Buying a property abroad is an intricate process. The hoops and loops of bureaucracy are unfamiliar and language barrier doesn’t make it easier. Still, with the right guidance, it doesn’t ned to stressful.
If, you too, fell for the charm of beautiful Catalonia and want to settle here, this infographic will show you the steps necessary to buy a home in this beautiful place…
NIE (Numero de identidad de extranjero)
You need to have a NIE, a Spanish tax identification number for foreigners. The process is not complicated, but does need some bureaucratic patience. To save time and your peace, use an attorney. The fees range from €100 to €150. This is best to avoid delays and missing out on the properties.
Spanish Bank Account
A Spanish bank account is absolutely necessary to administer all property related payments. It is good to open the account after getting your NIE, as you will have an access to more convenient and less pricey account options. You might need to provide paperwork documenting the origin of funds used to make a purchase and the requirements vary from bank to bank. It is important to check the offers of the banks. RENOVA BCN can be of use in this search.
Property Transfer Tax:
The most significant cost: Percentage of the purchase price, typically it is 10% of the costs.
Land Registry Fee
Land Registry charges a fee for changing ownership. An estimate cost for a purchase of €100,000 is €500.
Notary Fees
The signing of the property purchase is concluded in front of the notary. This formality is typically attended by solicitors (lawyers) representing both buyer and seller, and a bank representative if there is mortgage involved, and notary.
Typical fees for a purchase of €100,000 property is €800.
Legal Fees
It is important to appoint an experienced and independent lawyer (solicitor) to represent you in purchasing a property.
Average legal fees are about 1% of the purchase price.
Real Estate Agent’s Commission
Real Estate Agent’s fees should be paid by the seller. This is included in the purchase price.
Associated costs
Depending on the situation, there might be additional costs involved: if there is mortgage from a Spanish bank there might be additional fees.
Funding of the purchase
If you are going to buy the property in cash, you need to consider exchange rates. The banks usually charge a high fee for the transfer, so there are other companies worth looking at, for example TransferWise, Currency Direct…
Other option would be to approach a Spanish bank for a mortgage secured against the property in Spain. There are various documents needed and it depends on the bank.
Funding of the purchase
If you are going to buy the property in cash, you need to consider exchange rates. The banks usually charge a high fee for the transfer, so there are other companies worth looking at, for example TransferWise, Currency Direct…
Other option would be to approach a Spanish bank for a mortgage secured against the property in Spain. There are various documents needed and it depends on the bank.
Step 1. Formal Offer and Good Faith Deposit
Formulating an offer officially, in writing and putting down a good faith deposit. The deposit is usually held by the real estate agency and differs from property to property. It is usually about €2,000 more or less. If owner accepts your offer, it automatically becomes a reserve agreement which gives you conditions and timelines for the next contract, and the home is taken off the market. To avoid any mishaps and misunderstandings use an attorney that speaks your language and can oversee the procedure. This is also time to double check the property: your lawyer should check the documentation and it is time for a visit with an architect to check the property from structure point of view.
Step 2. The Private Arras Contract
The Private Arras Contract (Contrato Privado de Arras) is a simple contract in which the seller agrees to sell, and the buyer agrees to buy at the agreed price. It contains the essential information such as the purchase price, detailed description for the property, payment structure and completion date. At this point, you will be required to make a down payment of, typically; 10% of the property price to the seller’s bank account. The Good Faith Deposit will be included in this down payment.
This contract protects both parties by including a clause that, should a seller cancel the process at this stage, the buyer will receive double the down payment, and should the buyer withdraw from the contract, the down payment is lost. Also, prior to signing the arras contract, all of the legal and technical details of the property will be thoroughly checked. Your attorney should be involved in this stage.
Step 3. The Public Deed of Conveyance
Come the completion date, you must pay the remaining balance of the purchase price (the official purchase price minus any amount paid to date). Both the seller and the buyer need to sign the Public Deed of the Conveyance while a copy will be sent to Spanish Tax Office (Hacienda) and consequently to the Property Registry. The notary public is merely a public official serving as a witness. To protect your interests, a legal advisor is suggested.
Local Taxes
Local taxes (IBI – Impuesto Sobre Bienes Inmuebles) are calculated based on the cadastral value (valor catastral) of the land assigned by the Spanish Tax Office (Hacienda). It is advisable to check the annual local rates for a property before purchasing it, to avoid unpleasant surprises.
Community Fees
These fees apply solely when buying an apartment or a house within a closed community of neighbors. Community fees are usually paid on a monthly or quarterly basis and depend on the types of community maintenance expense. They may include perks such as concierge services, lift maintenance, cleaning, gardening expenses and so forth.
Non-resident Income Tax
If you are not a tax resident in Spain, but own a property in the country, you are required to pay nonresident income tax, IRNR (Impuesto Sobre la Renta de No-Residentes). The amount you pay varies when:
- The property is exclusively for personal use. In this case, the base fot eh applicable tax rate is usually 2% of the cadastral value of the property. The tax rate is 19% for EU residents and 24% for non-EU residents
- You rent the property out. In this case, you pay tax for the periods during which it is rented. Your applicable tax rate is calculated off the income you receive from renting out the property. Although, if you are an EU resident you can deduct various costs such as property management and maintenance.
Non-resident Wealth Tax
Anyone owning property in Spain (residents as well as non-residents) is requited to pay an annual wealth tax, calculated from the net value of their assets (properties, bunk funds, stocks…) in Spain after permitted deductions (e.g. mortgages). However, there is generous tax-free allowance. In Catalonia the allowance equals to €500,000 for residents and €700,000 for nonresidents.
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