CUSTOMER INFO

You are interested in a property or a real estate?

Now there are many ways to do this, but there are only a few which are really safe for you. You should in principle, only buy from an estate-agent or a person, which you really trust. If you should have unanswered questions or only the smallest doubt, secure yourselves by a local specialists such as a solicitor, architect or other experts.
The following sides are surely something dry, but it could however save you some kind of problems, therefore you should take yourselves a few minutes time to read this…

Acquisition of real estate by foreigners belonging to member states of the EU:

Fundamental Principles: One of the most important and recurring topical issues is the question of the legal guarantees in the event of acquisition of real estate in Spain, whether this be purchase through an estate agent or the sale from one private person to another.

Prior to the definitive completion of the purchase and the associated payment of the purchase price you really must check the listed items below if you do not wish to run the risk of losing both money and the newly acquired property. In every case, in the preliminary negotiations you should insist on presentation of the following documents and having them translated by an accredited translator if necessary (the costs of this will possibly save you greater losses!):

1. A simple Register extract of most recent date = 'Nota Simple Registral' (a so-called 'Certificado Literal' where appropriate) from the appropriate local Spanish property register (Registro de la Propiedad). Here you learn if the vendor
   a)is also in fact the legally registered owner of the property.
   b) Information about possible still outstanding charges such as mortgages, taxes payable and conditional clauses that may give rise to the nullity of a new purchase contract,
   c) whether, in the event of a plot of land being sold with the building, the building itself is recorded in the Property Register and - if such is the case - if the stated m2 is in agreement with the actual facts (e.g. addition of another storey, extension, annexes etc.).
   
2. The most recent decisions concerning annual Real Estate Tax payable, refuse disposal and, in so far as the property is connected to the sewerage mains, also the waste water treatment charges. In this way you learn, on the one hand, if the vendor has fulfilled his taxation liabilities towards the local authorities and, on the other hand, the approximate value (Valor Catastral) of the property is shown on the Real Estate Tax assessment which serves as the basis for calculation for your own tax liabilities following the carrying out of the sale. In addition, the Real Estate Tax assessment must be submitted both to the Notary (to become a part of the notarised purchase contract) and also as an entry in the Property Register.
3. In the case of an intended development on the land purchased (plots in urbanisations, vacant plots etc.) it is necessary - as accurately as possible - to find out about the respective building regulations, such as minimum plot areas for development, maximum permitted building volumes, permissible building heights etc.). The building officials (Departamento de Obras) of the respective city/local authority administration are competent in this respect.

If agreement has been reached with the vendor over the price a preliminary contract (Contrato Privado de Compraventa) is frequently concluded in order to secure the property. This preliminary agreement is best entrusted to a lawyer in private practice to draft. For the safeguarding of the property a 10 % advance payment is absolutely customary. Where, after a contractually agreed period of time, a notarised agreement does not arise the buyer loses the down payment in the form of compensation for damages for the vendor. As protection for the purchaser, on the other hand, the Spanish legislation provides that where the vendor withdraws from the sale on untenable grounds this party has to refund the down payment plus the same amount again as compensation for damages.

Where the Notary deadline is settled then the following is to be taken into consideration:

In the event that the purchaser is non-resident and the vendor is resident the regulations relating to transactions between residents and non-residents in Spain must be complied with in the method of payment of the purchase price i.e. at the time of recording by the Notary it must be possible to demonstrate that the purchase price has been brought into Spain in the correct way. This can be demonstrated in the following way:

A) through payment of the purchase price by means of a nominal bank check or Spanish bank, drawn on a non-resident account in the name of the Vendor or

B) by means of an import certificate to the value of the amount, issued by the customs authority at any Spanish frontier or at the airport.

This naturally also applies if the purchase price sum is to remain in Spain although the vendor is non-resident.

In the event that both parties to the agreement are non-resident the affair is considerably simpler since in the notarial deed of purchase it is simply included that the purchase price was paid beforehand abroad (Comment on Notarial functions) i.e. the money may also move abroad. The method of payment is laid down in the preliminary contract.

In contrast to Germany or other European countries the Spanish Notaries do not deal with the completion after the purchase: they simply legalise. In Spain there are for this reason neither client accounts nor a conveyance record, as it is known in Germany. The completion up to entry in the land register as well as all transfers (Electricity, Water, Telephone, Gas, local authority taxes etc.) are taken on by the so-called 'gestorias' (these are offices that deal exclusively with official completions) or the office of your lawyer.

The property becomes the property of the purchaser with the signature of the Notary. Since previously there was a great deal of misuse of sold properties the legislation has built in a kind of safeguard in the meantime: after the carrying out of the sale the Notary informs the appropriate Property Register by fax. The Register official grants this deed an entry stamp that is valid for exactly 10 working days after legalisation. Within this time nobody is able to submit a further deed of purchase. In other words: the copy of the notarial document for the purchaser should have been submitted to the property register within this time. Otherwise, this stamp expires and there exists the possibility of an additional deed being submitted for entry, since the Register official acts according to the principle of good faith i.e. the first submitted deed is entered. This transaction is normally taken on by the office of a 'gestor' [person who carries out dealings with public bodies on behalf of private customers or companies, combining the role of solicitor and accountant].

Following the purchase the purchaser is responsible for the following one-off expenses:

a) Notary's fees (based on the level of the purchase price: about 0.5 % may be set as an approximate value)

b) In the case of sale between private persons land transfer tax = on the Balearic Islands 7 %, on the Spanish mainland 6 % of the certified purchase price.

Otherwise 7 % value-added tax in the case of new buildings that are sold by a company as well as 0.5 % document tax for the deed.

c) Fees for the entry in the Property Register (as approximate value about 0.5 % of the certified purchase price may be set)

d) Costs of the conclusion of the transaction via the office of 'gestor' that otherwise undertakes all further transfers such as electricity, water, telephone, gas supply agreements. The charges for this may be ascertained beforehand.

IMPORTANT:
In Spain all taxes take the form of a so-called self-declaration that is then checked by the competent authorities rather than tax assessment on the part of the authorities. Taxes come under the statute of limitations in Spain after 4 years provided that no assessment (in the case of non-deliverability publication in the Official Gazette is valid) has been issued on the part of the authorities.

Taxes that are payable on a yearly basis by non-residents with property ownership: Local authority (Community) Tax (i.e. Real Estate Tax, Refuse Disposal and Vehicle Tax if applicable).

The level of this annual payable tax is calculated on the basis of the land register values of the property. This evaluation is carried out annually by the local authority administration where the property is located.

Wealth Tax (Impuesto sobre el Patrimonio)
In the case of real estate the basis of calculation is calculated on the highest of the following three values: Either the notarised purchase price of the property, the land register value or a value established by an authority for the calculation of other data. The tax rate follows from this calculation basis on a special tax table: up to an asset value of Euros 167,129.45 0.2 % is calculated, over and above that a progression starts that goes up to a maximum of 2.5 %.

Non-residents may in no way claim deductions. This tax liability arises at the end of a calendar year and, for the owner of two or more properties, is payable between May 1st and June 30th for the preceding year. Owners of a single property have the current calendar year (up to 31/12 at the latest) to pay the tax.

Income Tax (Impuesto sobre la Renta de las Personas Fisicas no-residentes = IRPF).
In respect of this tax two factors are to be taken into account:

1. Where the real estate owned is let out, all amounts that are paid as rent are to be considered as income. This amount is taxed at 25 % without the possibility of deduction for expenses. The tax is payable as soon as the income is obtained. The place of the tax liability is the finance authority in which area the property is situated or in which the representative for taxation purposes is resident.
2. Where the owner himself occupies the estate a value of 2 % of the register value of the property (the land register revision of which took place in 1994) serves as calculation basis for this tax. On this 2 % the general tax rate of 25 % will be levied. To sum up, it may be stated that a non-resident pays in tax 0.5 % of the value of the property (land register value). The tax deadline as above.

Detailed specifications for those interested are to be obtained from the website of the Spanish financial authority which may be read also in Spanish, English, French and German: www.aeat.es