Buying Guide
The buying process explained
Taxes and Costs involved in the purchase of a property in Spain and Tenerife.
Purchasing a property in Spain or Tenerife is a relatively straightforward procedure but you should not forget to budget for the additional costs and taxes over and the above the purchase price of the property you finally set your heart on.
As a foreigner in a country whose laws you might not be accustomed to, it is always advisable to retain the services of a local English speaking reputable lawyer to represent your interests.
Beckham Overseas work closely with respected English speaking lawyers on the island to ensure you get the best service available.
The normal procedure after you have negotiated the details of your purchase is as follows
The first thing your lawyer will do is check the official Property Registry to ensure that the seller owns the property free of charges and encumbrances. As the Property Registry is the last word in owner-ship, this step is absolutely essential in any property purchase.
We confirm that the owner of the property is the legal owner of 100% of the property and that no other parties have a claim.
We check that there are no outstanding debts on the property by way of mortgages, unpaid tax contributions or any other encumbrances. This is done by obtaining a ¨Nota Simple´. This document details the exact registered location, size and description of the property, the owner, and information of any debts attached to it.
Unless an immediate cash payment of the full purchase price is made, the next step is for Beckham Overseas to draw up a private purchase contract which reflects the legal description of the property, purchase price, form of payment, date of completion, date of possession etc.
Upon signature of the private contract, a payment on account of the total purchase price is made, which can vary depending on the terms of sale and date of completion. A normal deposit for completion within 30-60 days is 10% of the agreed purchase price.
When the entire purchase price has been paid, the seller will grant vacant possession of the property and issue the public deed of conveyance (Escritura) to the purchaser, free of charges and encumbrances, which is issued before a Spanish Notary.
It is then passed to the tax office to pay stamp duty then presented to the property registry for inscription under the new owner's name.
It should be noted:
On completion day, both parties, or their representatives with power of attorney, will appear before the Notary, who is a government official responsible for the execution of public documents and to ensure compliance with Spanish law.
The Notary acts for neither party, and does not replace the need for your own lawyer, but witnesses the signing of the Escritura de Compraventa (the transfer deed). At this time the balance of the purchase money will be paid to the seller, and any remaining purchase tax and fees will be paid.
You will then have the keys to your new property and a copy (Copia Simple) of the title deed until the formal deed comes to you from the land registry.
At every stage, both here and in Spain and Tenerife, Beckham Overseas will be on hand to co-ordinate and answer any questions you may have that are not covered by your lawyer.
Fees and taxes
Payable on all transfers of Spanish properties are fees and taxes typically as follows:-
TYPICAL COSTS OF BUYING IN SPAIN AND TENERIFE.
1. Transfer Tax (Stamp Duty) on resales - 6.5% of the declared value
2. Legal Fees - 1% approximately
3. Notary and Land Registry Fees - 1% approximately
4. Title Deed Tax - 0.5% of the declared value
5. Plus Valia tax on any increase in land value - varies, and may not even apply
1) TRANSFER TAX
This tax is 6.5% of the purchase price on a resale property and 5.75% if you are purchasing a new property from a developer.
2) TITLE DEED TAX
The Title Deed or Document Tax is 0.5%.
3) NOTARY FEES
Notary Fees are charged for the preparation of the Escritura and the witnessing the signatures of the two parties. These are government fixed and based on the value of the property.
4) LAND REGISTRY FEES
Land registry fees are a charge made to register the Escritura, and again is government fixed and based on the value of the property.
5) PLUS VALIA
This is a Municipal tax based on the increase in the value of the land from the last time the property changed hands. By law it should be paid by the seller, but in Tenerife it is customary for the buyer to pay it.
Other fees and costs.
Lawyer Fees
The fees for the lawyer will generally depend on how much time and work is involved in any particular purchase. In normal circumstances the fee will probably be about 1% of the purchase price.
Beckham Overseas will be pleased to recommend an English speaking Lawyer on your behalf.
3% Tax Retention
When a property changes hands between a vendor who is a non resident of Spain or the Canary Islands, 3% of the declared purchase price is retained by the purchaser or their representative in lieu of capital gains tax. The money must be paid to the Spanish Inland Revenue within 30 days of signing for the Title Deeds.
The responsibility of ensuring that the money is retained and paid to the Spanish Inland Revenue is that of the purchaser and it is then up to the vendor to instruct his fiscal representative to claim the money back if tax is not due. Your Lawyer will ensure that this is done for you.
If the vendor is a resident of Spain or Tenerife, then there is no need to retain the 3% as the vendor would be expected to be making his own tax returns on a regular basis
N.I.E. Identification number
Any person wishing to purchase a property or have a fiscal representation in Spain or the Canary Islands must obtain a certified identification number (N.I.E.) and appoint a qualified fiscal representative who is resident in Spain or the Canary Islands to deal with his tax affairs.
This is simply an identification number required by non-residents. If you subsequently become a resident this will also be the number of your ´Residencia´.
You must produce your passport and a photocopy at the Police Station for them to keep, together with two passport size photographs. The application form is filled in (with our assistance) and signed and the N.I.E. number is usually available for collection within a few weeks.
This number will be required by the Notary and will also be required by your bank. In the future it will be requested in other situations, such as ordering a telephone, or to purchase a car, etc. and your accountant will need it for your returns.
Non-residents mortgages
You can obtain a mortgage in Spain or the Tenerife using the property that you are purchasing as collateral for the loan. Interest rates are low and therefore cost effective, and loans can be repayable over any period up to 25 years dependant on age. In general you can borrow up to 70% of the purchase price as a non-resident and residents of Spain or Tenerife can obtain up to 75% of the value of the property.
Here at Beckham Overseas we have strong links to all the leading banks on the island and can recommend one of these banks for your mortgage purposes.
The mortgage rates in Spain and Tenerife are some of the cheapest in Europe, requirements generally are as follows:
• Six months Bank statements (i.e. current accounts, savings, loans, current mortgage)
• Three month salary slips
• Copy of employment contract
• Two years tax declarations
• Copy of P60
• Two years audited accounts (if applicable)
• Value of UK property - for example a recent valuation or copy of recent buildings insurance
• Details of share portfolio and savings plan if applicable
• Copy of purchase contract - Beckham Overseas will supply this document
• Copy of Escritura and Nota Simple for new property
• Copy of stage payments paid or deposit - Beckham Overseas will supply
• Copy of Escritura and Nota Simple of existing Spanish owned property
Details of mortgage rates and repayments are available on request subject to status.
Community of owners
The majority of people who buy a house or apartment in Spain or the Canary Islands will find themselves a member of a Community of Owners.
Whatever parts of building are jointly owned, or where there are gardens or a swimming pool common to all, then owners share the cost of maintenance and services each year towards the upkeep. This usually includes the insurance for the building.
Typical annual costs of ownership abroad.
COMMUNITY FEES
Controlled by the committee of owners based on the percentage of the cost to maintain the facilities provided, relative to the size of your property - Vary, but usually between 0.5% and 1% of your property value.
LOCAL RATES
Payable annually in June for the current year - Vary, 0.2% is typical.
PROPERTY TAX
0.2% of rateable value.
WATER AND ELECTRICITY
These have a standing charge and metering - Similar to UK and Ireland.
FISCAL REPRESENTATIVE
(Gestor) to manage tax returns etc. - £100 equivalent usually.
There is a charge for rubbish collection although sometimes this is included in the community fees.
Beckham Overseas can arrange this service on your behalf.
A Spanish Will
This is quick and inexpensive to arrange and highly recommended. It only needs to detail your assets in Spain or Tenerife.
Beckham Overseas can arrange this service on your behalf.
To summarise
Let Beckham Overseas with their professional sales and advisory team guide you smoothly throughout your purchase or sale in Spain or the Canary Islands providing you with every before and after sales service you could possibly require.
Every effort has been taken to ensure the information given in this page is accurate at the time of publication, but it is not intended to be a substitute for legal advice or professional assistance. Laws and regulations can and often do change and therefore Beckham Overseas accept no responsibility for any loss or damage caused by actions taken as a result of reading this information. *