Prospective buyers will need to obtain an NIE – a fiscal number for foreigners. This can be obtained in person from a police station if you show your passport. You also need an NIE to open a bank account or buy a car in Spain.
Once you have found your property and agreed a price, start by finding a bilingual lawyer who is experienced in Spanish property law. Spain has the law of subrogation, whereby properties carry the debts of previous owners, so your lawyer must ensure there are no outstanding charges on your property. The lawyer should also ensure the property has full title by checking the Registro de Propiedad.
Both buyer and seller sign the preliminary contract, the Contrato privado de compraventa. This should outline the agreed sale price, the names of the buyer and seller, the completion date and ensure that the property is free from debt. A non-refundable deposit of about 10 per cent is normal.
The final contract, the escritura de compraventa, is signed before the notary. The buyer should pay the full amount, including all costs and taxes. If the buyer has taken out a local mortgage, a bank representative may also attend this meeting with the notary.
Buying costs in Spain are higher than in the UK, and most experts suggest you allow 10 per cent to 12 per cent of the purchase price. The main charges are:
* Notary fees are about one per cent
* Lawyer’s fees are about one per cent
* Property transfer tax on a resale property is seven per cent and on a new-build property is eight per cent, which includes stamp duty at one per cent
* VAT on land or commercial property is set at 16 per cent
Buyers taking out a mortgage will have additional costs such as valuation charges of about €500 (£340) and an opening charge of about one per cent.
Running costs and taxes
A local property tax, the IBI, is issued by the local municipality and is normally between 0.5 per cent and one per cent of the rateable value of the property.
A municipal tax, the basura or rubbish-collection tax, is approximately £100 a year and, as with the IBI, differs from region to region.
Capital gains tax in Spain has been cut for non-residents from 35 per cent to 18 per cent. Residents are those who spend more than 183 days per calendar year in Spain or anyone considered to have most of their economic interests in Spain.
Inheritance tax differs between the regions in Spain and is further complicated by a sliding scale depending on your wealth and the closeness of the family relation who is inheriting. Get good legal advice on the best way to plan your estate and make a Spanish will.
Rental income is taxed at between 25 per cent and 35 per cent.
VAT (IVA in Spain) is 16 per cent. VAT on food and medicine is seven per cent.
Wealth tax is payable by residents and non-residents who own property in Spain. Non-residents are assessed only on assets within Spain but do not benefit from the generous allowances made for residents. Current rates are between 0.2 per cent and 2.5 per cent.