GENERAL PROCEDURE FOR PURCHASING PROPERTY IN SPAIN
Spanish NIE number
Non-resident property buyers in Spain can apply for a NIE (foreigner's identification number in Spain) in any of the Spanish consulates in your country which could save them having to come to Spain a few days early and endure long queues in an often badly-managed (to put it politely) and over-crowded Oficina de Extranjeros in a Spanish police station.
Anyone intending to sell or buy property in Spain (or indeed anything else which involves paying tax to the Spanish inland revenue) needs a NIE by Spanish law for tax purposes. Applying at your nearest consulate is more expensive than getting a NIE in Spain but it still may be an advantage for alot of non-resident property-buyers.
If you do decide to apply while still in your country, then you need to get together all necessary documentation and then go to the consulate where you will be asked to sign the NIE application form in front of a consulate employee. Your signature will then be given an official validation stamp.
You will need the following documents:
A stamped (also at the consulate) photocopy of your passport.
2 recent passport size photos. The background must be plain, and people who wear glasses and/or earrings must take them off for the photo.
An original copy + photocopy of a document which explains why you need your NIE. This may be the private sales contract you have signed with the estate agent, promotor or private vendor, if you are going to work in Spain, the job offer... We suggest ringing the consulate beforehand to find out what to take depending on your personal circumstances.
A self-addressed envelope - An envelope big enough to contain all the above + NIE application form addressed to the central police HQ in Madrid: Comisaría General de Extranjería y Documentación, Dirección General de Policia, C/ General Pardiñas, 90, 28006 Madrid, Spain: One the NIE application form with your signature and passport have been stamped, the consulate will send the envelope containing all the above to Madrid. Then you will have to wait to receive your NIE.
Once you have agreed to buy/sell a property in Spain and we have been instructed, using a copy of the current Escritura (conveyance deed) we will obtain a Land Registry search result (Nota Simple) of the property to confirm who owns the property, that they are authorized to sell it and whether or not there are any debts or mortgages on it.
Once the Land Registry search result has been obtained and is satisfactory then we will either prepare a private contract or proceed directly to the signing of the Escritura. The signing of the Escritura will take place in front of the Notary local to the property, which is being sold or purchased.
If for example stage payments of the purchase price are to be made or the purchase/sale is subject to planning permission then a private contract maybe necessary. If so we will liaise with you and the other side to agree the contract. Once the contract has been agreed it is standard practice for a deposit to be paid when the contract is signed. Normally the other side’s bank details will be set out in the contract and a bank transfer can be made directly into the bank account. Alternatively funds can be transferred into our bank account and then paid.
Bank transfers in Spain can take as long as ten days so it will be important for you to ensure that cleared funds are received in our account, the details of which are attached, at least two days before completion or signature of the private contract.
Mortgage in Spain
If you are financing your purchase by way of a mortgage it is important to contact a lender and provide them with the necessary documentation as soon as possible. Once the mortgage application has been completed the lender will arrange a valuation of the property and notify you formally of the mortgage offer. It is important that you have a formal offer or an agreement from your lender prior to signature of the private contract as if the mortgage was later rejected you may risk losing any monies paid.
If you are arranging a mortgage please let us know.
If you are selling and have a mortgage we will obtain a redemption statement from your lender and arrange to settle this on completion.
Once a deposit has been paid, we will liaise with the parties to the contract and agree a date to complete either the purchase or sale. As mentioned above, this will take place at the local Notary and all the costs involved in the transaction as set out above will need to be paid to us (or your mortgage bank) prior to the signing of the Escritura.
Under-declaring the value of the Spanish property in the Escritura
Prior to the signing of the Escritura the parties will agree the amount that is to be declared in the Escritura. Sellers may ask for the price to be under-declared. Under-declaring amounts to tax fraud and is illegal. This should therefore be avoided. The declared amount in the Escritura will determine the figure on which the 8% transfer tax is paid and provide the “base figure” for calculating how much capital gains tax you will be obliged to pay on any future gains when you sell. Capital gains tax in Spain is 19%. Therefore although you may save some transfer tax by under-declaring on purchase you will be exposed to a larger capital gain liability on sale.
We would strongly recommend that you arrange to have a Spanish Will prepared upon purchase for all your Spanish assets. Spanish Wills have to be signed in front of a Notary and ideally they should be signed when the Escritura is signed. We can arrange a Will for you and the cost of this is set out above.
Power of Attorney
If you are unable to attend the signing of the Escritura then we will require a Power of Attorney to enable us to sign this on your behalf. If you are financing your purchase by way of a mortgage and will not be present for completion we will include in the Power of Attorney the right to sign the mortgage deed on your behalf. The cost of the Power of Attorney is set out above.
Water/Electricity/Central Gas in Spain
If you are purchasing a new house then the utilities will usually only be connected after completion and connection can take up to four weeks. Bear this in mind if you intend to occupy the property on completion.
If you are purchasing a second hand house then all existing contracts that the seller has can be transferred over to you once the Escritura, which can take up to three weeks to be produced by the Notary, is available. Then a certified copy of the Escritura can be produced to the utility companies and the process of transferring the utility contracts can commence. The good news is that in all likelihood you would have connections to the utilities on completion but it could take some time before the actual contracts are in your name. Whether you are purchasing a new or second hand house it is important that you clearly identify who will arrange connection of the utilities i.e. the estate agent, seller or us. If you would like us to arrange the connections then we will require you to complete a form authorizing us to contact the utility companies on your behalf.
We would recommend that if you are purchasing a property that you open a Spanish bank account as soon as possible and pay in at least 400 euros to initially cover direct debits for water, gas and electricity. If you have instructed us to set up a bank account for you we would be grateful if you could let us have your bank details.
Residencia in Spain
If you intend to live in Spain then a residencia maybe required and we can assist you with the application process.
This will take place at the Notary local to the Property. On the day of completion the balance purchase monies will be paid along with some of the other costs as set out above. From the date of completion you will be the owner of the property and we will then deal with registration of the property in your name. Once registration has been completed an Escritura will be issued in the names of the buyers. It can take as long as 6 months for the Escritura to come through and sometimes even longer if you have purchased unregistered land, which is in the process of registration. When we receive the Escritura we will send it to you by recorded delivery or you can arrange to collect it. At this stage we will issue you with a fee note for the transaction and any overpayments made by you to us will be repaid and your file will then be closed and held for two years.
3% Retention on sale
If you are a non-tax resident selling your Spanish property the purchaser’s lawyers will retain 3% of the total sale price to be paid on account of your capital gains tax liability. The purchasers have 1 month to pay this amount to the Spanish tax authorities and the seller then has a further 3 months to pay any remaining balance of the capital gains tax.
CONGRATULATIONS you are the owner of a Spanish Property.
If you spend less than 183 days a year in Spain then you will be considered a non-resident and are subject to some of the taxes outlined below.
Local Spanish Taxes
An annual payment is required for the Impuesto de Bienes Inmuebles (IBI). This is similar to the English rates charged by the local Town Hall. This payment may also include an additional sum for rubbish collections, waste treatment and water. The first payment must be made in person by us, if holding a Power of Attorney, or by you after which payments can be made by standing order.
We may have already arranged for these payments to be made by standing order from your Spanish bank account together with payment of electricity, telephone bills etc. In this case you should ensure that sufficient funds are in your account on a regular basis.
National tax on Non-Residents in Spain
If you are non-resident then you are obliged to declare the ownership of your property in the tax area where the property is situated. The amount due to be paid must be lodged with the tax authorities before the 31st December of the year subsequent to declaration.
In order to assist you this Firm can act as your fiscal representative in Spain notifying you annually of the requirement to pay taxes and on receipt of the necessary funds from you, the taxes will be paid and full receipts and fee notes issued.
National Taxes for Residents in Spain
If you are or become a Spanish resident then you will be obliged to make an annual tax return. Our in-house tax specialist can advise you on this and enter the necessary returns for you.
Insurance in Spain
We can recommend local firms who can arrange insurance for your property and we suggest that you also have a policy, which includes civil responsibility in Spain, particularly if you consider renting the property in the future.
Should you require any further advice, please make an appointment to see one of our lawyers or conveyance’s.