In the Spanish real estate market, the purchase or sale of a property presents a number of legal complexities that are intensified when the parties involved are non-residents or foreigners. Spain, with its cultural richness, privileged climate and geographical diversity, has established itself as an attractive destination for international investors and buyers. This attractiveness, however, brings with it a globalisation of the real estate market that demands in-depth knowledge and an expert approach to deal with the legal and fiscal challenges that arise in these types of transactions.
Legal Context: Regulatory Bases for Buying and Selling in Spain
The sale and purchase of real estate in Spain is mainly regulated by:
- Civil Code: This body of law establishes the general provisions on buying and selling, defining aspects such as form requirements, the capacity of the parties and the obligations of both the buyer and the seller. It also regulates the interpretation of contracts, ensuring that they faithfully reflect the will of the parties.
- Mortgage Law: Complementing the Civil Code, the Mortgage Law regulates the registry aspects of real estate, ensuring publicity of property rights and providing protection against bona fide third parties. Its application ensures that the rights of buyers are recognised and defended in any legal dispute.
In addition to these general rules, there are specific considerations such as administrative restrictions and zoning requirements. For example, it is essential to verify that the property has the necessary planning permissions to avoid legal problems in the future. Urban planning also has a significant influence; properties in rural areas may be subject to limitations that restrict modifications or specific uses.
Formal requirements for the sale and purchase of dwellings
To guarantee the validity of a property purchase in Spain, it is essential to comply with certain formal requirements, which ensure both the legality and legal certainty of the transaction.
- Public Deed: The transaction must be formalised before a Notary Public. This professional acts as a guarantor of legality, verifying that the parties comply with all legal requirements. The public deed not only gives validity to the agreement, but also allows it to be registered in the Land Registry.
- Registration in the Land Registry : Registration in the Land Registry is essential to protect the rights of the buyer against third parties. This step ensures that the ownership of the property is officially registered, avoiding possible future claims.
- Choice of Notary: Generally, the choice of the Notary is up to the buyer. It is important to choose a professional with experience in international transactions, as he/she will be able to resolve specific doubts related to the particularities of foreign buyers.
Tax Residency: Implications for Foreign Buyers
One of the key elements in home buying and selling is the determination of tax residency status, as this factor directly affects tax obligations. The main types of foreign buyers are:
- Non-resident buyers: A person is considered non-resident if they do not spend more than 183 days a year in Spain. This status entails specific tax obligations, such as taxation on income imputed to the property.
- EU tax residents: Buyers from EU countries benefit from EU regulations that simplify procedures, offering tax advantages in some cases.
- Residents in third countries: This group is subject to additional controls, especially regarding the origin of funds and anti-money laundering regulations. Transparency in transactions is key to avoid penalties.
Tax Considerations in the Sale and Purchase of Homes
Buying and selling a property in Spain involves a series of tax obligations that both buyers and sellers must comply with. The main ones are detailed below:
- Non-Resident Income Tax (IRNR): This tax affects non-residents who purchase property in Spain. In the case of sellers, there is a compulsory withholding tax of 3% of the sale price.
- Transfer Tax and Stamp Duty (ITP and AJD): Buyers of second-hand properties are obliged to pay ITP, while for new properties VAT is applied together with AJD.
- Plusvalía Municipal: This tax is levied on the increase in the value of the land since the last transfer. Although it is generally paid by the seller, the parties can negotiate this obligation.
- Wealth Tax: Depending on the autonomous community, non-residents may be subject to this tax if the value of the property exceeds certain thresholds.
Deductions and Exemptions
- Deductions for investment in residential property: These deductions are not usually applicable to non-residents, except in very specific cases.
- International Agreements: Many countries have double taxation agreements with Spain that can reduce the tax obligations of foreign buyers.
If you are looking for specialist advice on buying and selling property in Spain, Gutiérrez Pujadas & Partners has extensive experience in international transactions. Our team of real estate law experts is here to guide you through every step of the process, ensuring security and transparency in your transaction. Contact us today for a personalised consultation.