Property Investment in Spain
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If you would like to have some advice about property investment in Spain you are in the right place. Our real estate clients run the range from holiday homebuyers to institutional investors…
AvaLaw is recognized in the sector as one of the leading firms in assisting foreign real-estate investors to buy and sell properties in Spain safely, with the best possible terms and with no surprises – while paying minimum taxes and other costs in the process.
Whether you are a holiday home buyer or a professional real-estate fund, you simply choose the property and we take care of the rest. Our full package of services includes tax planning, NIE numbers, setting up of companies, due diligence, survey, contracts, closing and even tying up any loose ends, such as direct debiting the invoices and transferring the utility contracts into the name of the new owner.
The fundamentals of property investment in Spain
Any person of any nationality, or any company legally incorporated in a country, can buy a property in Spain. The only requirement is that you can prove the funds you plan to invest have been legally obtained. In addition, you will need to complete certain administrative and legal processes, such as obtaining an NIE (Spanish Tax number for foreigners), opening a bank account, obtaining the anti-money laundering clearance, putting in place a Power of Attorney, if any are necessary; and in sizable investments, making the foreign investment declarations.
Although each project is different and the process of buying a holiday home or a second residence differs significantly from investing as a business, in general, the phases found in any real estate operation would consist of the following:
- Tax planning and deciding on the legal structure (do you buy in the name of a company, in your own name, together with your spouse or partner, in the name of your children, etc.)
- Administrative tasks (setting up the planned structure, if any; executing Power of Attorneys, applying for the tax identification codes “NIEs”, opening a bank account, getting the anti-money laundering clearances, seeking financing, etc.)
- Search for a potential purchase property (often simultaneously with the completion of points 1) and 2))
- Negotiation over the target object(s) identified
- Reservation agreement or letter of Intent
- Conducting of Legal and technical Due Diligence
- Negotiation of the down payment agreement
- Execution of the purchase deed before a Spanish Notary
- Consideration and obtaining of insurance coverage
- Payment of the Property Transfer Tax or VAT, as applicable
- Updating the Land Registry
- Arrangement and contract for utilities and establishment of direct debit facilities
- Planning for the inheritance of properties
No. You can authorize a representative to act on your behalf in the process. The easiest way to do so is to sign a Power of Attorney at a Spanish Notary while you are visiting Spain and looking for your property. If you wish to proceed with the purchase and are not in Spain, you can grant a Power of Attorney in your country of residence at a Spanish Embassy or Consulate or through a procedure of Apostille.
The only thing that normally cannot be done by a Power of Attorney is the opening of a bank account. According to the international banking rules, all banks are required to meet with their clients at least once in person. Some banks may exceptionally let you open an account with Power of Attorney, but may oblige you to meet with them, in person, before releasing funds. Once you have met with the bank officials once, the rest of the acquisition process, including dealing with the bank, can be done via Power of Attorney.
Yes! If you invest over 500.000 euros in Spanish real-estate, you and your immediate family can be granted a work and residency permit. This permit is commonly referred to as a “Golden Visa.”
The most significant cost when buying a property are the taxes, which vary, in part, according to the autonomous community. In some autonomous communities, the tax is scaled depending on the purchase price.
In addition, the taxes vary based on the following factors:
- Age of the property (second hand / new)
- Identity of the buyer (company / private individual)
- Identity of the seller (company / private individual)
- Type of the property (residential / commercial property)
Use of the property (rental / resale within five years without renting, etc.)
When investing as a business, the same rules apply mostly. The one significant difference is in relation to tax matters. For a holiday home buyer, there isn’t much to do in terms of optimizing taxes. On the other hand, when investing as a business, there are several possibilities to optimize your taxes. We recommend you consider the structure in advance, since there are many regulations you can take advantage of. For instance, if you invest in eight residential units and you rent the units for at least three years, you will be eligible to receive an 80 % reduction on your company taxes.
Also, knowing the market, the trends and the other players in the sector is crucial. In addition to our experience and knowledge, we have a wide realtor network to help you find the perfect targets.
Yes, that is usual in Spain. Unlike in most western countries where the down payment is paid to an escrow agent (closed account, trustee, Notary, etc.) instead of to the seller, the local practice in Spain tends to surprise foreign buyers.
Any risk can be reduced to very little with some basic reviews, for example, making sure that the time between the payment of any deposit and the final sales deed is not excessively long, making sure the seller is not a company on the verge of bankruptcy, and confirming that the outstanding amount of the mortgage does not equal the purchase price (in which case the down-payment cannot be paid to the seller because the whole purchase price has to be paid to the bank). With the right due diligence, it is acceptable in Spain to do as the Spaniards do – pay the down payment directly to the seller at the time of signing the down payment agreement.
When investing in a property, what are the responsibilities of the Realtor, the Notary and the Lawyer?
The Realtor is normally responsible for:
a) Finding you the perfect purchase target based on your search criteria.
b) Providing you with the relevant basic information regarding the target property.
c) Mediating in the negotiations between the seller and the buyer, or their representatives.
The Notary is responsible for:
a) Identifying the parties of the signature.
b) Gathering together the documentation required by law for the sales transaction.
c) Registering the property with the land registry. Please note that Spanish notaries, unlike in many countries, do not have any role in the deal during the negotiations or when drafting or signing the down payment agreements. They also, do not normally act as escrow agents because the money normally moves directly from the buyer to the seller.
The Lawyer is normally responsible for:
a) Tax planning designed to minimize the amount of taxes at the moment of purchase,
during the ownership and at the moment of eventual property sales.
b) Setting up the structure for the investment, if applicable (incorporating Spanish
c) Dealing with the banks (anti-money laundering clearances, financing, etc.).
d) Obtaining the NIEs.
e) Acting as your tax representative and making the corresponding tax declarations during and after the purchase.
f) Supervising the safety of the operation by conducting a thorough due diligence of the target property.
g) Negotiating and drafting the contracts involved.
h) Assisting you with the signing of the final purchase deed.
i) Following up on the registrations of the property in your name.
j) Changing the utilities and other service contracts into your name.
k) Dealing with rental or business licenses, rental contacts, illegal occupants, etc.
l) Providing any other necessary legal advice to close the purchase successfully.
m) Obtaining residency and work permits for the non-EU investors.
n) Planning the inheritance of your properties in Spain to minimize the inheritance tax and bureaucracy.
Having more doubts? Book a free consultation with our lawyers now.
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Hi I’m Raisa,
I’m a legal expert in Real Estate Investment and I’ll be happy to help you answer your questions, so don’t hesitate to contact me.