BUYING A PROPERTY IN SPAIN. LEGAL AND TAX NEEDS
— Execution of the notarized public deed of purchase. The acquisition must be attested to by aSpanish notary public or by a Spanish Consul abroad, to whom it is necessary to show evidence of The identity of the parties and, if applicable, the related powers of attorney, as well as their respective tax identification numbers; the seller’s title to the property; the special form that shows the effective payment and means by which the purchase was carried out (specifically, whether the payment was received prior to the formalization, the amount, and whether payment was made in cash, by check or any other money transfer instrument or by bank transfer).
— Payment of transfer tax or V.A.T. and stamp tax.
If the vendor is a private individual who is not an entrepreneur developing an economic activity, transfer tax would be generally applicable, at the rate of 7% as a general rule (certain Autonomous Communities and Cities have not enforced their own legislation and are still applying a 6% rate. In the Canary Islands, the applicable rate is 6.5%). If the vendor is an individual entrepreneur or a company, developing an economic activity, the following cases may arise:
– Transfers of buildable land (or land in the process of being developed) and first delivery of buildings: V.A.T. at 18% (8% if the building is for housing) plus stamp tax, in general, at 1%. The stamp tax rate may be modified by the Autonomous Communities. This regime also applies to “refurbished” buildings in accordance with VAT legislation – or buildings that are supplied for “refurbishment” or subsequent demolition – with the aim of developing them in the future.
– Transfers of rural land (unbuildable or non in the process of being developed) and second or subsequent delivery of buildings: Transfer tax or V.A.T. can be applied if the acquirer is an entrepreneur or professional who is entitled to deduct 100% of the input V.A.T. and the vendor chooses to pay V.A.T. rather than transfer tax, while meeting certain requirements.
• Notary public fees. Based on the value of the property.
• Transfer tax or V.A.T. and stamp tax (see above).
• Property Register fees. Here, a sliding scale is again applicable, ranging from 0.4% (for the first €6,010) down to 0.02% (for amounts exceeding €601,012).
• Municipal tax on the increase in urban land value. This tax is levied by
municipalities and is based on the deemed increase in the value of urban land from the date of the last sale to the date of the current sale (with a minimum of 1 year and a maximum of 20). This tax is payable by the seller. The amount of this tax depends (among other circumstances) on where the land is located (and, accordingly, on its cadastral value) and on the holding period of the immovable property at hand.
• Property tax. This tax (“Impuesto sobre Bienes Inmuebles”) is levied annually, every January 1, on the cadastral value of the real estate owned.