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Escritura: The Noterial Property Deed in Spain

The Escritura, or property deed in Spanish, becomes relevant during the property buying and selling process in Spain. It is an essential document for the transfer of absolute legal ownership from the original property owner to the purchaser. The formal document states who owns the property, and also provides a summary of the property. The Escritura defines a particular property whether residential or commercial. Next to this, it contains the changes in the ownership of the property.

For properties that form part of a community of owners, the property deed includes information about the community of owners. It will also state who is the administrator of the community, with the relevant contact and bank account details. When you buy a property, you need to change the ownership details in the property deeds.

The Escritura and the Catastro

As discussed above, the Escritura or Spanish property deed describes a given property, including details regarding the property owner. On the other hand, the Catastro (Spanish Cadastre or Spanish land registry) is a comprehensive register of all properties within the Spanish border.

You can check the Catastro for details regarding the number and location of all plots or parcels of land in Spain. Other profound information contained in the document includes boundaries, the position of the property, the class of the land, property size and the name(s) of the property owner.

When it comes to finding property ownership, the Spanish land registry is the only public department in the country that has those rights. In this regard, you can only register an Escritura in the Spanish land registry.

Get the help of a Property Lawyer in Spain, contact SpainDesk.

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How important are property deeds in Spain?

Simply put, the Escritura is the only documentation that fully secures the ownership of a property in the eyes of Spanish law. It’s worth noting that failure to transfer the property to your name means that you are not the legal owner.

The importance of having correct and up-to-date documentation for your property cannot be overstated. There are many costs involved when buying a property, but by purchasing a property without a proper deed, you will also potentially be opening yourself up to a lot of legal issues.

Property deeds transfer in Spain

Before a Spanish Notary the process of transfer and signing of the property deed is done. Thereafter, the owner gets the property rights and can manage it as his/her own. We highly recommend consulting qualified professionals such as SpainDesk to guide you through the entire process and ensure proper due diligence.

The Escritura is one of the most critical documents when purchasing property in Spain. It’s thus not surprising that all the parties (buyer and seller) must be present in-person to sign the property deed before the Spanish Notary. However, this can be exempted by either one or both of the parties arranging a Power of Attorney. In such cases, the representatives must all be present before the Notary. If you can’t be present, you can give us Power of Attorney, and let us take care of your property purchasing or selling.

When transferring a property deed, the parties must have a Spanish ID or passport to confirm their identity. On the appointment day, the Notary confirms all the relevant documents. Also, he/she confirms the payment that is made by the buyer to the initial property owner. The Notary then hands out the deeds for signing, only if there are no objectives from either of the parties.

After signing the property deeds, the Notary stays with the original documents for a few days. During this time the property is appropriately registered in Land Registry. The property deed transfer process is very straightforward. However, the in some cases it may take a longer process due to non-compliance with relevant regulations, permits, licenses, charges, and taxes. In case you lose your Escritura copy, you can request another one from the Notary, which typically takes a few days.

Updating Spanish property deeds

Whether you are a local or foreigner owning property in Spain, it’s critical to make sure that your property deeds are accurate. The description of your property registered at the Spanish land registry should match the actual nature of the property on the ground. When buying or preparing to sell your property, you should do proper due diligence. Confirm the registration of the actual property on the ground. This is properly done with the help of a lawyer.

After some time, extensions and changes to a property can mean that the relevant deeds are outdated. The property deed update process entails four items: Services of an architect, services of an asesoria, a Town Hall visit and a trip to the Notary office.

Before the completion of the property changes, the update of the property deed should be done. This prevents possible hurdles when selling your property in the future. Some of the updates you should provide in property deeds include:

Adding a swimming pool
Property extension
Applying for further planning permission
Registering a well or borehole
Additional accommodation, e.g. bedroom, dining room or bathroom
Storage room
Garage

At SpainDesk, we work closely with local and foreign clientele to buy, sell, and update their Spanish property deeds. We will register properties at the Spanish Land Registry and Catastro Registry properly. We will help you make more informed decisions concerning your property documentation. Contact us for a detailed description of our services.

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Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal advice. We highly recommended seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.

September 28, 2022

Land Registry Spain: Information on the “Registro de la Propiedad”

Property

The land registry is common to all countries in the European Union. In Spain, it’s called Registro de la Propiedad. Land registry records are a tool that everyone must access because they provide information about who owns the property and how much each owner owes on any mortgages or land loans. In this article, we discuss some aspects of the Spanish Land Registry.

What is the land registry in Spain?

The Registro de la Propiedad (or in English “Land Registry in Spain”) offers official information on the number and location of all Spanish plots or parcels of property. The Land Registry is a government agency under the Ministry of Justice that strives to provide security in the real estate market. The agency is the only public institution that offers property ownership information.

Functions of the land registry

The Spanish land registry provides information on:

Property boundaries
Lot position
Classes of land
Property size
Names of the property owner
Rights and the charges that fall on a property

The land registry officially recognizes owners until unproven in court and therefore provides legal security.

When do you use the land registry?

There are several reasons to use the land register in Spain. These include:

Buying property
Selling property
Renovating property
Buying land
Securing a bank loan
Dividing assets between heirs
Registering rights of ownership
Registering mortgages

When you want to change something in the land registry, you will do this through a public notary. The public notary is not there to protect your rights but to protect the rights of the government. To protect your rights in Spain, it is a good idea to work with a property lawyer.

Transferring property in Spain

It’s important to note that the purchase of a home in the Property Registry is not required by law. For example, if you are buying a farm, it is not necessary to register your purchase in the land registry. But bear in mind that a property registered in the land registry is safer to buy.

Transfer of property is often done with the help of a property lawyer. They will do an initial search of the registry records to see whether any issues could affect your purchasing power. The lawyer will then draft up contracts and protect the interests of the buyer or seller.

Is it necessary to register a property?

Because it is not obligatory to register a property in Spain, some people can think that it is unnecessary or that it is money that we can save. There are many advantages to registering your property in the land registry:

If a court decision does not specify otherwise, you will be treated as a single proprietor.
Property that is registered will safeguard the buyer from a seller’s creditors. The buyer will be able to protect themselves against unforeseen fees that may affect your house.
If you have a mortgage, it must be registered in the land registry.
When selling, the seller guarantees the transfer via a notary.
Information about limitations that affect the home will be clear so that no surprises can trap you.
If you believe that your right to possess is being threatened, there are several ways to get judicial support for it.
The fact that you are registering the purchase in the registry guarantees that no one will be able to get any rights over your property without your approval.

As you can see, there are many benefits to registering for owners, buyers, and sellers.

The land registry office

The land registry office has a website on which property owners can find out more about the property they are interested in. The website also provides information for engineers, architects, and lawyers who specialize in real estate.

Nota simple, and the land registry

One of the documents you can get from the land registry is the Nota Simple of a property. The Nota Simple is a document that certifies ownership, either by purchase or inheritance. It contains the date of transfer, the name of previous owners and new owners, plus all other details to establish the property’s history. The nota simple is often used when one buys a house in Spain or applies for inheriting it.

A word from SpainDesk

The land registry is of great importance to the real estate market in Spain. Unfortunately, scams are still happening where fraudsters sell fake properties they don’t own, or the properties have significant obligations, limitations, and risks attached.

Our property lawyers in Spain can help you with property law in Spain. We can draft contracts, analyze the law, act as a protective layer against a seller, and search the land registry records for any potential issues. If you need assistance with a significant purchase, like purchasing an apartment, villa, or office building in Spain, contact us.

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal or financial advice. We highly recommend seeking guidance from a legal or financial expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.

September 5, 2022

Plusvalia Tax: Everything on the Municipal Capital Gains Tax

Taxes

When you sell a property in Spain, you are liable to pay a tax called Plusvalia. This article discusses what the Plusvalia is, how it’s calculated on the property price, and who needs to pay it.

What is the Plusvalia tax?

The Plusvalia Tax on the Increase in Value of Urban Land (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana, IIVTNU) is a property tax levied by the Spanish government on the increase in value of urban land.

The goal of this tax is to tax the increase in the value of the land, whether there is a property on it or not. Some of this increase in value is due to improvements to the area that the local government has made.

Local property tax

The Plusvalia tax is similar to the capital gains tax; only it is paid to the municipality; in other words, the Plusvalia is the municipal capital gains tax. It is set by the local tax office where the property is located and is based on the value of the land value and the number of years that the seller has owned it.

When do you need to pay Plusvalia tax?

When you sell a property, the municipality has the right to collect the Plusvalia tax from you. The tax is payable when the transfer of ownership of the property is registered with the Land Registry (Registro de la Propiedad).

This can happen when:

Selling the property
Donating the property
Inheriting the property

Whether the property transfer is business-related or not is irrelevant, the municipality will still charge the Plusvalia tax.

How is the municipal capital gains tax paid?

The tax obligation happens when the taxable event is carried out, and the tax needs to be paid at one time.

When inheriting, the tax payment is due in 6 months.
When selling the property, the tax needs to be paid in 30 days.

You can pay the tax at the local town hall, local tax office, or online.

How is Plusvalia tax calculated?

The amount of Plusvalía tax you have to pay depends on three factors, including:

The municipality where the property is located
The number of years you have owned the property
The base (which is the value increase of the property)

You don’t have to pay the tax when you lose money on the sale of your property.

Base property price

The base value is determined by subtracting the purchase price from the sale price. The taxpayer has two options for the base of the calculation.

Real capital gain: the difference between the purchase price of the land and the selling price.
Nominal capital gain: a base that reflects the real property market. Which means the real capital gain.

If the real capital gain is higher than the nominal capital gain, the Plusvalía tax can be decreased.

The calculation

Base (real or nominal capital gain) * percentage = plusvalia tax

The coefficient depends on the number of years and can be found in the following table.

The table above is an indication and set as a maximum by the government. Depending on the municipality or time you check the table, the coefficient could be lower or higher.

What happens when land and construction are transferred?

When construction is on the land, the construction will be subtracted from the sales price to calculate the capital gain of the land.

Who needs to pay Plusvalia?

Depending on the situation, the person that needs to pay the Plusvalia tax is:

The seller: The property seller is responsible for paying the tax; however, the seller can negotiate with the new property owners to pay the tax. In some cases, where the property is sold as part of a company, the company is liable for payment.
The buyer: In case the seller is a non-resident in Spain the buyer will have to pay the Plusvalia tax. This is because the seller might leave the country and will never come back to pay the tax.
The donee: When it comes to giving, the donee, or recipient of the donation, is responsible for paying capital gains.
The beneficiary: In the case of inheritances, it will be the beneficiaries who must pay this municipal tax.

A word from SpainDesk

We hope you enjoyed this article. We advise you to seek legal counsel or tax advice for more information or specific cases.

If you would like to know more about Spanish property law or if you need assistance with your legal or tax case in Spain, contact us. We are happy to help.

March 23, 2022

Selling Property in Spain: A Complete Guide How

Property

Selling property in Spain can be daunting, and you need to make many decisions that could save you money or cost you money. Next to this, it can take quite some time to sell your property. In this article, we will give you tips on how to go about selling your property in Spain.

How to sell a property in Spain in 20 steps

We go through each step you’re likely to take throughout the selling process, from beginning to end.

1. Decide whether or not you want to sell your business

There are various reasons why someone may choose to sell their property. Moving for employment, desire to downsize, or the need for a larger home are all possible motives. Another reason might be that you inherited a Spanish property and don’t live in Spain. You may also have bought a holiday home, intending to sell it at a later stage.

Reasons to change your mind are just as plentiful. Perhaps you can extend the property with a new room, rent out the property, buy a new one, or wait a bit because property prices are rising. However, timing the Spanish property market is complex and depends on the region.

In any case, if you are not happy with your current living situation, selling may be the best option for you.

2. Consider the financial situation

Take a look at your mortgage, debts, and other financial obligations associated with the Spanish property. You will need to factor these into your decision of whether or not to sell.

Also, consider what the property may be worth and how much you will need to sell it to break even. You may also want to consult a real estate professional who can tell you what your home is worth in the current market.

It is hard to estimate the property price without putting it on the market. However, there are some methods you can use to get a general idea. Look at similar properties in the area that have recently been sold, or look up the average price per square meter in your city.

If you plan on getting a new mortgage to purchase a new property, you will want to factor in how much you will get before selling your property.

3. Decide to rent a property or acquire a new one

Consider what you want to do after selling your property. If you are selling the place where you live, you need to consider where you will be moving to. Are you going to buy a new property, or will you rent an apartment or house?

Consider what location you want to live in, and get some options ready, so you don’t have to scramble to find a new place to live once your property is sold.

After selling your property, it is wise to rent a property for a bit until you find the perfect home to buy. This way, you won’t be rushed into a decision, and you can take your time looking for the right property. You will need to consider the moving expenses and whether or not it is worth it to move your belongings.

4. Choose a real estate agent to sell your property

Once you have decided to sell your property, you must choose a real estate agent. It is essential to do your research and find an agent who has experience selling properties in your area.

The agent will help you put your home on the market and advise increasing the chances of selling your property. The agent will also help you negotiate with buyers and give you an idea of what price to expect for your property.

Depending on the real estate agent, you may be able to find someone who speaks your language, and this can be helpful, especially if you are not comfortable with the Spanish language. Usually, an estate agent will charge you a commission of 3% when your property is sold, and this percentage is calculated towards the property buyer.

You can also try to sell your house by yourself, but this is not always easy. It can be time consuming, and you will need to do your marketing. You will also be responsible for negotiating with buyers and drawing up the contract. If you are not comfortable with this, it may be best to hire an agent.

5. Obtain an Energy Performance Certificate

You must obtain an Energy Performance Certificate to sell your Spanish property. This certificate rates the energy efficiency of your property on a scale from A to G.

The certificate is valid for ten years and can be obtained from a certified professional. The cost of the certificate will depend on the size of your property.

6. Decide the price of the property you are selling

After you have obtained your Energy Performance Certificate, you will need to decide how much you want to sell your property for. This is where you will need to consider your mortgage, debts, and other financial obligations associated with the property. Contact your bank about this.

You will also need to consider the current market value of your property. Look at similar properties in your area that have recently been sold, or look up the average price per square meter in your city.

Most buyers will try to negotiate a lower price than what is listed on the market, so it is essential to buffer negotiations.

Sometimes multiple estate agents will appraise your property for free to get your business. It is essential to get various opinions, as the appraisals can vary greatly. If you are set on selling your property for a high price, the agent will need to be willing to list your property for that price. So talk about this with your agent before signing a contract.

7. Prepare to sell your Spanish property

Once you have decided on a price, the next step is to prepare your property to be put on the market. This includes staging your home, fixing any damages, and putting together a list of features that make your property stand out. Fixing damages can be expensive, but it is worth it to make your home look its best because it can increase the price significantly.

Next to this, you will need excellent photographs taken of your property. The photos need to be high quality and show your property in its best light to make an excellent first impression.

The real estate agent will help you with this process and put together a listing for your property. This includes all the essential details about your home, such as the number of bedrooms and bathrooms, the size of the property, and the price.

8. Market your property

Once your property is ready, the next step is to market it. This includes advertising your home in local newspapers and online, as well as creating a listing for your property on real estate websites.

The estate agent will do most of this for you, but it is essential to keep in mind that the more exposure your property gets, the better. It doesn’t harm to do some extra advertising on your own as well, since you are the one who stands to profit from the sale the most.

9. Use a property lawyer solicitor to assist you in the sale

When you have an interested buyer, the next step is to negotiate a sale price and sign a contract. This is where a property lawyer comes in.

Conveyancing solicitors are legal professionals who specialise in property law. They will help you review the contract, make sure that everything is in order, and represent you in the sale.

They can also assist you with the transfer of ownership and paying taxes, including a tax rebate. The tax rebate is based on the costs of acquisition and sales, so you can get a free lawyer to assist you in selling your Spanish property.

10. Choose a notary

A notary (notario) is necessary to sell any property in Spain. The notary is a public official who witnesses the signing of the contract and ensures that all legal requirements are met.

The notary will also draw up the deed of sale (escritura de venta), which is the document that transfers ownership of the property from the seller to the buyer.

The buyer pays the notary’s fees, and they vary depending on the property’s value. It is important to choose a notary registered with the Spanish Notaries Association (Colegio de Notarios de España), as this will ensure that they are qualified to carry out the sale.

If you are working with a lawyer, the lawyer can help you choose a notary. If you create a power of attorney for the lawyer, he can sign on your behalf to transfer the property to the buyer.

11. Prepare the documentation

When you are selling a property in Spain, you will need to prepare a number of documents. These include:

Title deed: the title deed or escritura de propiedad is the document that proves that you own the property.
The cadastral certificate (certificado cadastral): This shows the official measurements of the property and is used to calculate
Copies of utility bills: You will need to provide copies of the last three months of utility bills, as well as proof that you have paid any outstanding balances.
The energy performance certificate: (certificado de eficiencia energética): This certificate rates the property’s energy efficiency and is required by law.
IBI receipts: The IBI receipts or Impuesto sobre Bienes Inmuebles are the Receipts for local municipal tax. The buyer will want to see these to ensure no outstanding taxes. If there is still debt on the property, they may want to be discounted. IBI receipts for the last four years is necessary.
NIE, Residency card, and Passport: To process the property sale, the notary will need to see copies of your passport and residency card (if applicable, as well as your NIE number (tax identification number).
Property inventory: To make the sale concrete, you should have a complete inventory of all furniture, appliances, and fixtures included in the sale. This will help avoid any confusion or disputes after the sale is final.
Community statutes: If the property is part of a community of owners, you will need to provide a copy of the community statutes. This document sets out the rules and regulations that govern the community.
Fill out a buyer’s questionnaire: upon selling, a buyer will want to know what their buying out of. Specific questions about the property will be asked, and it is advisable to answer truthfully as some buyers may rescind the offer if discrepancies are found.

12. Accept an offer when it is made to you

Once you have found a buyer interested in your property, they will make an offer to you. This offer will be in the form of a contract, which will outline the terms of the sale.

If you are not happy with the offer, you can negotiate with the buyer to try and reach an agreement. Once an agreement has been reached, you will both need to sign the contract.

13. Negotiate the contract’s terms

Once you have verbally accepted the offer from the buyer, you will need to negotiate the terms of the contract. This includes setting a price for the property and agreeing on a date for sale to be finalised.

The contract should also state who is responsible for any outstanding debts on the property and whether or not the buyer is taking over this responsibility. It is also important to set out the date the buyer must take possession of the property.

Other aspects of the contract are

The period between the exchange of the contract and completion of the sale.
What is included in the inventory of the property?
Any discounts due to issues with the property (debt, lack of certificates, etc.).

Your lawyer should review the contract to ensure that all of your rights and interests are protected.

14. Settle the contracts

Exchange the contract and sign it with the buyer. This contract is binding, and once it is signed, you are both obligated to complete the sale.

The buyer will usually pay a deposit at this stage, generally 10% of the purchase price. This deposit is held in escrow until the completion of the sale.

As the seller pulls out of the sale, you may lose this deposit. If the buyer pulls out, they may be able to get their deposit back, depending on the contract terms. If necessary, your lawyer can help negotiate better terms for you or negotiate to both pull-out.

15. Move out of the property

Once the sale is completed and the keys have been handed over to the buyer, you will need to move out of the property. Ensure that you leave the property in a clean and tidy condition and remove all of your personal belongings.

As in the contract, the property needs to be in the state that you have agreed on with the buyer. The buyer and the buyer’s lawyer will do a final inspection of the property before completion to ensure that everything is as it should be.

The buyer’s lawyer will also check that all relevant paperwork (title deeds, community statutes, bills and receipts) is in order and transferred to the buyer’s name. They will check that all of the money has been transferred from the buyer to you and everything is as the contract states. Buying property in Spain also entails various other aspects.

16. Finalise the sale

When you hand over the keys to the property and remove all of your belongings, the sale is finalised. The buyer will receive the title deed to the property, and you will receive the money from the sale in your bank account.

At the notary’s office, the buyer will sign a declaration of purchase, and you will sign a declaration of sale. In the Spanish land registry, the buyer will enter their name as the property’s new owner.

This process in the Spanish land registry can take some time, depending on the complexity of the sale. Your lawyer will keep you updated on the progress of the sale and will help to finalise all of the paperwork.

17. Paying taxes on the sale

You will need to pay capital gains tax on the sale of the property. The amount of tax you will need to pay will depend on how long you have owned the property, as well as your tax situation.

You may also be liable for other taxes, such as local property taxes and stamp duty. Your lawyer will advise you on what taxes you need to pay.

They can assist you with questions such as “how much profit do you have?” and “how much tax do you need to pay?” Tax implications of the sale can be complex, especially if you don’t speak the language. Your lawyer will be able to guide you through the process and ensure that you pay the correct amount of tax.

After selling, you may be liable for a tax rebate of 3%. Costs for the acquisition of the property and the sales of the property, and other associated costs can be deducted from the tax payable. Ask your lawyer to get the rebate for you since you will need to submit the paperwork.

18. Settle the mortgage

The mortgage company will have given you and your lawyer a precise redemption amount (unpaid balance) for your mortgage on the day of completion. This is the amount of money you need to pay back to the bank for the mortgage to be paid off.

Once the mortgage is paid off, you will need to provide the bank with a copy of the title deed, as well as a copy of the declaration of sale from the notary’s office. The bank will then update their records, and you will no longer be liable for the mortgage payments.

19. Settle the lawyer and estate agent

The final step is to settle your lawyer’s and estate agent’s fees. Your lawyer, notary, and the estate agent will provide you with an invoice for their services, which you will need to pay. If you have given a power of attorney to your lawyer, they will be able to settle the fees on your behalf or get you the receipts.

Property taxes when selling a property in Spain

The Spanish tax office will want its property tax part, so an important aspect of selling a property in Spain is determining which taxes you will need to pay.

Capital gains tax

As a seller, you will have to pay capital gains tax to the federal government on the profits from the sale. The capital gains tax is either 19% for people not from the EU/EEA or 24% for people not from Europe. If you are a resident of Spain, you will pay between 19% and 23%.

19% for the first 6.000€
21% from 6.000€ to 50.000€
23% from 50.000€ onwards

The buyer must be a Spanish resident to avoid the 24% rate in some cases.

Plusvalía tax

The capital gains tax and plusvalía tax are two separate taxes. The municipality receives the plusvalía payment. The “plusvalía tax” or “plusvalía municipal” has changed in 2021. In general, the more significant the increase to the official cadastral value during their ownership, the more tax the tax will be.

For the plusvalia municipal, there are two options. You pay duty on the difference between the purchase and sales prices or use an equation based on the cadastral.

Although the rates will differ from location to location, they range between 0.08% and 0.45%. If there is no gain in the value of the land, no tax will be charged.

When a property trades hands, the seller usually pays the tax, but the beneficiary will see the bill if it is a gift or inherited property. If the seller is in a foreign country, the buyer will also have to pay the withholding tax.

Frequently asked questions

Will I need a lawyer to sell my property in Spain?

If you sell property in Spain, you must attend the closing. If you can’t be there, a lawyer can create a power of attorney so someone else (like your lawyer) can handle the transaction.

What costs are involved in selling a property in Spain?

Costs of selling property in Spain include the agent’s commission (3-6%), legal fees (1-1.5% + VAT), plusvalía tax, and capital gains tax.

Do you have to pay capital gains when you sell your house in Spain?

You will only have to pay capital gains tax if you make a profit on the sale of your property.

March 14, 2022

Property Tax in Spain: Read Our Overview

Property

Property tax in Spain is the taxation on real estate, and it is a very common Spanish tax. You will have to pay multiple taxes on your property, and in Spain, all property owners are required to pay these taxes.

You must apply for a NIE (Número de Identificación de Extranjero) to pay these taxes, which is your Spanish tax identification number. When purchasing a home in Spain, you must also have this number. This number identifies you with the Spanish authorities and is required to pay taxes.

Property taxes in Spain for non-residents

You are subject to income tax (including capital gains tax), annual property tax, wealth tax, and stamp duty if you reside in Spain as a non-resident.

Spanish income tax

The income tax for non-residents is limited to income from Spain only. A non-resident is always taxed at a flat 19% when you are from Europe and at 24% if from somewhere else.

When renting out a property in Spain, you will have to pay rental income tax. Non-residents only have to pay income tax over the income they get within Spain only.

Next to this, when you sell your property, you will have to pay capital gains tax on it. You do this via the income tax declaration form as well. In this way, the capital gains tax includes your income tax.

Get taxes done more quickly and efficiently with our tax services in Spain

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Annual property tax

When you are not renting out your property in Spain and using it for personal uses, you will also have to pay a tax based on the percentage of the value of your property. This is called the IBI tax. Next to the IBI tax, you will have to pay another tax that is the IRNR (Impuestos sobre la Renta de No Residentes).

IBI tax on property in Spain

The “Impuesto sobre Bienes Inmuebles,” or IBI, is the annual property tax in Spanish. The tax rises every year based on inflation. The tax rate for each year is between 0.4 per cent and 1.4 per cent of the property’s cadastral value.

The cadastral value is the Spanish authorities’ value for your property, and your real estate lawyer will be able to provide it. You can object to increases in the cadastral value, so you won’t have to pay more at the Spanish tax office, but you will have to provide good reasons for it.

The municipality’s annual real estate tax is a local property tax, and IBI tax rates increase every year depending on inflation. Remember that the cadastral value for the same size of properties in the same area can vary dramatically.

The IBI also takes into account your cadastral reference number, which identifies your property at the cadastral office, in addition to the assessed value of your home (cadastral value). This may be crucial when purchasing and selling properties because the physical description on the title deed does not match that on paper.

In general, the IBI bill will be sent to you, or you can pay it online. Your local tax office (SUMA) will handle the payments of the IBI.

IRNR tax on property in Spain

This tax is for non-residents that own property in Spain. The government created it under the assumption that non-resident property owners somehow profit from having a holiday home in Spain, even though they don’t rent it out.

Even if the owner does not receive any income or rent from their home, the property is taxed 1.1% or 2% profit on the property’s cadastral value. The amount of taxes varies on whether or not this cadastral value has been updated (1.1%) or not (2%). The tax is reported via the Modelo 210.

Wealth tax

The wealth tax in Spain is an annual tax on the wealth over a certain threshold that you own in Spain. This includes your Spanish property and other assets such as cash, cars, artwork etc.

The tax is levied on the market value of your total assets each year. As this amount increases every year, so will the resulting taxes owed to the Spanish government. You will have to pay wealth tax when your assets in Spain are over 700,000 euros.

Property taxes for residents

You are subject to income tax, capital gains tax, annual property tax, and wealth tax if you are a resident.

Spanish income tax

When you get a Spanish rental income from your property or properties in Spain. You will of course be obligated to pay tax. Residents of Spain will always have to pay the rental income tax in Spain.

The percentage to pay ranges from 15% for low-income individuals and 30% or 40% for those with high income.

When you rent out your property, you will have to pay taxes on your rental income, and this rental income tax is called notional rental.

Annual property tax

In Spain, there is an annual property tax. The annual property tax is derived from the cadastral value of the property. The tax is called the IBI, “Impuesto sobre Bienes Inmuebles”. The tax increases every year depending on inflation.

The annual tax rate is 0.4 per cent to 1.4 per cent of the property’s cadastral valuation. The yearly tax is set by the municipality and can vary a lot.

Wealth tax

As a resident in Spain, you will have to pay wealth tax on your worldwide assets. The wealth tax is a progressive tax rate.

You will have to pay wealth tax over the value of assets above 700.000 euros, and you don’t have to pay wealth tax on the first 300.000 euros of your home property.

The wealth tax is a tax put by the autonomous regions, and it differs from region to region.

The wealth tax can be complex to pay, especially for foreigners. It is recommended that you hire a Spanish accountant.

Property tax when purchasing new properties

When you purchase a new property in Spain, you will have to pay Stamp tax and VAT.

The Stamp Duty

The stamp duty is a fee that any person or entity that buys a new property needs to pay. The Spanish government sets this fee. The stamp duty is 1.5% of the sale of the property, and they are charged on top of the property price.

VAT

On top of the stamp duty, a 10% value-added tax (IVA in Spanish) is levied on the purchase price. While this seems higher than the tax on resale properties (ITP), this tax can be deducted from other expenses when buying property under a business.

Actos Juridicos Documentados (AJD)

The notorious mortgage tax or AJD (Actos Juridicos Documentados) is one of the taxes you must pay in Spain. This tax is known to vary by region, with a minimum of 1% and a maximum of 1.5%.

The percentage is determined on the basis of the “Responsabilidad Hipotecario,” which means “mortgage responsibility”. The mortgage responsibility is what the bank would owe if the person failed to pay for a period. It is an average of what it costs if they go to court and how much money the bank may need.

This is generally equivalent to between 150 and 200 per cent of the mortgage amount.

Property tax in Spain when purchasing resale properties

When you purchase a resale property in Spain, there are two taxes that you need to pay: the ITP and the AJD

The Impuesto de Transmisiones Patrimoniales (ITP)

The only tax imposed on real estate resale is transfer tax (Impuesto de Transmisiones Patrimoniales/ITP in Spanish). The autonomous regions set ITP. The amount owed is determined on a sliding scale depending on the property’s price. In general, ITP adds between 8% and 11% to the cost of buying a property.

Actos Juridicos Documentados (AJD)

As mentioned before you will have to pay the AJD. which is 1 to 1.5 per cent of the mortgage responsibility.

Selling a property in Spain

Because the Spanish Tax Agency (Hacienda) may check your records at the time of property sale, you can’t avoid paying property tax in Spain.

3% deposit for capital gainst tax

The Spanish Tax Authorities will require a 3% deposit within 3 months of the time of sale. The deposit is a guarantee against capital gains tax, income tax, and wealth tax in the previous four years, as well as a guarantee against your tax debt on capital gains. When you have paid your taxes and the 3% was not needed, then you get them back at your next Spanish tax return. At the time of sale, you will have to submit the sales agreement in order to pay this real estate tax.

Capital gains tax

When selling the property, you will have to pay capital gains tax. The capital gains tax for residents is:

19%: for the first 6.000€ obtained as a profit
21%: From 6.000€ to 50.000€
23%: From 50.000€ onwards
26%: From €200.000+

Fee’s

Many of the fee’s associated with the selling of property in Spain, are often paid by the buyer. However, you can expect:

Estate agent fee (around 4.5% of the sales price)
Bank transfer fee’s
Legal and financial fee’s (around 800 euro)

How to pay Spanish property taxes

For a non-resident, the best solution is to pay the tax by direct debit. The bank will provide you with a form authorizing the bank to pay the tax, and a copy of the document will be deposited with the local council. This will ensure that taxes are paid at the right time, just like other utility bills owned by you.

You will receive a letter from the municipality about your local taxes, while your annual income tax should be done on your annual personal income tax return.

The Spanish tax authorities are strict about the late payment of taxes, and any delay will result in penalties or fines, which can be very expensive. Next to this, your property must be adequately registered with the Spanish tax authorities for them not to claim that you are avoiding property taxes as well.

Frequently asked questions

Below you can find some frequently asked questions about Property tax in Spain.ert

Are there any other taxes I might have to deal with when selling or buying a property?

Yes, for example, you might encounter inheritance tax (succession tax), council tax, or other municipal tax. There are many taxes involved with buying and selling property in Spain, and it is advised to hire a tax advisor when dealing with the Spanish tax system.

Can you help me when I want to buy and let properties in Spain?

Yes, we offer a wide range of services for businesses such as company formation, accounting services, and property buying guidance. Get in touch with our team if you need any help or have any questions about buying and letting properties in Spain.

Get help with your property taxes

You need to pay any taxes when owning a property in Spain. If you want to be fully up-to-date with your tax payments, you should hire a Spanish tax advisor. Next to this, it is also recommended to hire a real estate lawyer when buying a property in Spain. If you want our help, you can contact us at contact@spaindesk.com.

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal advice. We highly recommend seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.

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January 23, 2022

Capital Gains Tax in Spain: Tax Guide When Selling Property

Taxes

If you live in Spain or are planning on investing in property or other assets within the country, you may eventually encounter the capital gains tax when it comes time to sell the property. It is important that you become acquainted with the tax requirements so you can plan ahead and determine what exemptions are applicable to your situation.

What is Capital Gains Tax in Spain?

The capital gains tax is the main tax in Spain to consider when selling your property and is a fairly straightforward concept. In short, the capital gains tax is paid on the profits earned when you sell an asset such as property or company shares within Spain. For example, if you purchased a property for €200,000 and then resold it for €250,000, the capital gains tax would be applied to the €50,000 – just the profit itself.

The tax itself primarily applies to property (buildings, apartments, houses, and land), company shares, government bonds, and precious metals.

Capital gains tax and Plusvalia tax

When it is time to sell, you will also need to pay the Plusvalia tax. The Plusvalia tax is similar to a capital gains tax, but paid to the municipality instead of the tax office, and is based on the increase of land value. It is typically less than the capital gains tax discussed in this article.

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Residency considerations:

Your residency status within Spain is a determining factor for what percentage you’ll be required to pay on your capital gains tax.

Residents

Something very important to note, if you’re living within the country for more than six months out of the year, you will automatically be considered a tax resident in Spain.

The capital gains tax brackets for residents are:

Up to €6000	€6000 to €50,000	€50,000 to €200,000	€200,000+
19% tax	21% tax	23% tax	26% tax

Please note that these percentages only apply to the actual profit earned on the transaction, not the overall selling price.

Non-residents

If you don’t intend to stay in the country for more than six months (183 days) out of the year, then you’ll be classified as a non-resident for tax purposes. For capital gains tax, non-residents are split into two key categories:

Non-residents from elsewhere in the European Union (EU) or European Economic Area (EEA)	A fixed 19% rate on all capital gains
Non-residents from countries outside the European Union (EU) or European Economic Area (EEA)	A fixed 24% rate on all capital gains

Once again, these rates only apply to the actual difference between your original purchasing price and what you’re selling the property/investment for – just the profits.

3% withholding tax for non-residents

When going through the process of selling your property as a non-resident, there is also another percentage you need to take into consideration. The CGT withholding or retention tax is a levy of 3% of the overall selling price that the buyer must pay to the Spanish tax authorities to cover any capital gains liability.

You can reclaim this money once the authorities are completely satisfied that you have paid all of your capital gains tax. However, this process takes a significant amount of time. Additionally, there have been reported incidents where non-residents have had difficulty reclaiming these funds for various reasons. So it’s imperative to have all of your documentation and paperwork in order to minimize the possibility of this happening.

Tax exemptions:

Exemptions for residents

There are a few different ways you can completely avoid or reduce the capital gains tax on the sale of your property or assets, provided you are a resident.

1. Reductions on assets purchased before 1995

If you are a resident of Spain who acquired property, shares, or other assets before 1995, you can benefit from a capital gains tax reduction. However, there are a few requirements:

The property or asset must have been purchased on or before December 31st, 1994.
The reduction can only be applied to gains up until January 2006. Meaning, the value increase of your property or asset after this timeframe will still be taxed at the standard rate.
You must sell your property or asset for €400,000 or less to be eligible for this tax reduction.

If the asset in question meets all of these requirements, you can benefit from reductions of 11.11% on properties, 25% on company shares, and 14.28% on any other assets.

2. Main home exemption

Residents can avoid the capital gains tax on the sale of their property altogether, provided the money earned from the sale will be reinvested in a new property that will be used as a primary residence. Two key things need to be proven to benefit from this exemption:

The property you’re selling must be your habitual residence as well as the property you’re acquiring with the money from the sale.
The property for sale or to be purchased must be located within the EU or EEA in order to qualify.

3. Exemptions for taxpayers over 65 years

If you’re a resident who’s 65 years old or over, then you’re not required to pay any capital gains tax on the property sold, even if you have no intention of reinvesting the profits into a new home. The main requirement is that the property you’re selling must have been your primary residence for more than three years.

Additionally, you may be exempt from capital gains tax on the sale of any other property or assets on the condition that you use a portion or all of the profit obtained to invest in a whole of life pension annuity, otherwise known as renta vitalicia, within six months of making the sale. Please note that only the money invested in the pension annuity will be exempt from the tax in this situation.

Exemptions for non-residents

Unfortunately, related to real estate selling, non-residents don’t have many options at their disposal for tax reductions or exemptions.

However, if you’re a resident of another country within the EU or EEA that participates in the tax information exchange agreement with Spain, you could be eligible to claim the main home exemption. Bear in mind that there are a number of requirements, and qualifying as a non-resident can be complicated, so we recommend seeking professional guidance before starting the process of your sale.

Spain does have tax benefits for non-residents such as the Beckham Law.

Changing your tax residency

If you’ve been a tax resident of Spain for at least 10 out of the previous 15 years and intend to leave the country and move elsewhere, you may encounter a Spanish exit tax. While this is a complex concept, we’ll break down the key things you should take into consideration.

The exit tax is applied to any unrealised gains made on various assets regardless of what country they are located. Unrealised capital gains are the difference between the purchase value and the market share value.
While the circumstances may vary, this exit tax should only be applicable if the value of your shares or assets exceeds €4 million or if your shareholdings are more than 25% and are valued at over €1,000,000.
Unrealised capital gains will be taxed under the standard resident thresholds at 19% for up to €6000, 21% for €6000 to €50,000, 23% for €50,000 to €200,000, and 26% for €200,000+.
If you happen to move to a country with a tax treaty and information exchange agreement with Spain or leave on a temporary work assignment, the exit tax can be deferred or may not apply. However, we suggest seeking professional advice before proceeding.

Planning ahead

We highly recommend obtaining all invoices, fees, and licences related to your property, as these may be valuable to help you reduce your capital gains tax in Spain when selling property.

If you require any guidance through the legal process of selling your property or assets, you can contact us for tax advice and property law services. We will be ready to assist you.

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal advice. We highly recommend seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.

Get taxes done more quickly and efficiently with our tax services in Spain

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January 14, 2022