Your Destinations – Buyers Guide
We know from experience that buying a house in Spain is incredibly exciting.
Chasing the ‘Spanish Dream’ is therefore quite an adventure.
What is important to know is that buying a house in Spain is not the same as in the Netherlands.
What is different in the purchase process, the parties involved and additional costs, we would like to show you in this Buyers Guide.
In this way, Your Destinations wants to make sure that you are as fully informed as possible before you embark on this fantastic adventure.
If you have any questions after reading this Buyers Guide, we would be happy to answer them at info@your-destinations.com.
In the meantime, take a look at the website where you can find our wonderful Real Estate projects!
The buying process
There are three main stages when buying a house in Spain, below you will find the description for each stage.
- Negotiation and Agreement
Once you as a buyer indicate your interest in a particular home, the negotiation process with the seller begins.
In this case, the real estate agent helps both parties reach full agreement on the sales price.
Once this agreement is reached, both parties confirm the terms in writing and the official contract of sale is drawn up.
- Preliminary Sales Agreement and Down Payment
The next stage includes a preliminary sales agreement and down payment.
The preliminary sales agreement is not mandatory and sometimes both parties prefer to sign the “Sales Deed” directly as the first signing of a contract. - Sale-Purchase Deed
The final signing of the purchase deed takes place before a notary in Spain in the presence of all parties or their legal representatives.
The payment of the full agreed purchase price, from which the deposit is deducted, takes place at that time.
Buyers have the right to choose their notary, as they bear the costs arising from the formalization of the title deed.
The ownership rights and duties of the property covered by the agreement pass to the buyer upon signing the deed.
The parties/persons involved
Gestor: A Gestor is appointed for all the administration when buying a property in Spain, usually working as part of a Gestoria, also known as an administration office.
Notary: To complete the purchase of a home and become the legal owner of the property, the notary must prepare a legal and notarized deed.
They are responsible for making sure there are no outstanding claims on a property and verifying that the property can be sold to a new buyer.
Attorney: An attorney is responsible for all due diligence checks, for example, outstanding debts on the property, outstanding taxes, land registry records, building permits and contracts.
Legal building survey: For all new construction properties, a structural survey is usually completed by the municipality.
Unless the property has obvious defects, it is not customary to conduct a structural survey during a purchase in Spain.
However, it is possible to hire an engineer or architect to assess the condition of the property if the buyer wishes.
A Spanish bank account
To buy a property in Spain you need a Spanish bank account.
Spanish banks require a passport number to open an account.
It is not necessary to have an NIE number to open a bank account.
Mortgage
As a non-resident of Spain, it is possible to take out a mortgage in Spain.
Of course, certain criteria such as income and equity must be met.
If you meet all the criteria it is possible to take out a mortgage for 70% of the purchase price of the property.
The remaining 30% of the purchase price, the VAT on the purchase price and all other additional costs must be provided from the buyer’s own funds.
A Spanish mortgage does not require life insurance, as is the case in NL.
Required documentation
The following documentation is required before you sign the title deed when buying a property in Spain:
- Original personal ID card or passport;
- Original NIE/ TIE number (foreign identification and tax number);
- Bank check or proof of bank transfer (as per payment terms);
- Spanish bank account information;
- Proofs for payments already made.
An NIE number
NIE stands for “Número de Identidad de Extranjero,” which means identification number for foreigners.
You need this number if you perform economic activities in Spain.
It must be filed with the notary and is needed to pay taxes.
To obtain this identification number, an application with specific documentation must be submitted to the appropriate office of the National Police.
The processing time is usually two to three weeks.
Property valuation
When buying the property, an official property valuation document must be prepared.
The price of this document depends on the value and size of the property and can range from €300 to €3000 or more.
The house, and if present, the parking lot are both valued separately.
Total cost summary
| Cost item | Percentage/Cost | How to pay |
| Home purchase price | 70% – 30% | Mortgage – equity |
| Brokerage Fee | Depends on broker | Equity |
| ITP tax (existing) | ± 8% – 11% of purchase price | Equity |
| IVA tax (new construction) | 10% of the purchase price | Equity |
| AJD tax (new construction) | ± 1.5% of purchase price | Equity |
| Mortgage intermediary | Dependent on intermediary | Equity |
| Mortgage Fees | 0% since the new Ley Hipotecaria | N/A |
| Mortgage closing bank fees | 1% – 1.5% of mortgage amount | Equity capital |
| Lawyer: fee | 1% of purchase price | Equity |
| Notary: fee | 0.5% – 1% of purchase price | Equity |
| Notary: property registration | 0.1% – 0.5% of purchase price | Equity |
| Connecting electricity and water | Depending on property | Own power |
| Property valuation | Depending on value and size of property | Equity |
Equity
All in all, you should meet around 50% of the purchase price of the home from equity:
- In case of a mortgage: 30% of purchase price of house
- New construction home: 10% IVA and 1.5% AJD of home purchase price
- Existing home: 8% – 11% ITP
- Other costs: ± 10%
To prevent money laundering through the purchase of a property, the source of equity is legally verified.
IVA, AJD and ITP (taxes) are described separately later in this Buyers Guide.
Power of Attorney
If it is necessary for your representative in Spain to request and/or sign certain documents, you will need a power of attorney.
This power of attorney is drawn up by a Spanish notary and needs to be legalized by Dutch.
You sign the power of attorney in person at a Dutch notary.
Then it must be proven that the Dutch notary is really a notary, by a court that provides the power of attorney with an apostille.
Then the power of attorney can either be sent by registered mail or by courier to Spain.
Total costs between €100 and €750.
Explanation of taxes
ITP: Transfer tax
|When the property is used as a home, the buyer must pay transfer tax.
The transfer tax (Impuesto sobre trainsmisiones patrimoniales, ITP) is generally the largest cost.
It is the tax imposed on all types of economic transactions, including the purchase of homes and is calculated based on sales price reflected in the title deed or private purchase contract.
If the value of the property is deemed higher by the Spanish tax authorities, the tax is calculated based on this amount.
ITP is paid to the tax authority of the municipality where the property is located, regardless of where the public sale/purchase or title deed is formalized.
The property tax payment period is one calendar month from the execution date of the title deed.
The percentage of ITP depends on the region where the property is located and the amount of the purchase price of the property (cumulative), but ranges between 8% and 11%.
Parking spaces that are purchased are also subject to an ITP rate, which also depends on the region and the amount of the purchase price of the pair parking space, but averages between 8% and 10%.
IVA: Value Added Tax (VAT).
VAT is paid by the buyer to the seller (along with the purchase price), and the seller must pay the VAT directly to the Internal Revenue Service.
- 10% for housing.
- 21% for land, premises, storage areas and garages.
AJD: Stamp duty
In general, when the purchase of a property is subject to VAT, the buyer must pay additional stamp duty (Impuesto de Actos Jurídicos Documentados, AJD) of 1.5% of the purchase price.
It is charged to the buyer and must be submitted within one calendar month (date to date) from the date of signing the title deed through the self-assessment procedure.
Other costs arising from the purchase of a property in Spain are:
- Notary fees and title registration fees.
These fees vary depending on the value of the property and other factors, but usually will not exceed 0.5% of the purchase price; plus, as the purchase price increases, the percentage decreases and may be as low as 0.1% or even lower.
These costs are both borne by the buyer. - Agency Fees.
Paid by seller unless otherwise agreed.
Rental property
Location
If you are going to buy a second home in Spain and return on investment is one of your priorities, think carefully about this at the very moment you choose a location.
The most important consideration is to buy the property near the coast.
Although fewer and fewer people are just lying on the beach during their vacation, proximity to the coast is often a requirement. Buying to rent in a big city like Barcelona is no longer interesting.
Only properties with an existing tourist license are still allowed to rent.
If the property is sold, the tourist license expires.
Rental period
Because many individuals rent out their second homes, there is a lot of competition, in addition to hotels and other companies that rent out apartments and cottages.
In addition, the real tourist season is limited to a number of weeks so that renting out your second home all year round is not a realistic idea.
For a good rental period, consider the months of July and August and also some long weekends during the rest of the year due to holidays.
Rental license
If you want to rent out the property you buy for short term or as a vacation home, you must apply for a rental license.
However, certain criteria must be met to qualify for a rental license, and not all properties meet these criteria.
The cost of a rental license depends on the municipality and region and is between €150 and €500.
The process of applying for a rental license can start when the property is in your name and can take up to four months.
Return
The return you get from renting out your property depends in part on the type and location of the property.
Real estate agents and developers often talk about excessively positive returns of up to 5% or even more.
They often talk about compound returns and often do not include the costs you have on your property in the calculations.
It is more reasonable to assume a net return of around 2% (between 1.5 and 2.5%) from renting out your second home in Spain.
Taxes
Of course you have to pay income tax on the rental of your second home.
You pay this in the country where the property is located: in Spain. The income tax on rental income from your second home is 19% of the net income.
For people outside the EU (including Norway, Iceland and the UK for now), it is 24%.
This means that you can still deduct many things from the gross income.
These include repair and maintenance costs, rental company commission and keyholder fees.
There are even financing costs and depreciation that you can deduct under certain conditions.