Cost associated with buying Property in Spain - G-EXTERNAL GESTION DE SERVICIOS EXTERNOS S.L. | SPANISH SOLIITOR`S COMPANY.

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Cost associated with buying Property in Spain

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COST ASSOCIATED WITH BUYING PROPERTY IN SPAIN
As a buyer of property in Spain there are a number of costs and taxes over and above the property price that you will have to pay. Depending upon whether you are buying a new property from a developer, or a resale property from a private individual, you will either have to pay VAT & Stamp Duty, or a transfer tax. The different cases are explained below, along with the other costs and taxes that are common to both cases.

NEW BUILD FROM A DEVELOPER
VAT & Stamp Duty (IVA & Actos Jurídicos Documentados - AJD)
These taxes apply if the property is being sold for the first time, and the seller is a property developer. The VAT (known as IVA in Spain) is 7% on the price of the purchase in the case of built residential property (villa, apartment, etc), and 18% in the case of plots of land (without built property) and commercial premises. The Stamp duty (known as AJD) is fixed at 1% of the price of the purchase. Both VAT and Stamp Duty are paid by the buyer, and if any deposit is paid before completion of the sale, such deposit will be subject to VAT at the moment of payment of this deposit. In this scenario there is no transfer tax to pay.

RESALE FROM A PRIVATE INDIVIDUAL
Transfer Tax (Impuesto sobre Transmisiones Patrimoniales - ITP)
This tax applies if the property is deemed to be a second or posterior transfer. The Transfer Tax is 7% on the price of the purchase, depending on the Spanish Autonomous Region in which the property is located. The transfer tax is paid by the buyer. If any deposit is paid before completion of the sale it is not subject to the transfer tax. However the full amount of the transfer tax still has to be paid upon completion. In this scenario there is no VAT to pay, and stamp duty is already included in this tax.

Income Tax Provision When Buying From Non-residents
If the seller is not a Spanish resident, the buyer has to withhold 3% of the purchase price and pay it to the tax authorities (application form 211). If this is not done the property will be considered by the tax authorities as the asset backing the capital gains tax liability of the seller. This condition is very unlikely to apply when purchasing from a developer.

COMMON COSTS
As a buyer of property in Spain there are a number of costs and taxes over and above the property price that you will have to pay. Depending upon whether you are buying a new property from a developer, or a resale property from a private individual, you will either have to pay VAT & Stamp Duty, or a transfer tax. The different cases are explained below, along with the other costs and taxes that are common to both cases.

Legal Fees
You are strongly advised to hire a lawyer to help you during the buying process. Your lawyer drafts and reviews contracts on your behalf and can explain all the legal and administrative issues you face. Your lawyer should also carry out any necessary due diligence (checking ownership claim of the seller, charges on the property, permits, etc.) and arrange all the required documents to complete the process (property registration, tax payments, etc.).
A lawyer - Abogado in Spanish - will charge you according to the service you require. This will vary according to the complexity of the purchase. Many charge around 1% of the purchase price in legal fees.

Mortgage costs
If you choose to buy with a mortgage then this will incur several additional costs. First there will be the property valuation that the mortgage provider will require before granting the mortgage. This is paid for the by the buyer and can cost around 500 Euros. Then there will be the costs of the mortgage itself. This varies according to the provider, and even according to the particular branch. However there is usually some kind of opening fee of around 1% of the value of the mortgage. Finally a mortgage will increase the Notary expenses.

Notary Expenses
Notary expenses are nearly always paid by the buyer and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate Notary fees as being 1% of the purchase price declared in the deeds of sale. In many cases however Notary fees are more like 0.5% (or less) of the price declared in the deeds.

Property Registry Inscription Fees
Expenses related to inscribing the sale with the land registry are also nearly always paid by the buyer, and are calculated in relation to the purchase price declared in the deeds of sale. To be on the safe side you should calculate 1% of the purchase price declared in the deeds, though once again it depends upon the property and the area, and the fee could be considerably lower.

Other Costs
Bear in mind that it may be prudent to carry out a survey of the property and that this will have a cost.
In Summary, allow for up to 10% of the purchase price in taxes and other costs.

If the buyer takes out a mortgage these costs can be somewhat higher due to an additional public deed for the mortgage and the inevitable bank charges involved. In this case transaction costs might reach between 10% and 12% of the value of the property purchased.

Banking Costs
To pay for the property, you will more than likely need to request a banker's cheque from a bank in Spain. In order to do that, you will need to open an account with a bank that has branches in Spain, and transfer money from the bank in your country. Unless you are careful, the cost of transferring the money can go up to 0,4% of the amount transferred, and the banker's cheque could cost you 0,5% of its amount. To avoid paying such high banking charges, which together can increase the cost of your purchase by 1%, make sure you negotiate low fees for transfers and banker's cheques with a branch manager before you open an account in Spain. Spanish Living recommends Escape Currency plc for all your foreign exchange needs. If you need to move money to Spain or abroad, they charge no commission and can offer rates up to 5% better than the banks, saving you money. Click here for details.

Furniture Costs
Once you own a property you will need to furnish it. The cost of furnishing a property depends entirely upon what you want. However as a very general rule of thumb a 2 bedroom apartment will cost around 20.000 Euros to furnish nicely if you buy everything new.


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