If you are planning to buy a property in Spain there are a number of legal costs and taxes that you will have to account for. We will try to give you an insight on just some of these things so that you can start planning for that dream home in the sun.
COMMON COSTS OF BUYING A RESALE PROPERTYTransfer Tax ( Commonly known as ITP)
This tax applies if the property is a resale property and is usually 7% on the price of the purchase. The Transfer Tax is paid by the buyer and has to be paid upon completion.
Agency FeesOur Estate agency fees or commissions are paid by the seller, unless otherwise agreed. Other agencies may expect the commission to be paid by the buyer or even both.
Despite the ability to buy without the need for an agent most people still use agents to find property in Spain, as this guarantees greater coverage and provides you with the comfort that you will have someone available to you who can speak the language fluently and is in a much better position to make any offers on your behalf.
Mortgage costsIf you choose to buy with a mortgage then this will incur several additional costs. First there will be the property valuation that the mortgage provider will require before granting the mortgage. This is paid for the by the buyer and can cost around €400. Then there will be the costs of the mortgage itself. This varies according to the provider, however there is usually some kind of opening fee of around 1-2% of the value of the mortgage. Finally a mortgage will increase the Notary expenses.
Notary ExpensesNotary expenses are nearly always paid by the buyer and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate Notary fees as being 1% of the purchase price declared in the deeds of sale. In many cases, however, Notary fees are more like 0.5% (or less) of the price declared in the deeds.
Land Registry
Expenses related to registering the sale with the land registry office are also nearly always paid by the buyer, and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate 1% of the purchase price declared in the deeds but the fee could be considerably lower. In summary, allow for up to 10-12% of the purchase price in taxes and other costs.
Banking CostsTo pay for the property, you may need to write a banker’s cheque. In order to do that, you will need to have a Spanish bank account which we can open for you and transfer money from your own bank. We will normally provide you with contact details for companies who specialize in foreign currency transfers.
OTHER COSTS TO KEEP IN MIND
There will of course be costs associated with owning a property in Spain. Some of these will be maintenance costs, such as cleaning, repairing, reforming, utility bills, rubbish collection, and so on.
Property Ownership Tax (Commonly known as IBI)
A local tax on the ownership of property in Spain, irrespective of whether the owner is a resident or not. Calculated on the basis of the ‘valor catastral’ (an administrative value that is usually lower than the market value, sometimes considerably so) set by the town hall the tax rate goes from 0.4% - 1.1% of the ‘valor catastral’ depending on the Spanish region.
Annual Wealth Tax (Impuesto Sobre Patrimonio)
Both residents and non-residents have to pay an annual wealth tax on the net wealth they own on 31 December each year. For non-residents this tax only applies to assets located in Spain. Non-residents who only own property in Spain (and no other types of assets) can expect to pay a wealth tax based on the value of the ‘Escritura Publica’ or the ‘valor catastral’, or a value assigned by the tax administration for the purposes of other taxes - whichever being highest. The tax rate varies between 0.2 and 2.5%.
Personal Income Tax (Commonly known as IRNR)
Non-residents who own property in Spain have to pay an annual income tax that varies according to whether the property is rented out or not. Non-resident property owners who do not rent out their property and who do not have any other source of income in Spain pay income tax based on the value of their property. The tax rate is fixed as 25% of 2% of the ‘valor catastral’ of the property.
If non-residents rent out their property and receive an income in exchange, they are obliged by law to declare this income and pay taxes on it. The taxable base and the tax rate will be determined by the laws as they apply to each person’s particular circumstances (taking into account the double taxation treaty - if any - between Spain and the country of origin of the non-resident). In many cases non-residents simply pay a flat rate of 25% of the gross income they earn from their property in Spain.
Residents in Spain will have to pay the income tax based on their income earned during the year. The tax rate depends on the level of income.
Insurance
Household insurance will vary according to the circumstances of the owner and the type of property. However it should be born in mind as a cost that all property owners will face and Banks providing mortgages will expect you to purchase Buildings insurance and will also ask if you want life insurance to cover the mortgage should something happen.
Consult Easy Property Spain at our web site http://www.easypropertyspain.co.uk/ for more than 300 properties and let our real estate agency in Spain guide you in your property search in Spain with their experience and expertise. Alternatively you can contact our Valencia property agents at sales@easypropertyspain.co.uk or call us on our UK National Number 0871 666 5350.Easy Property Spain is the best choice for your real estate agent in Spain.
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