Having decided on your favourite Spanish region and narrowed down your property search area, there are a few other important things to consider before you begin the formal process of purchasing a property in Spain. Having the correct paperwork in place, understanding your obligations, and (very importantly) knowing how much the property purchase will cost you in fees and taxes, will help the process run as smoothly as possible (and get the boring part over and done with more quickly)…
Spanish taxes are decided at both the state and regional level, with different rates in each of the 17 regions, and just to make life easier, the situation is constantly changing. With this in mind and particularly with Brexit fast approaching we strongly recommend that you do your homework prior to making an offer on a property in Spain and seek independent advice where necessary.
Below you will find an overview of the fees and taxes you can expect to pay on your property purchase in Spain, along with some additional expenses to consider.
First and foremost any foreigner wishing to purchase or rent a property in Spain must register for an
NIE Number
An NIE number (Número de Identidad de Extranjero) is a national ID number for foreigners and a way for the Spanish authorities to track who needs to pay tax in Spain. Simply put, if you plan to buy a property in Spain you need an NIE number and because it can take up to 4 weeks to process it’s best to plan ahead!
How do I apply? There are two ways to apply for your NIE number – in Spain via the local police station (in the region you wish to buy), or via your Spanish consulate at home (London or Edinburgh).
What documents do I need to bring to the appointment? An EX-15 form which has been completed in Spanish, but not signed, a valid passport (and copy) and completed Model 790 payment form. You may also be required to supply a document such as a mortgage approval form or deposit contract that justifies why you are applying for an NIE number
Is there a fee? Yes, the fee is approximately £10-15 per applicant (if the property purchase is registered in two names you each need an NIE number)
Anything else I need to know? The documents must be filled out in Spanish so you may want to hire a translator or bilingual lawyer to assist you. And don’t forget – do not sign the form until you are at the appointment!
What fees and taxes will I pay when I purchase a property in Spain?
Do consider the additional fees and one-off and annual taxes that you will be liable to pay when purchasing your property in Spain. You should expect to pay up to 15% of the purchase price in fees and taxes.
Firstly, consider the fees:
Lawyer fees: Although not a legal obligation to hire a lawyer when purchasing a property in Spain, it is highly recommended. They will charge you according to the service you require, the standard rate is about 1% of the purchase price of the property, or they will charge you on an hourly basis.
Notary fees: These will vary depending on the purchase price of the property as stated in the deeds of sale. You should allow 0.5 – 1% of the purchase price.
Mortgage costs: don’t forget the additional costs associated with taking out a mortgage in Spain, including an initial fee related to property valuation by the mortgage provider
What about my tax obligations?
To be paid at purchase:
- For a new property: You will pay IVA (value added) tax (currently set at 10%) and IAJD (stamp duty) which ranges from 0.5-2% of the property’s declared value
- For a resale property: You will pay ITP (Transfer) tax which currently ranges from 6 – 10%
The above rates are set by the local government and do vary according to region, so ask your lawyer to check the current rates before you go ahead with your property purchase.
What will my annual tax obligations be?
There are two main annual taxes payable for Spanish property owners:
- IBI or Property tax – this is a municipal tax calculated by the local council (the equivalent to rates or council tax in the UK). It is based on the cadastral value of the property (valor catastral) which is the rateable value of the property and lower than the market value. The amount you pay varies but typically it is in the region of 200 – 800 euros per year
- Non-residents Income Tax (IRNR): must be paid if you own a property in Spain but spend less than six months of the year in Spain (correct at time of writing). The tax varies depending on if you rent out your home in Spain or not. If you do rent out your property then the rate is based on the annual rental income.
What other taxes should I be aware of?
- Wealth tax: Payable on properties worth in excess of 700,000 euros – this tax has changed several times in recent years so do make sure you check the latest information before you commit to a purchase
- Capital gains tax: Payable by non-residents when they sell a property in Spain. Capital gains tax is paid on the difference between the sale and original purchase price of the property
- Plusvalia Municipal Tax: One to watch! This tax is calculated on the basis of the valor catastral of the property and varies according to how long the seller has owned the property. Normally it is paid by the vendor but the buyer becomes liable if the vendor fails to pay it. Sometimes the buyer agrees to pay this tax during the negotiation process – do ask your lawyer to double check this tax has been paid by the vendor otherwise you could become liable.
How do I pay tax in Spain?
The tax year in Spain runs from 1 January – 31 December. You can submit your tax return and pay tax via the Agencia Tributaria
A note on joint ownership: As well as needing separate NIE numbers you will be treated as separate tax payers so do remember that you must file your annual tax returns separately.
Finally it’s worth considering the other expenses that will be associated with your purchase on an ongoing basis. These include (but are not limited to) – insurance, utilities, property maintenance and community fees (these fees are typical if you are purchasing a property which is part of a development).
