Buying property in Spain can be a complex process, especially if you’re a foreigner. There are numerous procedures and documents you need to consider before finalizing the purchase. In this article, we explain the main contracts and permits required, as well as the taxes and legal obligations related to real estate transactions in Spain.
1. Reservation Contract and Earnest Money Contract
The reservation contract is the first step in purchasing a property. This document allows the buyer to reserve the property in exchange for an agreed amount, giving time to secure financing or obtain the necessary permits. Later, the earnest money contract formalizes the purchase and obligates both parties to proceed with the transaction. In case of breach, the defaulting party may lose the deposit or, alternatively, be required to return double the amount received.
2. First Occupation License and Urban Planning Compliance Certificate
To inhabit a new property, you need a first occupation license, which certifies that the property meets all technical and urban planning requirements. Additionally, it’s essential to obtain the urban planning compliance certificate, confirming that the construction complies with current regulations and has no pending penalties.
3. New Construction Declaration and Age-Based Construction Declaration
When purchasing a new home, you must present the new construction declaration, which certifies the legal construction of the property. If the construction is old, there is the age-based construction declaration, used to regularize buildings that have existed for a specified period without being legalized.
4. Construction Declaration Tax and Property Tax (IBI)
The construction declaration tax is a fee paid when legalizing the construction of a new building. In addition, all property owners in Spain are required to pay the IBI (Impuesto sobre Bienes Inmuebles), an annual tax that varies based on the property’s cadastral value.
5. NIE (Foreigner Identification Number)
If you’re a foreigner looking to buy property in Spain, you will need to obtain the NIE (Foreigner Identification Number). This document is essential for conducting any financial or legal transactions in the country, including purchasing real estate.
6. Designation of Notary Public and Property Registration
The role of the notary public is key when buying a property, as they formalize the purchase-sale deed. Additionally, the property must be registered in the property registry, which provides legal security to the buyer and helps prevent fraud.
7. Utility Contracts: Electricity and Water
Once the property is purchased, it’s essential to arrange for basic utilities. The most important are the electricity contract and the water contract, both of which are necessary to make the property habitable.
8. Tax Representative for Non-Residents and Other Taxes
Non-resident property owners in Spain must appoint a tax representative to handle their tax obligations. Additionally, if you rent out your property, you’ll need to pay the INR (Non-Resident Income Tax).
9. Energy Performance Certificate (EPC)
The Energy Performance Certificate (EPC) is mandatory for any property sale or rental in Spain. This document rates the property’s energy efficiency, ranging from Class A (most efficient) to Class G (least efficient).
With this guide, you will have a clear overview of the documents and procedures needed to buy property in Spain. If you are a foreigner, remember that appointing a tax representative and obtaining your NIE will be crucial steps to completing the transaction smoothly.
