LEGAL ADVICE

ARNOT INVESTMENTS recommends every purchaser of real estate in Spain to appoint a qualified solicitor in order to protect his interests. In case you as purchaser should not be acquainted with a solicitor, ARNOT INVESTMENTS will be happy to recommend you a solicitor specializing in real estate law and speaking the language of your choice.

Purchasing real estate in Spain is a relatively straightforward procedure. The final decision as to real estate assignment will be made by the registry office, the “Registro de Propiedad”, which will give immediate information whether the seller owns the respective real estate free of encumbrances. In most cases, unless an immediate cash payment of the full purchase price is made, a private contract of purchase is signed wherein the following details of the purchase are stated:

• the exact legal description of the real estate to be purchased

• the agreed purchase price

• the agreed terms of payment

• the agreed date of contract performance as well as the date of the purchase assignment
  

Upon signing this private contract of purchase, a down payment of the purchase price is usually made which is essentially calculated according to the agreed terms of the contract and the agreed date of the contract performance. When agreeing upon a contract performance period of 30 to 60 days, there is a standard down payment of 10% of the agreed purchase price.

Upon payment of the total or remaining purchase price, the seller will ask a Spanish notary public to issue a notarial title of real estate free of encumbrances (Escritura) for the benefit of the purchaser. This title will be forwarded by the notary public to the tax office for the appointment of the purchase tax on real estate. Then the notarial purchase contract will be presented to the registry office for assignment. Upon requirement, the notary public can attend to a provisional registration of the assignment immediately after signing of the notarial purchase contract.

REAL ESTATE PURCHASE COSTS
7% transfer tax: In Spain, this tax is called I.T.P. and it is comparable to the purchase tax on real estate. It is payable for the purchase of any real estate, villas, apartments, plots, business premises, garages belonging to an apartment, provided the purchase is on a private basis. Should the seller be a building contractor, building owner or real estate agent, an additional issuance fee of 1% will occur.

16% VAT: This tax is payable for recently developed plots, business premises and commercial garage spaces, in case the seller is a building contractor, building owner or real estate agent. In this case, the additional issuance fee of 1% will also occur.

Notary public fees and registration costs for the title register: The notary public fees should not exceed the amount of € 902.00, although the costs could increase due to the number of pages or the complexity of the notarial purchase title. Examples:

• Purchase object  € 300,500.00 Notary public fee app. € 481.00


• Purchase object  € 601,000.00 Notary public fee app. € 401.00


• Purchase object  €1,202,000.00 Notary public fee app. € 661.00

The registration costs for the title register amount to 65% of the notary public fees.

Betterment tax: This tax is evaluated by the community on the basis of a special index and reflects the increase of the price per square metre for the plot for the period between the actual seller’s purchase and the actual selling date. This tax is basically payable by the seller, but in common practice it is often paid by the purchaser. As there are several variables used for the evaluation of this tax (location, size of plot, volume of development, period of ownership of the seller), the amount payable can vary substantially and should be calculated precisely before the purchase.

All in all, within the range of real estate purchase, the purchase costs of real estate amount to 7% to 9 % of the purchase price, plus betterment tax, in case it is to be paid by the purchaser.