EXPENSES WHEN YOU BUY A PROPERTY IN SPAIN
EXPENSES IN THE PURCHASE OF A PROPERTY IN SPAIN
In addition to the price of the property, in each autonomous community you have to pay additional expenses, but what are the expenses when buying a property in Costa del Sol? The expenses involved in buying a property are the following: legal services, the notary’s fees, taxes paid when buying a property in Spain and the property registry expenses.
THE REAL ESTATE AGENCY IN COSTA DEL SOL DOES NOT CHARGE FEES TO THE BUYER
It is very important to keep in mind that the fees of the real estate agency are borne by the seller and are included in the agreed price of the sale.
EXPENSES IN A REAL ESTATE LAWYER IN COSTA DEL SOL
When the buyer has found the dreamed property, our expert lawyers in the real estate sector verify each and every one of the legal aspects of the purchase and sale operation, for your total peace of mind. Among the tasks carried out by a legal advisor specialized in the real estate sector, we mention the following:
— Opening of a bank account in a Spanish bank, in case the buyers are foreigners.
— Procedures for obtaining the Foreigners Identification Number (NIE), in case the buyers are foreigners. This is necessary for any legal action in Spain, including the purchase of a property.
— Formalities for obtaining a residence permit, if necessary, or a certificate of non-residence.
— Verification of the legal and economic situation of the dwelling. It is vitally important to verify that everything is in order before buying a real estate property, as this will mean the success or failure of the operation.
— Obtain a certificate of the property in question in the Property Registry. The certificate specifies who owns the property and whether there are any charges on it, such as mortgage loans that have not yet been paid.
— Check at the town hall that the property in question has the corresponding building license and habitability certificate.
— Check that the owner(s) have paid for all housing services, such as water and electricity, municipal taxes and community expenses. For this, he/she will obtain the corresponding certificates and/or invoices.
— Preparation of the documents for the sale, including the earnest money contract, the contract of sale and the deed which will then be signed before a notary.
— Payment of the notary’s fee.
— Registration of the property in the Property Registry, with updated data of the new owner.
— Signing the Power of attorney: in case it is impossible for the buyer to travel to Spain for any specific procedure, he may grant powers to his legal representative to sign it on his behalf.
— Attorney’s Fees: Fees paid to the attorney in Costa del Sol are usually of 1% of the purchase price of the property.
NOTARY FEES WHEN YOU BUY A PROPERTY IN SPAIN
You will require a notary to formalize the sale of the property you are going to acquire. He is the one who writes the public deed and that service has a cost.
However, this cost fluctuates depending on the needs of each case. For example, in the calculation of notarial expenses you influence aspects such as whether you need to ask for a mortgage, the sale price of the property or the rates of the notary you choose. In general, notary fees range from approximately 0,5% to 1,5% of the purchase value.
Which of the two parties (buyer or seller) should be responsible for paying the notary's expenses when buying a property on the Costa del Sol? As stipulated in the law, the seller is in principle obliged to pay the notary the expenses of granting the deed. For his part, the buyer must pay the expenses of the first copy of this deed.
However, the law leaves the parties the option to agree and distribute these expenses as they wish. In practice, it is customary for the buyer to take responsibility for all the notary fees. The notary’s fees are applied on the base of a scale established by law.
TAXES YOU MUST PAY WHEN YOU BUY A PROPERTY IN COSTA DEL SOL
While you are considering a budget to buy your dream property in Spain, do not forget about taxes. In general terms, taxes directly related to the purchase of a finished property are between 10% and 12% of the established price; also the expenses go in proportion to the price of the property, if the price is higher, the sum of the expenses goes up too.
In tax terms, a distinction must be made between new properties acquired directly from the developer or builder, and second-hand properties.
— New properties: For the new construction properties, the buyer pays 10% of the established price as Value Added Tax (VAT) plus the so called Tax on Transmissions and Documented Legal Acts (Impuesto de Transmisiones y Actos Jurídicos Documentados), in this case under the modality called simply Tax on Documented Legal Acts (a tax imposed on the signature of all notarial documents).
If we talk about commercial premises, a parcel bought directly from a developer or a garage that is not attached to a house, VAT is 21%.
What is the amount of the Tax on Documented Legal Acts? In the Autonomous Community of Andalusia, where the Costa del Sol is located, the general rate is 1.5%, which will be applied to the first copies of notarial deeds.
There are two exceptions: In the case of the purchase of properties with a mortgage loan under 35 years old and a real value of the property less than 130,000€, the tax will be 0.3%. For the purchase of homes by persons with a degree of disability equal or superior to 33% and with a value less than 180,000 €, the amount of this tax will be 0.1%.
In summary, when buying a new property in Costa del Sol or another place in Andalusia, the buyer pays the following taxes:
— Value Added Tax (VAT): 10%.
— Tax on Documented Legal Acts: 1.5% (except in the case of the two bonuses set out in the previous paragraph).
— TOTAL: 11,5%
— Second hand properties: In the case of second-hand properties, the buyer pays the Tax on Patrimonial Transmissions and Documented Legal Acts (“Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados”), in this case under the modality called Tax on Onerous Patrimonial Transmissions (“Impuesto sobre Transmisiones Patrimoniales Onerosas”).
For its part, the seller will pay the Tax on the Increase of Value of Urban Land (“Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana”), or “municipal surplus”, a tax paid to the city council which taxes the increase in the price of the land.
He/she will pay as well the Patrimonial Gains Tax (“Impuesto sobre Ganancias Patrimoniales”), commonly known as “state surplus”, or simply “surplus”, which taxes the difference between the original purchase value and the sale value (put links to expenses of the sale of a property).
We see below the amount of the Tax on Onerous Patrimonial Transmissions, paid by the buyer in Andalusia (where the Costa del Sol is located):
Tax on Onerous Patrimonial Transactions
Purchase value Tax rate
Up to 400,000€ 8%
400,001 – 700,000€ 9%
From 700,000€ 10%
There are bonuses to this tax: the rate to be applied would be 3.5% for the purchase of properties for an amount less than € 130,000 euros, for habitual residence if the buyer is under 35 years old.
PROPERTY REGISTRY FEES IN SPAIN
For the property to be the buyer's for all purposes, it must be registered in the Property Registry, and this has a cost. The cost is legally fixed and will depend on the place where the property is located and the cost of the purchase. Approximately the cost is usually between 0.15% and 0.2% of the value of the purchase.
Who pays registration fees when you buy a property in Costa del Sol? The registration costs are exclusively for the buyer and are stipulated by law and according to a scale that depends on the value of the property.
It is important to remember that contracts signed between the two parties, buyer and seller, have legal effects between them, but for them to be valid before third parties, they must be registered in the Property Registry.
WHO PAYS THE MORTGAGE EXPENSES WHEN BUYING A PROPERTY
In the event that the buyer subscribes a mortgage loan to pay for his property, we should answer the following question: who pays for the expenses generated by the mortgage on a property in Spain?
According to the new Spanish mortgage law, which has come into effect on June 17th, 2019, all the expenses generated by the mortgage on a property (notary, registry, appraisal, management and Tax on Documented Legal Acts) are paid by the bank.
EXPENSES AFTER THE PURCHASE OF A HOME IN SPAIN
After having completed the purchase of a property in Costa del Sol or elsewhere in Spain, you must bear in mind that other types of expenses will occur, among which we must distinguish annual expenses and monthly expenses.
ANNUAL EXPENSES FOR THE OWNER OF A HOME IN SPAIN
— Real Estate Tax (Impuesto de Bienes Inmuebles, IBI). It is a tax on real estate property imposed by the town hall. It corresponds to a percentage of the cadastral value of the property and may vary according to the municipality where the property is located.
In Costa del Sol it ranges between 0.4% and 1.3%, depending on where the property is located. Before formalizing the purchase of a property, the seller must provide a copy of the last IBI receipt paid.
— Non-Resident Income Tax (“Impuesto Sobre la Renta de No Residentes, IRNR”). Foreigners who own property in Spain and do not reside in the country are required to pay an annual tax, which must be paid from the year following the purchase of the property.
The Spanish State Tax Agency considers that non-resident owners obtain economic benefits from their property and therefore allocate to each property an annual income of 1.1% or 2% of the cadastral value, depending on when it has been updated.
This is the taxable base. If the cadastral value of the property has been updated in the last 10 years, the corresponding income is 1.1%. If the cadastral value was updated more than 10 years ago, the allocated income is 2% of the cadastral value.
What percentage of this taxable base must be paid to the Spanish Treasury? Owners who reside in a EU member state, Norway or Iceland pay 19% of the taxable amount. This is a reduced rate applied in 2016. Owners who are resident in countries outside the European Union and that are neither Norway nor Iceland pay 24% of that taxable base.
— Patrimony Tax in Andalusia. This tax affects all owners, residents and nonresidents, whose net patrimony exceeds € 700,000 euros, as holders of assets equal to or less than this amount are exempt from payment.
In 2008, the government of the Autonomous Community (Junta de Andalucía) suppressed the payment of this tax, but in 2011 it was temporarily reestablished —for two years— and it has been successively extending the obligation to pay it.
The taxable base is the net value of the patrimony. In order to calculate the net value of a property, the highest of the following is taken: the cadastral value, the purchase price or the value established by the Administration for the purposes of other taxes.
In the calculation we also take into account the mortgage loans that weigh on the home or homes. Residents in Spain may benefit from additional benefits, depending on their personal circumstances. The amount of the Patrimony Tax in Andalusia varies between 0.24% and 3.03% of the tax base, according to a progressive scale.
— Garbage collection tax: It is an annual tax that municipalities charge for the mentioned service. In the case of Mijas, Benalmádena, Fuengirola, Marbella, within the urban area, the properties located in the first category streets pay around €90 euros per year and villas around €130 euros. Outside the town, the flats pay around €190 and the villas around € 280 euros.
— Ownership of a non-resident company: When a property belongs to a corporate entity located in a jurisdiction classified by Spain as a “tax haven”, an annual tax of 3% of the cadastral value must be paid.
MONTHLY EXPENSES FOR THE OWNER OF A HOME IN SPAIN
Communal Expenses: In all communities there are expenses that are necessary to cover burdens, services and other responsibilities. These are distributed among all the owners and according to the participation they have in the building. All works for the maintenance and conservation of the building are included, as well as common facilities (swimming pool, garden, shared areas). All owners are required to meet all payments.
At the time of signing the deed of purchase and sale in notary, these fees must be currently paid and the owner must provide a certificate issued by the community of owners, stamped and signed by the administrator. The cost of this certificate will be borne by the owner (seller).
TAXES TO PAY WHEN RENTING YOUR PROPERTY IN SPAIN
Which are the income taxes you have to pay when you rent your house (seasonally or long term) and you are not a tax resident in Spain?
The answer is the Rental Income Tax and, in terms of the calculation of the amount, it strongly reminds that of the Non-Resident Income Tax (IRNR, see above). Since 2016, owners residing in a EU member country, Norway or Iceland will pay 19% of the rental income.
On the other hand, owners residing in countries outside the European Union and which are neither Norway nor Iceland will pay 24% of the income. Certain expenses, such as the payment of community bills, the Annual Property Tax (IBI) or part of the home insurance, will be deductible from the base of this tax.
Similarly, any investment directly related to the property, such as repairs, installation of air conditioning or the fees charged by the real estate agency for finding the tenant.
Important note: If you rent your property (for example, for 3 weeks in a year) and pay the Rental Income Tax, this period will not be taken into account for the IRNR declaration.
This tax is paid on an annual basis and, for your convenience, we can put you in touch with a fiscal adviser’s office that will be in charge of all procedures. The cost of these does not usually exceed € 100 euros to € 200 euros.
All laws and regulations are subject to change. The information contained in this section has been collected as a guideline for potential buyers of property in Spain, without implying any contractual obligation.
Important warning, we cannot guarantee or ensure that the information provided above is maintained over time, is subject to change, is indicative, and is not binding in any case.