Other costs

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There are a number of other costs that might be relevant and should be borne in mind:

  • International bank transfer. Most banks charge a fee (lifting or reception fee) for receiving money from international bank transfers. If you haven’t agreed this fee with your bank in advance it can be surprisingly high, for instance 0.5% of the value of the transaction. If you are transferring 100,000 Euros to your account in Spain in preparation for signing the deeds, you may find that your bank charges you 500 Euros or more for receiving the funds. Many bank branches in Spain are prepared to negotiate this fee and set a limit, say of 30 Euros. Be sure to bring up this fee when you open an account.
  • Bank-guaranteed cheque fee. If you need a bank-guaranteed cheque (cheque bancaria) to pay the vendor at the signing of the deeds you need to find out in advance how much the bank will charge you for this. As with the reception fees mentioned above, this fee can be as high as 0.5% of the value of the cheque if you don’t agree it with your branch in advance, preferably when you open your account. You should ask for it to be limited to a maximum of 15 to 30 Euros. If you are buying a property of 100,000 Euros without a mortgage, and have not agreed a reception fee and bank-guaranteed cheque fee in advance, you could find yourself spending 1,000 Euros on these two expenses, the equivalent of 1% of the price. Therefore it is important to look into these fees if you think you are going to need either of these facilities.
  • Power of attorney. If you need a power of attorney the cost will depend entirely on where you arrange it. If done in Spain this needs to be witnessed by a notary and could cost anything from 50 to 200 Euros, depending upon whether you use a lawyer to help you.
  • Making a will. It is a good idea to have a will drawn up in Spain if you are going to open property in Spain. This can be done by your lawyer and may cost around 250 Euros.
  • Property broker fee. If you buy through an estate agent the fee is usually paid by the vendor. However you should always clarify this in advance to avoid any unpleasant surprises. If you use a buyer’s agent you will be expected to pay them a fee for their service, often of 2.5% of the transaction price of the property.
  • Furniture. Never forget that you will need to furnish the property one you have bought it. If you have furniture in the UK that you can use you will incur shipping costs to get it to Spain. Many companies offer furniture packages, which for a typical 2-bed apartment start at around 12,000 to 15,000 Euros.
  • Utility set-up costs. If you buy a new property you will have to set-up new utility contracts. A very approximate guide to the costs of doing this yourself are as follows:
    • Gas: 70 Euros
    • Telephone: 130 Euros
    • Water: 120 Euros
    • Electricity: 100 Euros

Summary table of main conveyancing costs

The following table gives you an approximate idea of the main fixed conveyancing costs. However it does not include other important costs such as legal fees, banking costs and foreign exchange expenses, which will depend upon the terms you agree with those respective providers.

TABLE MISSING

However it must be stressed once again that these figures are just indicative, provided to help you draw up your budget and understand the costs you are invoiced during the purchase process.

Though just approximate figures it helps to know what to expect. A British person who recently bought a property for 600,000 Euros was charged by his lawyer € 2,295 Euros in notary fees and €1,530 in registry fees, along with €6,960 in legal fees, €215 for ‘forms and faxes’, and €490 for changing utility contracts. Total €11,490 for a service that could just have easily have cost under €5,000. If you leave payment of the notary and registry fees to a lawyer and suspect that you have been overcharged, you should ask to see official invoices from both the notary and the registry.

The cost of owning property in Spain

Property is a demanding asset in terms of ownership and maintenance costs. The bigger and more expensive the property you own, the higher the taxes and running costs you face.

Taxes

When you own property in Spain you have to pay the local rates (IBI), a wealth tax (Patrimonio) and income tax (IRPF). The wealth tax and income tax will vary according to your residency status and whether or not you rent out your property. Your lawyer or a fiscal advisor will be able to help you find out or estimate these taxes before you buy a property.

You are strongly advised to appoint a fiscal representative in Spain to handle all your tax payments. If you fail to pay your taxes you will be fined, and in the worst case your property can be seized and sold off by the authorities to pay your taxes. If a non-resident owns more than one property in Spain they are obliged by law to appoint a fiscal representative. Note that if you have only bought one property, but have more than one set of deeds (if the garage has a different set of deeds for example) then you are considered to own 2 properties and have to appoint a fiscal representative.

Municipal rates (IBI)

MUNICIPAL PROPERTY TAX
Spanish NameImpuesto sobre Bienes Inmuebles (IBI)
DescriptionThis tax is the Spanish equivalent of the rates and is collected by local government. All property owners in Spain pay this tax.
Tax base and rateThe tax base is the cadastral value of the property and the rate values from 0.4% to 1.1% for residential property (urbana>, depending upon the region. The tax rate can be as low as 0.3% for agricultural property, or higher than 1.1% under certain circumstances. You can find out the tax rate for a specific property from the vendor or the town all.
FormN/A
DatesPayment period determined by the local authority. In many cases this tax is collecte in Septembre.
ExampleVaries, but 200 Euros – 500 Euros per annum is common.

Wealth tax and income tax

WEALTH TAX
Spanish NameImpuesto sobre el Patrimonio (Patrimonio)
DescriptionEveryone who owns property in Spain (residents and non-residents alike) has to pay an annual wealth tax based on the net value of their assets in Spain after permitted deductions, such as mortgages. This tax is collected by regional governments. Residents are allowed certain deductions, but non-residents are not.
Tax base and rateThe tax is based on the net value of you property (less mortgage, if any) or another value deemed appropriate by the tax authorities. The tax rate works on a sliding scale of tax bands with marginal rates starting at 0.2% and rising to 2.5% for assets worth over 10.7 million Euros. The first 108,200 Euros is exempt of tax for residents, and 150,253 Euros is exempt for a principal residency. There is no exemption for non-residents, who will pay tax on the full net value of their assets.
Form714
DatesPresented during June for previous calendar year.
ExampleA non-resident with a property valued at 300,000 Euros and no mortgage in Spain would pay approximately 700 Euros per annum.A non-resident with a property valued at 300,000 Euros and a 70% mortgage in Spain would pay approximately 180 Euros per annum.A resident with a principal home valued at 300,000 Euros and no mortgage in Spain would pay approximately 300 Euros per annum.A resident with a principal home valued at 300,000 Euros and a 70% mortgage in Spain would not have to pay any wealth tax.
INCOME TAX FOR NON-RESIDENTS WHO DO NOT RENT OUT THEIR PROPERTY (STANDARD DECLARATION)
Spanish NameImpuesto sobre la renta de no residentes, declaración ordinaria (IRNR)
DescriptionYou pay this version of income tax in Spain if the following conditions apply: 1) You do not reside in Spain, 2) You own property in Spain, 3) The property is exclusively for personal use and you do not rent it out, 4) You have no other source of taxable income in Spain. Although you do not earn an income from the property, in the eyes of the Spanish tax authorities you still derive a benefit from owning a property in Spain and therefore have to pay an imputed income tax.
Tax base and rateTax base: 1.1% of the cadastral value (or 2% if the cadastral value has not been subject to revision or modification sine 1st January 1994).Tax rate: 25%
Form210
DatesPresented before the 30th June each year. For example you have from 1st January to 30th June 2006 to declare tax on income during 2005.
ExampleCadastral value of property = 200,000 EurosBase = 2,200 EurosTax = 25% x 2,200 Euros = 550 Euros
INCOME TAX FOR NON-RESIDENTS WHO DO NOT RENT OUT THEIR PROPERTIES, COMBINED WITH THE WEALTH TAX
Spanish NameImpuesto sobre la renta de no residentes, y Patrimonio (IRNR y Patrimonio)
DescriptionUnder certain conditions, non-residents can pay the two taxes mentioned above (IRNR and Patrimonio) in the same declaration and using the same form. Therefore this is not an extra tax, just a more convenient way of paying the two taxes previously mentioned.To present these taxes together in the same form you have to meet the following conditions: 1) You do not reside in Spain 2) you only own one property in Spain, and 3) this property is exclusively for personal use and is not rented out.
Tax base and rateThe value of the tax is the sum of the two taxes as explained above.
Form214
DatesPresented any time during the following calendar year. So you present in 2006 for taxes in 2005.
ExampleN/A
INCOME TAX FOR NON-RESIDENTS WHO RENT OUT THEIR PROPERTY
Spanish NameImpuesto sobre la renta de no residentes, declaración ordinaria (IRNR)
DescriptionIf you 1) do not reside in Spain 2) own property in Spain and 3) rent out your property, you have to pay income tax on the rent instead of the imputed tax described above. If you rent out your property to a Spanish company, the company will deduct tax at source and pay it to the tax authorities. In this case a non-resident is not obliged to present the forms 210 or 215. However if you do not rent your property to a Spanish company you have to declare and pay income tax.
Tax base and rateThe tax base is the gross rent, with no deductions allowed, and the tax rate is 25%
Form210 or 215
Dates210 = Monthly, one month after rent is due215 = Quarterly, in the first 20 days of the month following the end of the quarter.
ExampleAnnual gross rental income of 20,000 EurosTax @25% = 5,000 Euros
INCOME TAX FOR RESIDENTS
Spanish NameImpuesto sobre la renta de las personas fisicas (IRPF)
ExampleOrdinary income tax that all Spanish residents have to pay. This is not a property tax and depends entirely upon your income and fiscal circumstances.

 

© Mark Stucklin (Spanish Property Insight)