Buying Property in Spain - the basics:
Buying Process
Costs
Terms explained
Things to do when you move in
Mortgage Approval
Buying Property in Spain - the process: (back to top)
1. Research the area.
There are lots of companies selling Spanish Property. Firstly, we recommend that you do a bit of research on the area where you are considering buying. If you are going to spend hundreds of thousands of euros buying a home, spend a few euros first and research the topic. Click here for books on buying property in Spain (from Amazon)
2. Put together a checklist of what you want -
e.g. near to golf courses, close to the beach, number of bedrooms etc.
3. Find a Property.
Many Estate Agents offer subsidised inspection flights so you can view some properties and check out the local area.
4. Get a Structural Survey.
Most people buying property in Ireland get a structural survey to insure that the property in in good shape. It is advisable to do the same when you are buying a second hand property in Spain (or elsewhere)
5. The conveyancing system is very different to the system of buying in Ireland. In general, it is possible to make similar 'searches' or enquiries to those we make when you buy a property in Ireland. But, it is important to note that The Spanish Notary Public who you sign the legal documents and land transfers in the presence of is NOT there to give legal advice to either the buyer or the seller, but is only there to witness the signatures and to deal with certain administration functions. It is therefore very important to get independent legal advice which can usually be arranged through your estate agent.
6. Get legal advice (on whose name you should purchase the property in)
There are a number of options open to you, each with advantages and disadvantages. It is very important to look at these options (in conjunction with looking at your existing will, and probably getting a Spanish will). The potential tax savings of setting it up properly at this stage are huge down the line as the Spanish system of Inheritance tax can attract very high rates of tax. If you gain nothing else from this guide, please take note of this. The options for purchasing the home are:
- Buying the property in your own name
- In joint names with your partner
- In your children's names who will eventually inherit the property
- In the name of a limited company
- By way of a Family Trust
Info on Double Taxation Agreements (TaxIreland.ie)
This guide is general. There is no substitution for legal advice .We suggest that you get legal advice so that you can buy the property in the most tax efficient way.
7. Finance.
Mortgages can be arranged through some Irish lenders or through a local Spanish lender. Getting finance by way of re-financing your existing mortgage can allow you to borrow enough to cover 100% of the purchase price, all fees and additional costs such as buying furniture. Because Ireland and Spain are both members of the Euro, there are no currency fluctuation problems to worry about. Generally speaking, local lenders will lend 60 - 70% of the property price.
Arrange up to 100% finance for your overseas property, by refinancing your Irish Property
What costs are involved? (back to top)
Preparation of the Escritura by the Notary - Approx. 50.000 - 100.000 Pesetas
Land Registry Fees - Varies - depending on the value of the property Approx. 50.000 Pesetas
VAT & Stamp Duty - Varies - depending on property value, type of property and location. Typical costs of 6% -7% of the purchase price
Plus Valia - This is a tax which is charged on the transfer of property & which should be paid by the Vendor. Many contracts try to make to Buyer liable for this and at a cost of thousands of pounds it is important to look out for this.
Legal Advice - While the Notary witnesses the signing of the contracts, he is not responsible for providing independent legal advise which is recommended. It is also wise to get a Spanish will written for you as this may save you thousands in the event of death. (For example, the property may not automatically be passed onto your spouse and they may be liable to pay Inheritance tax if a suitable will is not produced).
Power of Attorney - If you do not wish to be in Spain when the title deed need to be signed you can arrange for a lawyer to sign on your behalf. The typical cost would be approx. 250 euros
NIE - This is the Foreigners Identification Number you need, when you buy a property. Your Estate Agent / Solicitor usually arranges this for you at a cost.
Surveyor - If are buying a second hand property it's wise to get a structural survey to insure that the property is structurally sound
Finance - If you are re-financing your existing Irish property to raise finance for buying overseas, you would be liable for Irish legal fees and outlays in relation to your existing title deeds
Terms: (back to top)
Escritura
This is the title document containing a detailed description of the property, showing the ownership of the property. Under Spanish law you need to sign the Escritura in front of a Spanish Notary Public.
Fiscal Representative
If you are buying a home in Spain as an investment or holiday home rather than living there all year round, it is a good idea to nominate someone to act as your 'Fiscal Representative'. This person will receive any correspondence from the tax authorities. The fiscal representative has to be a resident of Spain - but it's up to you who to choose - a friend, tax adviser or lawyer.
Gestor
A 'gestor' is a local who can look after the paperwork you need to fill out when you own a property in Spain. For example, you will need the utility services such as water, electricity etc transferred into your name and will have to register for local rates, taxes and open a Spanish bank account. The 'gestor' can look after filling out the forms. This is not a bad idea particularly if your Spanish is not fluent. Apart from anything else, when you buy a holiday home the last thing you want to do is spend days or weeks filling out forms.
Notary
The legal system in Spain is different than the system in Ireland. In Ireland, you use a solicitor who looks after your interests in the deal. The Notary is a public official who neither works for the vendor nor the buyer, but whose function is to record the fact that the title deed showing the sale & purchase of the property has been signed in front of him and that it is understood by both sides.
NIE
To buy a property in Spain, you have to register with the Spanish tax authorities. They will allot you a foreigners identification number called an NIE
Now that you have bought the property - what else do you have to do? (back to top)
If you are buying the property in Spain as a holiday home or as an investment (or if you spend less than 183 days a year in Spain) you are considered a non-resident. You will have to:
- Appoint a fiscal representative in Spain
- Make a Spanish Income tax declaration and pay tax on any income you earn in Spain
- Pay local rates
- Make a declaration of all your capital assets in Spain and pay wealth tax on them if necessary
- Pay utility bills (direct debits through your bank may be the best idea)
If you are planning to live or work in Spain, you will have to consider:
- Apply for work permit or permits to open a business
- Import your car, furniture etc
- Arrange for your pension to be paid in Spain
Whether you're planning to live there all year round or not it may be worth joining The Institute of Foreign Property Owners at approx €50 per year. (They can also arrange to act as your Fiscal Representative in Spain) Telephone: +34 65 84 2312 Fax: +34 65 84 1589
Mortgage Approval. (back to top)
The way most people raise finance for an overseas property, is by refinancing their Irish Property - assuming that you have enough equity in your Irish property, this could allow you to borrow 100% of the property price + additional funds for the costs you incur such as your property taxes & legal fees etc. Apply for approval
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