Legal aspects you should know when purchasing property in Spain

Legal Aspects Every Foreign Buyer Should Know When Purchasing Property in Spain

Note: Regulations and laws in Spain may be updated periodically. For the most recent and accurate information on legal and tax matters, we invite you to contact us. At Taylor Wimpey España, we provide guidance and support throughout the entire process.

Buying a property in a foreign country can be a rewarding experience, but it also comes with certain challenges, especially when it comes to complying with the country’s legal and tax requirements. In Spain, there are several key legal aspects that every foreign buyer should be aware of to avoid surprises and ensure a smooth and well-founded purchase.

1. Taxes When Purchasing Property in Spain

Taxes are one of the most relevant and sometimes complex aspects for foreign buyers. In Spain, taxes vary depending on whether the property is new or second-hand:

• Value Added Tax (IVA): If the buyer acquires a new home, they must pay a 10% IVA on the purchase price. For commercial properties, the IVA increases to 21%.
• Transfer Tax (ITP): For second-hand properties, the ITP applies, and its rate varies by region, usually ranging between 6% and 10%.
• Stamp Duty (AJD): This tax applies to the signing of notarial documents and property registration. It also varies by region, typically ranging between 0.5% and 1.5%.

In addition to these direct taxes, buyers must also consider notary fees, registration fees, and other administrative costs associated with the purchase.

2. Basic Legal Requirements for Foreign Buyers

In Spain, foreign buyers must meet certain requirements and present specific documentation to complete the property purchase. Key aspects include:

• Foreigner Identification Number (NIE): This number is essential for any economic or legal transaction in Spain. It must be requested at a police station in the country or at the corresponding Spanish consulate.
• Spanish Bank Account: To manage payments and taxes, it is recommended to open a bank account in Spain. While not a strict legal requirement, it simplifies the process.
• Non-Resident Certificate: This certificate may be required by Spanish banks when opening an account and conducting significant transactions.

3. Contracts and Legal Aspects of the Purchase

The purchase contract is an essential document that sets the terms and conditions of the transaction. In Spain, property purchases follow a well-defined formal structure:

• Deposit Agreement (Contrato de Arras): This preliminary contract specifies the intention of both parties to proceed with the purchase. Typically, a deposit of between 5% and 10% of the purchase price is required. It is crucial to carefully review the contract’s clauses, as penalties may apply if either party withdraws from the transaction.
• Deed of Sale: The sale is formalized through the signing of a public deed before a notary. The notary ensures that both parties understand the terms and that the transaction complies with current regulations.

At this point, it is advisable to have the support of a specialized lawyer to review the contract and verify that the property is free of encumbrances or outstanding debts, such as mortgages, that could affect the buyer.

4. Local Regulations and Urban Planning Aspects

Each autonomous community in Spain has its own urban planning regulations, making it essential to understand local rules before acquiring a property. Key issues include:

• Construction and Habitability Permits: Verify that the property has all necessary licenses and permits, including a first occupancy license for new properties.
• Tourist Rental Regulations: If the intention is to rent the property, it is crucial to understand local laws regulating vacation rentals, as restrictions can vary significantly between regions.
• Protected Zones and Urban Limitations: Some areas in Spain are protected by environmental or urban planning laws that may restrict the use or development of properties.

5. Associated Property Costs

Beyond the property’s purchase price and initial taxes, foreign buyers should also consider other recurring expenses, such as:

• Property Tax (IBI): An annual municipal tax based on the property’s cadastral value.
• Community Fees: For properties within residential complexes, community fees can be a significant additional cost. They cover the maintenance of common areas, security, and additional services.
• Home Insurance: Not mandatory, but highly recommended to protect the investment in case of damage or unforeseen events.

Final Considerations and Recommendations

Purchasing a property in Spain is a significant decision with various legal and tax implications. It is crucial to be aware of these legal aspects and have professional advice to avoid costly mistakes in the long term. For example, enlisting the assistance of a specialized real estate lawyer and a tax advisor with experience in international transactions can significantly simplify the process and protect the buyer’s interests.

At Taylor Wimpey España, we are here to guide you every step of the way, offering comprehensive and personalized support. From obtaining the NIE to signing the public deed, we provide the expertise and knowledge necessary to make informed and secure decisions. Do not hesitate to contact us to receive updated information on the legal and tax aspects of buying property in Spain.

Buying property abroad can be an ambitious and exciting project, but with proper preparation and the right professional support, it can be achieved smoothly. We are ready to help you fulfill your dream of owning property in Spain!