Guide for Buying and Selling Properties in Spain
Buying a home in Spain as a foreigner
is not a complex process, what's more, we can call it a simple procedure. Let’s get to know the main points to take into account to do it correctly:
1.) Applying for the NIE. The NIE is the foreigner identity number, it’s a code that facilitates the identification of non-nationals in Spain. It is essential to carry out any economic transaction. The interested party must apply for it in the General Directorate of the Police, it’s also possible to carry out this bureaucratic process outside Spain through the Consulate.
2.) Bank Account in Spain. Legally, it’s not mandatory to have a bank account in Spain, but it’s advisable to have a bank account in Spain. The main reason is because it facilitates tax payments and payments associated to the property: IVA in new homes or the ITP in second-hand homes, notary expenses, inscription, etc.
3.) Knowledge of sale and financing procedures. Probably the most complicated part for a foreigner who wants to acquire a home in Spain is to know precisely all the procedures associated with such an investment: notion of the legal framework, rights and duties as owner, real estate appraisal, requirements for financing, mortgages, etc.
If we add the language barrier to this last point, a simple procedure may become long, tedious and difficult. Therefore, it’s advisable to hire professional experts when buying and selling properties for foreigners, capable of performing all the procedures required by this process, including a translation service in the required language. This way, the foreign customer only has to be advised, not worrying about any kind of management, enjoying a transparent, easy and convenient purchase process. Immovesla Real estate advisors and consultants.
Golden Visa (Visa oro) – Spanish residence for foreigners outside of the European Union.
Foreign real estate investors may, from September 27th, 2013, obtain the Spanish residence permit through the purchase of one or several houses, provided that the amount is equal to or greater than € 500,000. The Spanish residence permit "Visa Oro" will allow the foreign investor to reside in Spain and travel throughout Europe, thus promoting the Spanish real estate market.
The Immovesla team can help you get the Spanish residence by answering all your questions and putting you in touch with a specialist who can help you find the best solution to quickly obtain Spanish citizenship by residence.
To obtain this Golden Visa, investments must meet one of the following conditions:
- 1.) -Make an investment for a value equal to or greater than € 500,000.
- 2.) The investment of EUR 500,000 has to be free of charges.
- 3.) The applicant must demonstrate that the investor owns the property or real estate for a minimum amount of € 500,000. To do this, you must provide the certificate or domain certificates of the Property Registry corresponding to the real property.
- 4.) For the purchase of housing, only the NIE is necessary.
- 5.) Have public or private medical insurance authorized in Spain.
- 6.) Other usual requirements such as: Not being irregularly in Spain, being older than 18 years-old, not having a criminal record and having medical insurance
Visas are issued for two years and can be renewed after two years, provided that the criteria are still met. Nowadays, one of the most used mechanisms to obtain the residence permit in the country is through the investment in real estate, business or the purchase of public debt; nevertheless, the first option is one of the most sought by foreigners, since it is simple and quick, all you need to do is have that amount of money, or in the opposite case, request a mortgage loan that covers that amount.
This type of decisions that the Spanish government has taken has the main purpose of attracting foreigners who wish to live in the country and offer them, in a simple but reasonable way, the opportunity to live here quietly and under the protection of the law.
According to sources close to the Government, the Ministry of Foreign Affairs receives at least dozens of calls per week from Chinese, Arab and Asian citizens interested in knowing the rules that would allow them to have access to one of the 3 million empty houses in Spain. These nationalities have been especially interested in this project, as they have a high purchasing power, and have seen a golden opportunity to invest in real estate in Spain.
What taxes do non-resident foreigners have to pay to buy or sell their home in Spain
The number of non-resident foreigners who purchase or sell a home in Spain has been increasing steadily since 2011. However, as in any transaction, you have to comply with tax obligations. What taxes do you have to pay for the acquisition and sale of a property?
When a person, whether they be Spanish or a foreigner, decides to buy a home, they must know that they’re not only going to have to pay the price for it, but also for other compulsory expenses, such as the appraisal of the house or taxes that apply to this transmission. Both national and foreign individuals pay exactly the same taxes for buying a house. The difference comes from the taxes to pay for selling it. The non-resident foreigner will have to tax the Non-Resident Income Tax (IRNR). And in the event that the foreign seller is not in Spain, as an exception, the municipal capital gains will have to be paid by the buyer.
Three diffrent types of Taxes on selling Spanish Property (Taxes levied on the sale of a flat in Spain)
The vendor that doesn’t reside in Spain will have to pay various taxes: the Non-Resident Income Tax “IRNR” (el Impuesto sobre la Renta de No residentes) and the Tax on the Increase of the Value of Urban Land “IIVTNU or capital gains” (Plusvalia in spanish).
1.) The IRNR
The tax reform that has been in effect the non-resident as a citizen, as it has brought changes to the IRNR. Monetary adjustment coefficients have disappeared, which served to correct the effect of inflation on the value of real estate, which means that it will no longer be taken into account that a euro today doesn’t have the same value as it did ten years ago.
Regarding the abatement coefficients, they can only be applied with an overall limit of EUR 400,000 for transmissions carried out after 2015, whether they are homes, stocks or any other type of movable or immovable property acquired before 1994. Above this limit, it shall cease to be applied and it shall be taxed for all capital gains generated by the sale of the house. The percentage to be applied depends on the year of acquisition and the type of asset. This coefficient intends to deduct part of the enormous revaluations of the oldest houses from the capital gains.
In short, when the sale of a house occurs in an environment where the sale of all goods does not exceed EUR 400,000, the capital gains generated by the sale of a home generate a lower tax payment due to the reduction of the tax rate that rules them. However, when the sale of a house and the rest of the property exceeds the limit of EUR 400,000, taxation is worse for the taxpayer.
The tax rate that non-residents apply to the transfer of real estate in 2015 was 20%, and in 2017, it is 19%. Let's look at an example of the amount that a non-resident has to pay for the IRNR:
A non-resident foreigner bought a home in Spain in 2005 for EUR 200,000 and sold it in early 2017 for EUR 300,000. The gross equity gain is EUR 100,000, on which we must apply 20% of taxes, this means the payable tax rate is EUR 20,000.
Finally, this tax rate can be reduced by retention. There is an obligation for the buyer to apply a withholding tax of 3% on the agreed sale value to prevent the non-resident from leaving the tax unpaid.
2.) Municipal Capital Gain (La Plusvalía municipal)
The Tax on the Increase of the Value of Urban Land (IIVTNU), better known as the municipal capital gain (La Plusvalía municipal), is another one of the taxes that any foreigner that sells his/her house in Spain has to pay, just like any other citizen. The sale of real estate also generates the municipal capital gain due to the increase in the value of the land. That is why you have to find the difference between the value of the land at the time of sale and at the time of acquisition. On this difference of value, the tax that depends on the municipality/city where the house is located will apply. It must be paid within 30 days after the sale closes.
However, the seller is not in Spain, the buyer will be responsible for the payment, as a substitute to the taxpayer.
Taxes levied on the purchase of a house
There are two different taxes depending on whether the house is new or second-hand
New house The tax levied on this property is 10% VAT. Therefore, in a housing of EUR 200,000, the tax will be EUR 20,000.
Used house The tax levied on this type of property is the Transfer Tax (ITP) and varies depending on the Autonomous Community, but oscillates between 5% and 10% of the price charged (between EUR 10,000 and 20,000 for the example above). It should be remembered that the tax collector can claim a higher payment from the buyer if it considers that the home is worth more than what it has paid for it. The tax collector of each CCAA has minimum price tables and, with them, they calculate the minimum ITP that a person has to pay when buying a house.
Thus, whoever buys a second-hand home and is not well informed, can be found in the situation that, after paying 7% of what has been spent in the house to the tax collector, it asks for the payment of a supplemental amount of ITP. This amount would be 7% of the difference between the value for which the house was sold and the minimum value that the house has in the eyes of the tax collector, plus the corresponding interest due to the delay in payment.
For example, if we buy a flat for EUR 200,000, we should pay EUR 14,000 per ITP. If the tables show that the house has a minimum price of EUR 250,000 and that corresponds to a minimum ITP of EUR 17.500 the payment of the difference will be claimed: EUR 3,500 plus interest.
Regarding the ITP in some CCAA, there are bonuses for large families. For example, in the Community of Madrid, the rate at which the ITP is taxed is 4% for large families, provided that it’s the usual dwelling.
3.) Leagal Documents - AJD
The purchase of both new and used housing, if made by mortgage, is subject to the payment of another tax, which is the Legal Documents Act (AJD), which represents about 1% of the book value of the sale and another 1% of the book value of the mortgage.