Logo-altavista-property-black

LUXURY SELECTION

Buying Property In Spain: All You Need To Know

Are you a foreigner thinking of buying a property in Spain? Many people from various countries are drawn to Spain by its colourful yet laid-back culture and world-famous Mediterranean cuisine, dreaming of countryside villas in the hills or beachside apartments by the ocean.

Before you can buy your dream house in Spain, though, you will need to know more about what the process of buying a home in Spain is like, as it may be a little different to how things work in your country. Not to worry – Altavista Property is here to answer your questions.

As expert property agents with a portfolio spanning the Costa del Sol in Andalucía – which tops the list of most popular places to buy second homes in Spain – we have the local knowledge to guide you through the process of becoming a property owner in Spain.

You may be wondering what the rules are for buying property in Spain as a foreign national, and how long you are allowed to live in Spain if you are not actually a resident. You may not have even thought about taxes yet – but here is everything you should know about buying a home in Spain. NEW

Can a non-resident buy a house in Spain?.

Yes – if you have the funds to buy a property in Spain as a non-resident, you should be able to buy a home or land to build on. Spain encourages property investment from foreigners to boost its economy, so you will not be restricted from purchasing property if you are not a Spanish resident.

The only requirement that applies as a foreigner is registering for an NIE (Número de Identificación de Extranjeros) – a tax identification number for non-Spanish nationals. This number is required for most transactions in Spain, so you will need one to buy a house and pay taxes on it. You can apply for this number in Spain or at the Spanish embassy in your home country.

Once you have your NIE, it is also a good idea to open a bank account in Spain. You do not necessarily need a Spanish bank account to buy a house in Spain, but it is often more efficient than moving money back and forth from different countries and paying conversion fees.

Buying a property in Spain as a non-resident

When you have found a property in Spain you want to buy, you can check market prices for similar properties and try to negotiate with the seller. However, this can be difficult if you are not a fluent Spanish speaker, so you may want to hire a lawyer and/or a real estate agent in Spain.

If you need a mortgage, you should research and apply for the best deal as soon as possible. Then you can sign the reservation contract (Contrato de Reserva) and pay a holding fee to take the property off the market while you carry out thorough checks on it.

After the property and documentation checks are completed to your satisfaction, you can confirm your mortgage with an official valuation and proceed to sign the private purchase agreement (Contrato Privado de Compraventa). You will then have up to 10 days to fulfil the down payment agreement (Contrato de Arras), which is typically a 10% deposit.

To complete the sale, you and the seller and any representatives must attend an appointment at a public notary office. The notary will be an official witness of the signing of the property’s title deed (Escritura Pública) and then update the Land Registry with your details as the new owner.

Before signing, you must make sure you understand everything in the contract, and that you have the funds to cover the necessary payments, fees, and taxes on the purchase. Your nationality should not affect these one-time expenses, as they are based on the property, not the buyer.

When you have signed the contract, made payments, and completed the sale, you will be the proud owner of a property in Spain, even if you are not a resident.

Can I live in Spain permanently if I buy a property?.

Not quite – owning a property in Spain does not automatically grant you the legal right to stay in the country as long as you want. Generally, if you are a non-resident from a non-EU country, you may need a  short-stay visa each time you want to enter Spain for tourism or leisure purposes for a limited period. Some countries have agreements with Spain that do not require a Schengen Visa, but you should check whether citizens from your country are exempt to make sure.

If you want to live in your house in Spain for longer than this, or if you intend to work or study while living in Spain, you must apply for the correct visa before applying for a residency permit. This temporary permit enables you to live and work in Spain for up to 5 years, subject to upholding the conditions of your visa and renewing the permit every 2 years after the first year.

To obtain permanent residency in Spain, you would need to meet the conditions to apply – which include living in Spain for more than 183 days each year to qualify as a Spanish tax resident. If you become a permanent resident after 5 years, you can live in Spain permanently without needing to renew the card for up to 10 years. This does not mean you are a Spanish citizen, though, as you can only apply for Spanish citizenship after maintaining residency for 10 years.

While you do not have to be a resident or work towards citizenship to buy a house or visit the country, you do need the right visa or residence permit to live in your property in Spain long-term. If you are buying a house with the aim of immigrating to Spain, you could look into fast-track options like the Spanish Golden Visa, which allows you to obtain residency through property investment.

How long can I stay in Spain if I buy a house?.

Unless you are a citizen of a country within the EU or European Economic Area – which have freedom of movement agreements with Spain – you are likely to use a Schengen Visa (short-stay tourist visa) to travel to Spain, both for property hunting and for visiting the house you buy.

This type of visa only allows you to stay in Spain for a maximum of 90 days out of every 180 days. If you do not want to pay the penalties for overstaying, you must leave the country before this period expires, and not return until the minimum number of days has passed. This applies not only to Spain but all countries in the Schengen Area.

This might not be a problem if you are buying a holiday home in Spain, without owning other homes in the Schengen Area, and do not intend to spend more than 3 months at a time living there, no more than twice a year. If you want to stay longer than this, though, you will need to get the right visa for the purpose of your stay and use it to apply for a residency permit, as explained above.

The length of time you spend in Spain also affects your tax liabilities, which you will need to consider if you want to become a resident. As long as you have the right documentation, you can stay as long as 183 days and remain a non-resident for tax purposes (note: this does not mean tax-free). If you want to stay for longer than 6 months a year, you will become a tax resident, and be subject to different tax rules.

Do you pay tax when buying a house in Spain?.

There are various associated costs you will have to pay when buying a home in Spain, not just the price of the property. While they are not taxes, you need to take these accumulated expenses into account when budgeting for your property purchase:

  • Notary fees – preparing the deeds, witnessing the signature, and related administration can cost 0.1–0.4% of the purchase price.
  • Land Registry fees – inscribing your title (and mortgage, if you have one) in the Registry can cost 0.1–0.3% of the sale price.
  • Legal fees – using a lawyer to review, negotiate, and draw up contracts may cost around 1–2% of the purchase price.
  • Estate agent fees – using an estate agent to manage the purchase may cost 2–10% of the sale price (depending on the agency).
  • Banking costs – transferring money from other currencies will incur conversion and transaction charges of up to 0.5%.
  • Mortgage fees – bank charges of around 1% may also apply to financing used for the purchase, plus 500€ for the valuation.

So, you could expect to pay an additional 5–15% in professional service fees on top of the sale price before you even get to the property taxes. The taxes you must pay depend on whether it is a new property or a resale, and the amount depends on the property type and value.

Taxes when buying a new property in Spain

A new property is one that has not changed ownership before – usually a new build sold directly to the buyer by the developer. It does not matter how old the property is, it would still count as a ‘new’ home if it had never been sold before.

Buyers of new properties in Spain must pay a form of VAT (Value Added Tax) known as IVA (Impuesto sobre Valor Añadido). This is 10% of the purchase price as standard across Spain, though there is a lower rate of 7% in the Canary Islands.

A version of Stamp Duty known as AJD (Actos Jurídicos Documentados) also applies when buying a home that has never been sold before. This can vary between 0.5–1.5% depending on the region, but is most commonly 1.2–1.5% (except in the Basque Country, where it is 0%).

You can expect these two taxes to add up to 11.5% of the sale price to your total costs. They must be paid to the seller right after signing the deed, so they can pay the Spanish tax authorities.

Taxes when buying a resale property in Spain

Resale properties are homes that have been sold at least once already, which typically means purchasing a home secondhand from a private individual. This includes properties that are technically new but were bought or taken over by banks (e.g. due to defaulting on payments).

When transferring a resale property from one owner to another, the buyer is required to pay a property transfer tax known as ITP (Impuesto sobre Transmisiones Patrimoniales). The amount levied depends on the property’s deed price and location.

Autonomous regions can apply a rate of their own choosing, which is why ITP can be as low as 4% in the Basque Country and as high as 10% in other parts of Spain. It normally ranges between 6–10%, with the national ITP average being 8%.

Pro rata ITP does not apply to deposits, but this tax must be paid in full after signing the deed, as the transaction cannot be registered in the Land Registry until payment of the tax is confirmed.

What taxes do you have to pay if you own a property in Spain?.

Even after the property sale is complete and you have taken care of all the associated expenses, ongoing property ownership in Spain comes with other tax obligations, just as it would in any other country. Again, the taxes and rates owed depend on whether you are a non-tax resident (living in Spain longer than 90 days but less than 183 days a year) or a tax resident (living in Spain for more than 183 days a year).

Non-residents are still liable for common taxes such as property tax and capital gains tax, but they only have to pay income tax on earnings within Spain, whereas tax residents must pay income tax on global earnings (unless there is a double taxation agreement and the income has already been taxed in another country). Permanent residents in Spain may also be entitled to tax reliefs that are not available for non-residents.

However, Spanish residents pay taxes on a progressive scale, while non-residents pay a flat rate starting from 19%. The standard tax rate for non-residents who are not EU/EEA citizens is 24%. These rates apply to income and capital gains, but other taxes may have their own rates that apply regardless of tax residency status.

It is your responsibility as the property owner to make sure you are registered with the local town hall and keep track of taxes due, filing your returns and paying taxes on time. Some non-residents find it easier to appoint a representative in Spain to manage this for them.

Spanish municipal property tax

Every property owner in Spain must pay IBI (Impuesto sobre Bienes Inmuebles), which is an annual property tax paid to the local authority. In provinces where the Suma Gestión Tributaria is responsible for collecting it instead, the tax may be known as SUMA.

As the local town hall usually collects the tax, rather than the state, the rate can vary from one municipality to another. The tax goes towards paying for public services in the area, including the maintenance of public roads, parks, and street lighting.

The Spanish government does mandate an upper and lower limit, so while local authorities can set their own IBI rate, it must be between 0.4–1.3%. This tax is applied to the rateable value or cadastral value of the property, which is in turn a percentage of the property’s market value.

The cadastral value is calculated based on factors such as the location, size, age, and condition of the property, as well as the characteristics of the land and the public infrastructure in its vicinity. It is generally around 60–70% of the actual market value.

As an average example, if your property was worth 500,000€ and the cadastral value was 65%, then the taxable value would be 325,000€ – so if the local IBI rate was 0.8%, you would pay 2,600€ a year to the local town hall.

 Spanish rental income tax

Many people purchase a second home in Spain with the intention of using it as a holiday home, and letting it out when they are not staying there – or, if you are an investor, you might want to add a property in Spain to your rental portfolio.

If you are a non-resident who rents out their property in Spain, not only will you need to apply for the appropriate licence and follow the housing regulations for rentals in your municipality, but you will also have to pay income tax on your rental earnings.

Non-resident income tax returns – known as IRNR (Impuesto sobre la Renta de No Residentes) – must be filed quarterly, reporting income for those three months within 20 days of the quarter ending. EU and EEA citizens are taxed at 19% and can deduct expenses like maintenance costs, but non-EU/EEA nationals are taxed at 24% with no deductions.

What many non-resident property owners may not realise is that even if they do not rent out their property when they are not staying there, and it is uninhabited for months at a time, the Spanish authorities still classify the property as a taxable benefit.

This means you will still have to pay a ‘notional’ income tax, but the 19–24% rate will be applied to a percentage of the property’s cadastral value instead of any rental income. This is usually 1.1–2% of the cadastral value, depending on whether this has been revalued before.

Spanish wealth tax

Spain has a ‘wealth tax’ known as IP (Impuesto sobre el Patrimonio) that applies to both residents and non-residents alike. This annual tax is charged on wealth and assets with a net value exceeding 700,000€ at a progressive rate between 0.2–2.5%.

So, no matter how long you stay in the country, if your property in Spain exceeds this value, you are likely to have to pay IP in addition to IBI and IRNR. However, if your property is located in Madrid or Andalucía, these areas have abolished the wealth tax by reducing it to 0%.

That said, the Spanish government has introduced a temporary ‘solidarity wealth tax’ – ISGF (Impuesto Solidario a las Grandes Fortunas) – which may continue after its 2023 tax year trial. This applies to wealth and assets with net values from 3,000,000€ and up, starting at 1.7% and ranging to 3.5% for wealth exceeding 10,000,000€.

If you were already eligible for IP, you could deduct this amount from your ISGF liability, but if you did not pay the standard wealth tax due to the property being located in Andalucía or Madrid, you would have to pay the full solidarity wealth tax.

How long can a UK resident stay in Spain per year?.

UK residents are still able to buy property in Spain like anyone else, but Brexit has changed the way Brits are allowed to stay in Spain. After leaving the EU, the UK no longer has the same freedom of movement as EU citizens, meaning the 90/180 rule applies to UK citizens.

Brits currently do not have to apply for a visa to travel to Spain for short-term visits – as long as they can provide the other required documents for entering Spain. However, if a Brit wants to live in Spain for more than 3 months at a time, they must apply for a longer-term visa and use this to apply for a TIE card (Tarjeta de Identidad de Extranjero).

This foreigner’s identity card acts as a temporary residence permit that allows you to stay in Spain from 6 months to 1 year, depending on your visa, but you must apply for it within 30 days of arriving in Spain. By renewing your visa and TIE periodically, as required, you can follow the path to permanent residency if you want to live in Spain as long as you like.

However, UK nationals should also consider their tax liability, as leaving the EU means that Brits must pay 24% income tax in Spain, while EU citizens may pay 19% or less with deductions. Staying longer than 6 months in Spain would also make a British citizen a tax resident rather than a non-resident with limited tax liability, as discussed earlier.

How can I find property for sale in Spain?.

The key to finding a property in Spain is knowing which features you want it to have, how you intend to use it, and how much you want to spend. Rather than wasting time searching websites for likely listings that tick some of the boxes, it is much more efficient to go directly to an established real estate agent in the area you want to buy property in.

Professionals like Altavista Property can match you to the perfect property from our portfolio to meet your requirements, catering to your preferences as closely as possible. Our team has been providing first-rate real estate services on the Costa del Sol for over a decade, so you can trust us to make the process smooth and straightforward.

You do not have to worry about not speaking the language or knowing the ins and outs of Spanish real estate – our industry experts can take care of you every step of the way. To benefit from our reliable property services in Spain, call our office in Marbella on +34 952 787 788, or email your enquiry to info@altavistaproperty.com and we will be in touch.