QUESTIONS & ANSWERS
Please find below Questions and Answers relating to taxes when Buying Property in Spain. For more Information please visit our News/Blog.
What are the Costs when Buying Property?
When buying property in Spain, there are various taxes and fees to be paid:
- LAWYER FEES: usually about 1% of the purchase price plus 18% IVA
- NOTARY FEES: normally in the range of 300 to 700 Euros
- PROPERTY REGISTER FEES: approximately 40% of the notary fees
- TRANSFER TAX: 7% of the purchase price, but when buying new from a developer this is replaced by 8% IVA plus 0.5% stamp duty
- PLUS VALIA: This is a local municipal tax and is based on the officially assessed increase in the value of the land since the last time the property changed hands. This tax will be normally paid by the vendor.
Who Pays What?
It is normal practice for the buyer to pay the above fees and taxes with the exception of the “Plus Valia”, which to be paid by the seller. The vendor will pay his own capital gains tax and also the estate agents fee.
Where can I get a copy of my Escritura?
Your Escritura is recorded by the Property Registry (Registro de la Propiedad) in the area which the property is located in. In order to get a copy of your Escritura, you will need to know the Volume and Page where the document is recorded. You may find these details in your Escritura, after this has been registered. If you don’t find the Volume and Page for your property there, you will have an Escritura, but your property has not been registered with the Property Registry.
What is Capital Gains Tax?
Capital Gains Tax is the tax to be paid by a non resident owner, when selling a property. The tax amount is 18%, with a 3% withholding provision.
How to be exempt from Spanish Capital Gains Tax?
Residents over 65 yrs old, selling their property (principal residence) in which they have lived for the past three years are not liable for capital gains tax. Residents and non residents, including those over 65 years of age, living in the property for less than 3 years are liable for the full capital gains tax.
Do I have to pay Capital Gains Tax if I am re investing in Spain?
No, as long as the full amount from the sale of your property is reinvested in buying a new property in Spain within a period of 2 years starting from the date you sold to the date when you bought your new property.
What is a NIE Number?
A NIE Number (Número de Identificación de Extranjero) is your identification number in Spain, which you will need to buy a property, pay taxes, buy a car, establish a business, open a bank account. Both EU and non EU citizens get issued a NIE.
Can I file my own taxes as a non resident?
A non resident who owns property in Spain is allowed to file their own tax forms. However, please note, the tax office does not send notifications of IBI tax to addresses outside Spain. It is therefore advisable for any person who has a property in Spain, but doesn’t live there all the time, to appoint a Fiscal Representative. The tax authorities will send all correspondence relating to your taxes in Spain directly to your Fiscal Representative. Appointing a Fiscal Representative will ensure that the Spanish tax authorities have a point of contact, so that unnecessary debts or fines can be avoided.
What is Spanish Inheritance Tax (IHT)?
Spanish Inheritance tax (Impuesto sobre Sucesiones y Donaciones) can be quite a substantial amount, depending on a number of factors: the inherited amount, the relationship between the parties involved and the level of current wealth before receiving the inheritance. Spanish IHT rates vary from 8% to 40%.
What is Plus Valia tax?
Plus Valia is a municipal tax to be paid by the owner at the time of a sale. This tax reflects the increase in value of the land, since the last change of ownership. The law states that the vendor should pay this tax when it comes to a sale of property. Plus Valia can vary considerably depending on the amount of land a property occupies and the age of the property. It is low on modern properties such as apartments and townhouses in urbanisations, where land values have increased little since the properties were built and little land involved. Plus Valia is based on the official “rateable” value of land (valor catastral) which is officially revalued periodically for this purpose and is usually lower than the actual market price.
What is the ‘cadastral’ value of my property?
The cadastral value is the value on a property, set by the local Town Hall. It is used for calculating the local property taxes (rates) and Spanish Deemed letting income tax.
Cadastral value usually varies between 50% 70% of the market value of the property. Many local authorities are now reviewing cadastral values and you can identify if/when this happens from your last IBI tax receipt.
What are the Inspection Fees of an Architect or Surveyor?
Employing an architect or surveyor to inspect a building or plot of land, his fees will vary considerably depending on the work involved and size of the property. A structural survey of 2 3 bedrooms Villa usually cost between 600 and 1.200 Euros.
What is a Usufruct?
Usufruct is a formal agreement which gives permission by the owner of a property to other person or persons to live in the property for a specified period of time. This is often used by Spanish families, to reduce the effects of gift or inheritance tax between generations. The beneficiaries of a usufruct have the right to live in the property without becoming the owner of the property, but cannot sell or rent out, and are responsible for the payment of annual taxes and property insurance. The property owners cannot use the property while a usufruct is active.
What tax to be paid when Renting out my Property?
If a non resident is renting a property and receives an income, the non resident is obliged by law to declare this income and pay taxes. Non residents pay a flat rate of 25% of the gross income they earn from their property in Spain.
What I should know about Short or Long Term Rental Contracts?
Short Term Rental Contracts
This type of contract is normally used for Spanish holiday rentals and may run for up to one year. Short term rental contracts in Spain (contrato de arrendamiento de temporada) require that the tenant vacate the property when the contract ends. The condition must be specified in the contract. When the contract does not stipulate a rental period, it will run for one year.
Long Term Rental Contracts
There is one major downside to long term rentals in Spain. A long term rental contract in Spain has a duration exceeding one year. After the year, the tenant has the right to renew for up to five years and the landlord can only increase the rent by the annual rate of inflation. If the contract does not exceed five years, it will be renewed automatically upon its expiration, unless the tenant is not willing to renew it. The landlord is obliged to accept these renewals, except when he had previously stated in the contract that he needs to recover the property for his own use.
Divorce / Separation. How to remove a co-owner from the Escritura?
Dissolution (Dissolving) a Joint Ownership of Property allows the co owners to re arrange their shares to be transferred to the other party, when the partnership breaks down. Each co owner has the right to dissolve their co ownership of the property. The solution to this is to transfer their share to the other party, named in the Escritura. Examples of situation where this applies are:
- Couples owning property in joint names
- Divorce or separation
- When a partner dies
- Re arranging property shares between families and friends
When transferring co ownership shares, this will involve legal fees and taxes. In order to avoid paying these high taxes, we can offer you a legal and tax efficient solution that will enable you to save money. To arrange for a consultation contact us.
Inheritance? Avoid paying high taxes on inherited property shares
Spanish Inheritance tax can be a substantial amount of up to 40%, depending on a number of factors: the amount inherited, relationship between parties involved, and their current level of wealth, before receiving the inheritance. To avoid paying this high tax, those who inherit a share in a property may wish to transfer these shares to another joint owner, resulting in a significant saving, in both tax and legal fees. Regarding these matters, we can offer you more tax efficient solutions. To arrange for a consultation contact us.
What is Property Register & Catastro?
Property Register (Registro de La Propiedad) deals with ownership, the Catastro (Land Register) gives you a physical description of the property with the exact location, boundaries and size of the plot. In many cases the Title Deed (Escritura), registered with the Land Register, do not correspond with the size or boundaries of the land that is being offered for sale. If there is any discrepancy between the Property Register and Catastro, then it will be necessary to do a rectification / update, to record the exact measurements.
Where do I get a Nota Simple of my Property from ?
A Nota Simple of your property can be obtained from the Property Register (Registro de la Propiedad). You should already have a Nota Simple from your Lawyer, when you purchased your property. If you have a mortgage on your property, all original paperwork including the Nota Simple and Escritura, will be filed with your bank.
Disclaimer: The information provided here is intended as information only. We make every effort to ensure that the information contained herein is accurate; we take no responsibility or liability for any inaccurate, delayed or incomplete information.