INVESTING IN PROPERTY IN SPAIN?
Things You Should Know When Buying Property in Spain
There are no restrictions for foreign investors to buy property in Spain; however you will need to obtain an NIE (National Identity Number (see paragraph 3) and open a Spanish bank account (see paragraph 8). EU citizens have the right to move to any other EU country to live and work. They will have to apply for a residencia if they intend to live in Spain for more than 6 moths. However, getting a residencia for a non EU citizen who decides to stay in the country on a permanent basis can be difficult.
On 27th September 2013 the Spanish Government approved a package of measures to encourage non EU foreign investors to buy property in Spain. Among others measures, non European citizens can now get residency straightaway if they invest at least 500,000 in a property. Now that property prices are at rock bottom prices, it is an opportunity that cannot be missed is you wish to live in Spain and can afford to buy a luxury property in Spain.
When buying property in Spain, there are a few things you should know to hopefully avoid any pitfalls and consequently help you to save money and difficulties:
1. Consult and take advice with professional Lawyers and Accountants.
They have the expertise to ensure a safe purchase and they can easily detect any potential risks affecting your purchase, such as embargos, mortgages, licenses, legal paperwork, fines.
A property in Spain could have debts and taxes owing on the property and any debt will become the new owners responsibility if overlooked. Your Lawyer must obtain proof that the vendor has paid all his obligations, utilities, outstanding mortgage and taxes.
They will also liaise and advise you accordingly about all the tax matters before and after completion. All registered Abogados (Lawyers) are covered by professional insurance giving you peace of mind with your new purchase.
2. Research the credentials of your Estate Agent.
Not all Estate Agents are registered and have a commercial office, which means there will be no comeback if things go wrong.Â Choose a long-established and licensed Estate Agent with a strong reputation in the area, who is also a registered and approved member of the AIPP (Association of International Property Professionals).
3. NIE Number (Spanish National Identity Number).
A NIE number is required when you are buying a property in Spain. You will have to make sure that you apply in advance to the Foreign Office before completion date. It takes approximately one week from the time of application.
You may apply in person or you can grant your Lawyer in Spain or in the UK with a Power of Attorney to make the application on your behalf.
If you live abroad, this option will save you time and money. They will prepare a draft application in both languages and give you full instructions on what steps to take in your native country.
4. Request a Survey if you are buying property in the countryside.
Requesting a survey can be very advisable if you are purchasing a property in a rural/countryside location as this will help you to know more about boundaries, construction specifications, if any licenses are required for any extensions and avoid any surprises.
5. Get the right advice on taxes.
You may buy a bargain but your Lawyer will need to advise you regarding the amount of tax payable and will contact the Tax Office.
They will also advise you about any future obligations to deal with. Any purchaser will be liable to pay two property taxes every year, Council Tax (IBI) and Non-Resident’s Tax (if they are non-resident).
Nominate a fiscal representative who can receive your correspondence on your behalf and act on time.
6. Ask about potential inheritance taxes.
Sit down with your Lawyer and discuss about future implications on Inheritance Tax before completion. Splitting ownership with your inheritors can significantly reduce your tax exposure.
There are other options that can reduce your tax bill to your inheritors so professional advice is necessary.
7. Draw up a will.
This will avoid having to go down the path of the grant probate route as inheriting will be a relatively straightforward matter.
8. Open a Spanish bank account.
You will need to open a Spanish bank account to be able to withdraw the euro bankers draft required for completion and transfer all utility bills relating to the property for future payment.
Your Lawyer can also advise you with regard to money transfers from your country of residence to your Spanish bank account directly to ensure you get the best exchange rate and transfer fees. Your Lawyer will also be able to advise you about different alternatives in paying for your property, i.e. paying the vendor directly in Sterling from your bank in the UK to the vendors UK bank account.