Buying a Property in Spain

As a long-standing favourite destination for expatriates seeking a home in the sun, Spain has much to offer.

Thousands of miles of coastline with golden beaches, fantastic weather, pretty mountain villages and purpose-built resorts for golf and many other leisure pursuits make it no surprise that Spain remains so popular.

Consequently, the market for expatriate properties in Spain is a strong one and you can find estate agents wherever you go, including online.

All sorts of property are available, from plush, seaside apartments in a communal block (urbanisation) to rural farmhouses ripe for renovation.

Once you have selected the area you wish to live in, research the prices and decide whether you will want to renovate it once you have moved.

The associated costs of buying a house in Spain are about 10 per cent of the purchase price.

Try to find an agent that knows the area well. It is also helpful if they have a good knowledge of the tax situation and legal aspects.

However, remember that estate agents are not lawyers, accountants or tax advisors. Check all details thoroughly, including the rate of commission the agent charges, often between three and seven per cent of the property's value.

Use an agent that is registered with one of the major bodies in Spain, such as Gestor Intermediario de Promociones y Edificaciones (GIPE) or Agente de Propiedad Inmobiliaria (API).

You can ask to see their certificate of registration and registration number for proof – the latter is normally displayed so it is visible from the exterior of their premises.

Avoid unregistered agents or 'cowboys' offering you property on the street or in a bar.
The legal side of things can be complicated, due to a former practice of under-declaring the sales value for tax reasons, and incomplete, or missing, title deeds.

Be aware that unpaid mortgages and taxes stay with the property, not the vendor, upon sale.

Check that there is no outstanding debt that you could be saddled with.

We strongly recommend you use the services of a reputable Spanish lawyer (abogado) and would be pleased to arrange an introduction for you.

Spanish property taxes

As with property in all countries, there are taxes to be paid when buying in Spain. These are:

• IVA (Impuesto al Valor Anadido), the equivalent of UK VAT, payable at seven per cent of the property value for new properties bought from a property developer
• ITP (Impuesto sobre Transmisiones Patrimoniales), or transfer tax, is payable if IVA is not applicable (i.e. you buy the property from a private person). It is between six and seven per cent of the property value, depending on the region of Spain where situated
• IVT (Impuesto sobre el Incremento del Valor de los Terrenos), commonly known as Plus val√≠a tax, is a local authority tax payable on change of property ownership. It is based on the increase in value of the land (not the property) since it was last sold. However, it is usually only a small amount, unless the vendor has held the property for a long period of time or the area of urban land is considerable e.g. a villa on a large plot. It is the seller's responsibility, but if not paid the local authority can embargo the property. Often, the buyer pays it and the sum is taken off the asking price. Check what your contract says
• stamp duty at one per cent (if VAT is charged, but not if the sale price is subject to ITP). 

If you sell your Spanish property, you are liable for Capital Gains tax at 18 per cent (both resident and non-resident indivduals).

A Spanish resident individual who has lived in a property for at least three years whilst a Spanish tax resident will be exempt from Capital Gains Tax if the sale proceeds are reinvested in another habitual residence.

Those aged 65+ are not subject to this reinvestment condition as they are automatically exempt from CGT.

The ongoing costs of owning a Spanish property include:

• property tax (IBI - Impuesto sobre Bienes Inmeubles) must be paid to the local town council (ayuntamiento) annually. It is based on your property's rateable value (valor catastral), and varies depending on where you live
• community charges (Cuotas de Comunidad) if you live in a community of owners.
• for non-residents (e.g. less than 183 days in a calendar year in Spain), income tax on deemed income (IRNR - Impuesto sobre la Renta de Non Residentes) is an annual amount. It is based on the property's rateable value (valor catastral). 

Calculate these costs carefully before committing to buying a property, as they can soon mount up.

To discuss how we can help you through the buying process in Spain, please email us or telephone us on Gibraltar (+350) 200 42686 and ask for a member of the International Tax Team.