WHAT SHOULD YOU KNOW BEFORE BUYING A PROPERTY IN SPAIN?
✅ TOTAL COST ON PURCHASE
There are various taxes and costs associated with the purchase of a new-build villa or a new-build apartment in Spain. The total cost that must be added on top of the purchase price of the new building is around 13.5%.
The different costs are:
– VAT: 10% VAT comes on top of the purchase price.
– STAMP DUTY: 1.5% of the purchase price (or slightly lower)
– NOTARY FEE: The notary fees are set by an official scale and the costs depend on the selling price and size of the property and its value.
– PROPERTY REGISTRY COST: Approx. in the same order as the notary fees, and are the costs for registering your property in the Property Registry (“Registro de la Propiedad”).
– LAWYERS’ FEE: standard 1% of the purchase price
✅ PROFESSIONAL LIABILITIES OF THE PROJECT DEVELOPER
From the moment of delivery, the project developer is responsible for any defects in the home and he is obliged to repair:
• Up to 1 year after delivery for poorly finished small works
• Up to 3 years after delivery for minor defects
• Up to 5 years after delivery for major defects
• Up to 10 years after delivery for major structural defects
✅ BUYER PROTECTION
The autonomous government of Andalucía (“Junta de Andalucía”) has taken steps to introduce a decision to better protect consumers after the 2008 banking crisis. At the national level too, many measures have since been taken to ensure that only financially strong companies can meet the imposed requirements with regards to the financing of their projects. All project developers are also required to present a complete information package to a potential buyer.
For example, information must be provided regarding the identification of the builder, the designer, the project manager, the project developer and any intermediary involved in the sale.
All information about the project must also be submitted: floor plans, specifications of the buildings, dimensions, delivery date, guarantees on devices and equipment, general terms and conditions of sale, property registration details and information about insurance on construction. Spanish law requires the purchase contract to state a delivery date with a penalty for delay. This clause states that the new building must be transferred within “x” days after the license of first occupation (“licencia de primera ocupación”) is issued by the town planning department of the municipality.
The project developer must also be able to present a bank guarantee (or insurance) for all payments made by the buyer. Both for the payments made when signing the purchase contract and all other further payments made during the construction period. With a bank guarantee you have the guarantee that you can recover all your money 100%, in case of non-realization of the construction, even in the case of bankruptcy of the construction company.
In recent years there have also been many rulings from the Spanish courts in favor of foreign buyers, whereby the bank that had received the down-payments – and in this case the bankruptcy of the construction company/promoter – was obliged to refund all down-payments made to be paid to the foreign buyer.It is therefore safe to say that in the year 2020 the buyer of real estate in Spain is very well protected.
✅ ANNUAL RETURNING TAXES AND CHARGES
1. – Community Fees
They are agreed among all co-owners in function of the services provided (cleaning, monitoring, maintenance of gardens and swimming pools, etc …). Payment is monthly although some communities offer prompt payment discounts for twice-yearly or yearly payments.
2. – “Basura” or Spanish for garbage collection. To be paid in July.
3. – “IBI” or the property tax, to be paid 1x/year in the month of July. The amount of the “IBI” tax depends on the area of the apartment or villa (including the share of the common areas) and the municipality. (It is a city tax)
To give you an idea, and purely as a guideline:
– IBI tax for a 2 bedroom apartment – target amount: between 750 and 1,000 Euros
– IBI tax for a 3 bedroom apartment – target amount: between 900 and 1200 Euros
– IBI tax for a 4 bedroom apartment – target amount: between 1200 and 1400 Euros
– IBI tax for a 3 to 5 bedroom villa – target amount: between 1,500 and 3,500 Euros
✅ – RENTAL INCOME (real rental income or fictional income)
1. 👉 when renting out the property (= real rental income).
Tax based on the actual rental income – for the period that the property is actually let.
This rental income must be reported quarterly to the Spanish tax authorities.
For a NON-RESIDENT and EU RESIDENT, the rental income is taxed at the fixed rate of 19%.
2. 👉 in the case of non-rental of the property (= notional rental income)
The tax to be paid is 19% calculated on the tax rate of 1.1% on the cadastral value (= the taxable value) of the property. This tax rate can reach a maximum of 2.2% for large assets with many properties. Declaration must be made before December of each year. (1x/year declaration)
Example: An apartment has a cadastral value of 300,000 Euros. (this value is stated on the annual IBI assessment letter) Calculation assessment: 1.1% on 300,000 € = 3,300 €
Annual tax: 19% on 3,300 € = €-627 to be paid.
✅ TAXES ON SALE OF YOUR PROPERTY IN SPAIN
1. – “Plusvalía” municipal tax. This is a tax calculated on the added value of the property. (Not the house). This added value tax must be paid by the seller.
2. – 19% tax on the recorded capital gain. (for both residents and non-residents)
The tax on the realized net profit (net profit: after deduction of all costs incurred, including agent’s commission, lawyer’s fees and the “plusvalía” municipal tax) on the sale of your house is set at 19% in Spain.
Simulation example surplus value tax. The purchase amount of an apartment was 300,000 Euros (excluding VAT and taxes) and the sale amount is 400,000 Euros. (without VAT and taxes) After deduction of all related expenses, we have a net capital gain of 55,000 Euros. (100,000 Euros – 45,000 Euros costs)
Capital gain tax to be paid: 55,000 Euros x 19% = 10,450 Euros.
If you wish to go through all the information in further detail, we gladly refer you to our webpage 👉 >>> BUYING GUIDE