The property must be secured which can be done through private contracts between the two parties. It is customary that 10% of the purchase price is paid at this time. On completion a deed of conveyance, the “escritura publica”, must be signed by both parties at the Spanish Notary Office.
The Notary certifies the deed of conveyance as a registered public document. Notary’s fees are paid by the seller, unless agreed otherwise. The fees are fixed by law on the basis of a sliding scale. It is advisable to appoint a local lawyer, who speaks the purchaser’s language, to carry out a title search and for advice on the investment. Lawyer’s fees are between 1-2% of the purchase price of the property.
On new residential buildings there is VAT (IVA) charged at 8% of the value, plus 1% stamp duty, and these are paid by the purchaser. On re-sales, there is a property transfer tax set at 7%. In all cases there is also a municipal tax, “plusvalia”, which should not be confused with capital gains tax. In theory, this “plusvalia” is paid by the seller but may be subject to negotiation between buyer and seller. It is a tax on the increase in value on the land only.
Registration of the new ownership is done by inscribing the deed of conveyance, “escritura publica” at the land register office which is the final step in assuring legal title to the property.
European Union citizens or citizens coming from the Swiss Confederation do not need residence permits. However, non-European Union citizens who want to reside permanently in Spain must first obtain a special residence visa from the Spanish Consulate in their home country in order to apply for a residence permit.
The I.B.I. (Impuesto Bienes Inmuebles) is an annual real estate tax levied by the local town hall and is usually 0.85% of the cadastral value (valor catastral). This value is the assessed value for tax purposes and other taxes are based on it as well. The buyer needs to see the seller’s last receipt for the I.B.I. payment which contains the value and the exact amount of the tax.
The Non-Resident Property Owners Imputed Income Tax is yearly and is payable during the following year. The Spanish tax agency attributes 2% of the cadastral value of the property as imaginary income each year. It then charges the non-resident income tax rate of 24% on this imaginary income.
Garbage Collection. A local municipal tax.
It is customary on the Costa del Sol that the seller of the property pays the real estate agent’s commission, which may vary depending on the agency and the price of the property.
Unless agreed otherwise with the buyer, notary fees are paid by the seller, except for the cost of the first copy which is paid by the purchaser. Notary fees are fixed by the law on the basis of a scale. Another tax to be paid by the seller, although it may be subject of negotiation with the purchaser, is “plusvalia”, a municipal tax on the increase in value of the land alone.
A non-resident seller is subject to a 3% tax withholding on account of any possible capital gains. Capital gains tax is 19% of the profit of the sale. This profit is the difference between the selling price and the purchase price plus all purchasing costs and costs on improvements of the property. If the seller’s liability is less than the 3% withheld at the time of the sale, the seller can claim it back from the tax office. If higher, the seller will have to pay the difference to the tax office.