Janet Anscombe

Spain has a Notarial system for property transfers and sales, and so both vendor and purchaser appear together before a Public Notary to transfer money and keys, and for buyers to sign their new title deeds. Notaries are independent legally-qualified officials who are ultimately responsible for both the legal form of the Escritura (Title Deed) and the declarations of taxes and costs due on the transaction.

As part of your purchase procedure, the Notary will verify that the property you are buying is legally owned and registered to the vendor, that it is free of all costs and charges, and that it comes with vacant possession. S/he will be able to offer an official translation of the documents involved in your completion, if required. If you are unable to sign in person, then you can allocate a representative by specific Power of Attorney to sign at the Notaria on your behalf. What Notaries do not do is confirm the specific legality of the property being transferred. It is possible to transfer, legally, a property that is actually illegal, and so it is still necessary to undertake a full and independent conveyance beforehand.

After completion, the taxes due on the transaction must be filed with the tax authorities, the Escritura submitted to the Land Registry, and the costs disbursed. These costs, known as gastos, are paid by the purchaser in Spain, and around 10% should be allocated on top of an agreed purchase price. These gastos include the Notary’s fee, the land registry fee, and, primarily, taxes, which will either be 5% or 6.5% depending on whether the property is new or resale. They are normally paid when the Escritura (title deed) is signed at Notary, and generally break down as follows:

Tax. Either 6.5% ITP (Impuesto sobre Transmisiones Patrimoniales, a transfer tax) for resale properties, or 5% IGIC (Impuesto General Indirecto de Canarias, equivalent to VAT) on new properties. For new properties only, a document registration tax equivalent to stamp duty of 0.75% will also be payable.

Notary Fee. This will vary depending on the value of the property, and should be between 500 and 1000 Euros. The minimum charge is around 300 Euros.

Land Registry. Your new property must be registered in the municipal land registry (Registro de la Propiedad), and the fee should be around half of the Notary fees, except for garages or parking spaces, where the fees will be around the same as the Notary fees.

Plusvalía. Plusvalía is a tax on the increase in assessed value of the land on which your property is situated during the period of ownership of the vendor (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana). It is calculated both on the surface area of the plot as well as the difference in its Valor Catastral (rateable value) between the point of previous sale and your own purchase. Plusvalía is usually in the region of a few hundred Euros, but can rise to thousands of Euros if a large amount of land is involved and the previous owner has held title for many years. The amount is often not known much in advance of signing, and sometimes not until afterwards, because it is calculated by the municipal authorities, some of which only produce the figure after completion. By law, the vendor is required to pay this tax, though in the Canaries, it has frequently been negotiated so that the purchaser is responsible; a retention is usually held to cover the assumed amount. Over recent years, however, vendors are increasingly agreeing to pay Plusvalía as part of their legal requirement.

Once you have bought your property, there will be certain ongoing costs to maintain it legally. These include utilities bills, annual local and national taxes, and community fees if your property is part of a complex.

You should allow for:

Water. This is usually paid directly to the relevant Water Board and is charged according to metered usage. Occasionally, it will be paid via a community who will meter usage internally.

Electricity. This is normally paid directly to the relevant Electricity Company and is also charged according to metered usage. Very occasionally, it too will be paid via a community who will meter usage internally.

Rubbish (Basura). This is usually paid directly to the municipal authority and is charged annually or half-yearly depending on municipality. Occasionally, it will be paid via a community where it will be included in the community charge.

Rates (IBI: Impuesto sobre Bienes Inmuebles). These are usually payable in May/June, or September/November in Adeje. The rate depends on the size, location and age of your property, and is calculated at around 0.45% of Valor Catastral (rateable value), or the chargeable base rate, base liquidable,  if different to the Valor Catastral after a local rates revision.

Community Charge. This is payable by owners of properties which are part of complexes governed by the Law of Horizontal Division, under which a Community must be legally established. At an AGM of owners, the community will approve and adopt a budget which will depend on the various facilities and features of the complex, e.g. lifts, swimming pools, gardens, security, lighting, etc. The budget will be divided amongst the owners according to their quota, which is determined by a recognized formula: in simple terms, it is mainly based upon square metreage. The resulting community charge is paid into a communal fund which is disbursed by a Certified Administrator appointed by the Community who acts in accordance with all instructions arising from decisions made by the owners at Annual or Extraordinary General Meetings.

Income Tax (Impuesto sobre la Renta). Residents and non-residents owning property or investments in Spain are obliged to file annual tax returns. The Income Tax rate is currently 24% on investments, including interest obtained from deposit accounts, and rental income. Non-residents are further required to declare notional rental income even if they do not let out their properties. Notional income is deemed to be 2% of the property value, which is determined to be the highest of the value on the Escritura, or the Valor Catastral, or the value deemed by the municipal authority if the Escritura value is not accepted.

Wealth Tax. The previous annual liability for Wealth Tax is now defunct. The tax has been abolished, or at least, there is now a full tax deduction allowance, making for a zero liability.