 3-5 % plus VAT.
     • Owners must be up-to-date with payment of the Property Tax (IBI), the garbage tax, and the Property Owner Community fees.

3. Once the property is purchased

The Town Hall will issue the following receipts, which we suggest you pay by direct debit via your bank account:

• Property Tax (IBI): The annual municipal tax is issued on 1st January each year and in Ibiza it is payable between August and September. The value is updated each year in the municipal budget. The IBI receipt shows the cadastral reference number and the cadastral value of the dwelling/garage/storeroom.
• Garbage Tax: the receipts are usually issued every 6 months.
• Special contributions (if any).
•  Property Owner Community fees: We recommend consulting the administrator of the urbanization who should issue a certificate showing that community payments are up to date. In the absence of this certificate, legal responsibility passes to the buyer for payments corresponding to the
  purchase and also the previous three years community fees.
  

4. Obligations of non-residents as property owners in Spain

Spain requires non-resident property owners to pay tax on imputed income (a tax on property used for personal use or left vacant) and on rental income (a tax on income generated from renting out the property, whether long-term or short-term).

      • If you have not had any tenants, income tax is calculated on a notional income (normally between 1% and 2% of the cadastral value).
EU citizens currently pay 19% and non-EU citizens 24%.
In this case, the declaration is made annually. You will have to pay these taxes each year, before 31 December.
     • The same tax is also paid by foreigners resident in Spain, in second homes or other properties located in Spanish territory.

When a foreign company owns a property in Spain and rents it out for tourism purposes, it is subject to Spanish corporation tax. The rate

5. Renting your property

• Spaniards or Residents in Spain for tax purposes: add the amount received as rent to your annual income tax return (IRPF(7)).
• Non-residents: declare your rental income and pay tax.

Glossary

(1) IVA: Value Added Tax (Impuesto sobre el Valor Añadido). The current Reduced
Rate: 10%. General: 21%.

(2) ADJ: Stamp Duty: Impuesto de Actos Jurídicos Documentados or AJD in Spanish, equivalent to Stamp Duty.
In general, whenever the purchase of a property is subject to VAT, the buyer must also pay the stamp duty (AJD in Spanish) at 1.5% of the purchase price. It is due by the purchaser and must be presented within 1 calendar month (from date to date) from the date of signing the title deed.

(3) ITP: Transfer tax. (Impuesto de Transmisiones Patrimoniales).
When the property is used as a dwelling, the purchaser has to pay the Property Conveyance Tax (Impuesto de Transmisiones Patrimoniales or ITP, in Spanish). This tax is calculated based on the declared sale price reflected in the title deed or the private purchase contract, unless the value of the property, according to the Tax Department is deemed higher, in which case the price will be recalculated by the tax authorities accordingly.
This tax must be paid to the Tax Office of the municipality where the property is located, regardless of where the public sale/purchase or title deed is formalised.
The payment deadline of the Property Conveyance Tax is one calendar month from the title deed execution date.
In the Balearic Islands, the rate is between 8% and 11% of the taxable base, depending on the value of the conveyed property.

(4) IBI: Property tax (Impuesto de Bienes inmuebles), levied by the town hall.
Approximately 1% of the Cadastral Value.

(5) NIE: Identification number for foreigners (Número de Identificación de
Extranjeros).
It must be presented to the notary and is necessary to pay taxes. To obtain a NIE, you must submit an application accompanied by specific documentation to the appropriate national police station. The processing time is usually two to three weeks.

(6) Plusvalía: Capital GainsTax on the increase of the value of urban land. This
municipal tax is levied on the increase of the value of property in the case of sale of plots, and on the land attributed to a dwelling as of the last conveyance.

(7) IRPF: Personal income tax (Impuesto de la Renta de las Personas Físicas).