Buying and Selling a Property in Spain
Once you have decided on the property that you want to buy or you have a buyer for your property, the process is as follows:
Simple Registry Note “Nota Simple Informativa”
With this document from the Property Registry (Registro de la Propiedad), you’ll find out if the property is free of debt, if it really belongs to the seller, and if the description of the property matches what the buyer has been told (to avoid surprises about missing square meters).
The Pre-Agreement “Contrato de Arras”
Between the seller and the buyer there has to be a contract in place until the public deed of purchase is ready. It’s usually a simple document in which the seller expresses their intent to transfer the property to the buyer, and the buyer expresses their intent to buy at the price and conditions agreed upon. At this time, the buyer also gives to the seller a percentage of the agreed-upon price, normally this will be 10%. The typical agreement in Spain (called Arras y Señal) is if the buyer backs out of the contract, they lose the deposit; if the seller backs out, they have to pay double. Of course, the buyer and seller may choose another type of agreement if they prefer.
Certifying the transfer of property
Certifying the transfer of property
The property transfer must be certified by a Public Notary “Notario”. The Deed of Purchase “Escritura”, will be given to the buyer after the Notary reads it and the parties present agree to the contents of the deed. The following must then be presented: proof of identity (or power of attorney) of both parties, the seller’s title of property (a form that reports the investment to the Central Register), and the buyer’s payment. The buyer and seller sign the contract; beneath their signature, the notary signs using his “firma protocolizada” and the deed is ready for taxes.
For the buyer: transfer tax”ITP”: Impuesto de transmisiones patrimoniales) and Stamp tax “AJD”: Impuesto de actos jurídicos documentados.
If the seller is an individual, the buyer pays a tax of 8% between 0 € and 400.000 €, 9% between 400.000 € and 700.000 € and 10% between 700.000 € and above (7% in some regions) of the price specified in the deed. To this you must add the stamp tax “AJD”, in this case reduced to 0.5%,
For the seller: a local tax called the “Plusvalia”
With a copy of the deed in hand, the seller must go to the Town Hall(or wherever local taxes are paid). After filling out the form, the seller will receive in the mail or via e-mail, a notice of how much they have to pay. This amount is calculated based on the number of years the property was held, and on the property’s Catastral Value “Valor Catastral. Be aware that each town has a different procedure regarding payment of this Plusvalia. It’s best to ask at the notary’s office about this payment.
For the Seller: Non Resident Tax and Capital Gains Tax
If the Seller is a Non Resident in Spain, a retention of the sales price will be applied. This will be 3% of the Sales Price on the Title Deed. This can be claimed back buy the vendor if the Capital Gains Tax is applicable to the sale is not higher than the Retention made. This means that if the Vendor has sold at a profit, he/she will be obliged to pay 28% of the Profit obtained. Please remember that all expenses such as Notary, Registry, Lawyers Fees applicable to the property when originally purchased, as well as Legal Expenses and Agents Fees applicable to the sale of the property and building works etc that have been carried out on the property during the duration of the ownership can be deducted. It is important to take note that all of the above must have its corresponding bill of payment “Factura” with the applicable VAT “IVA” otherwise the expense will not be taken into consideration and will not be discounted from the profit obtained.
To qualify and be treated as a Spanish Resident requires you to have been living in Spain for 3 or more years and to be able to prove this, by providing the previous 3 year Tax Returns, an Escritura in your name that is more than 3 years old or a Certificate “Empadronamiento Histórico” from your Local Town Hall to say that you have been registered as living in Spain for more than 3 years. You will also be required to prove that you intend to continue to live in Spain by providing a Contract to Purchase a new home or a Rental Contract for at least 6 months. Your Lawyer or Asesoria will apply for the corresponding Certificate from the Tax Office to say that you qualify to be exempt from the payment of the 3% Retention. In this situation you must pay 20% tax on the profits from the sale. This amount is not paid on completion of sale but is declared in your following year´s tax declaration. If within 2 years of the sale you invest all of the proceeds from the sale into another primary home you will not be obliged to pay this tax. If you do not, then you will be requires to pay 20% on what is not spent on your next home.
Foreign Residents who are aged 65 and over
If you are selling your primary residence you are not liable to pay Capital Gains Tax.
Again you will be required to prove that you have lived in Spain for 3 years or more and intend to continue living here. If you intend to return to your home country you will pay 3% tax on the full declared price on completion and then in your next tax declaration you can claim this money back from the Tax Office. If you do not declare your taxes in Spain but can prove that you earn less than 11.200.00 Euros per annum, then you are exempt from paying the Capital Gains Tax.
Please Note that to satisfy the requirements of the Tax Office regarding Spanish Residency, Spanish Residency will only be proved if you are in possession of a Residencia certificate or card and your declaration of yearly income tax which is known as “Renta”.
If you want to be sure that your rights to the property are fully protected, you must register your title at the corresponding Land Registry “Registro de la Propiedad”, check the Simple Registry Note “Nota Simple” to see which Land Registry Office Corresponds to your property.