Don’t be fooled by all that sunshine and sangria! 30% of foreigners who buy property in Spain have serious problems after buying property in Spain. However we will try to help you avoid the most common pitfalls with this guide.

The increase in house prices in Spain differs from region to region and in some cases even between locations situated within a very short reach. We have examples of people who have saved 50% or more by looking in the neighbouring town for almost the same type of property.

There are no restrictions on foreigners buying in Spain. Before purchasing any property you should decide whether you wish to be resident or non-resident in Spain.

This is because you need a NIE (numero de identificación extranjero) if non-resident or NIF (numero de identificación fiscal) if you wish to become resident in Spain. This identification is required in order to complete the legal paperwork for buying and assist in opening a bank account.

If you are unsure, apply for a NIE using your solicitor or a “gestor”. If at a later date you wish to become resident you need to apply for a NIF.

Below is a list of considerations that may affect your decision about residency. However we recommend you check with your solicitor and tax accountant for guidance about your situation.

If you spend less than 183 days in Spain, you generally will be considered non- resident.

If you intend to spend more you than 183 days in Spain you will be considered resident.

You will also be considered resident if :-

You have no residency elsewhere

Absences outside Spain are not included by the tax authorities, taking your period above 183 days

If you spouse or children are permanently in Spain

If the centre of your financial affairs is based in Spain

If you choose to become resident you need to apply for a residents card "tarjeta de residencia," within three months of relocating.

You will have to make an income tax return in Spain for your world-wide income which can be reduced with Double Taxation Agreements. However taxes in Spain are generally lower than most other EU countries particularly those in Northern Europe.

As a resident, you may off-set the costs of purchasing a new dwelling against any capital gains from selling their old property, while the non-resident must pay 35% on the net difference between the values in the old escritura and the sales escritura.

A resident also does not have to pay income tax on the notional value of his dwelling whilst a non-resident must declare the full value of the fictional use of his property, without any deductions, and pay a flat rate of 25%.

Furthermore when a resident sells a property in Spain, he is exempt from the obligation of letting the buyer retain 5% of the declared value which is paid to the tax Office (Hacienda) as a guarantee for the seller's tax payment.

Inheritance tax there can be very complicated. Generally you should have two wills, one for assets in Spain and another for assets in your home country. This is minimise tax liabilities and to resolve issues relating to which country takes precedent of the testament.

Inheritance Tax is calculated on the basis of a number of variables, namely value of assets being transferred, family relationship between the giver and receiver and pre-existing wealth of the latter. Deductions are based on the age and residency for tax purposes status of the inheritors, on the consideration of habitual domicile of the property inherited (between spouses) and also miscellaneous expenses (funeral etc).

Spanish law gives preferential IHT benefits children and grandchildren under the age of 21 before other relatives including spouses. However, if you are a non-resident, this law will not apply to you and you will be able to leave your estate to the person of your choice. You will not be exempt from paying the inheritance taxes.

However, if you are an official resident in Spain, and leave your inheritance to a spouse, they will be subject to a tax liability unlike many countries. Beneficiaries will pay tax on a sliding scale on amounts above 15,956.87 Euros.

As a resident you can freely use Spain's Health and Social Security System. However as a non-resident you are only entitled to free emergency health care using the European Health Insurance Card.

As a resident you can register to vote if you are on the "padron" at the town hall. Being eligible gives you and other foreigners to influence social and political matters in Spain to improve the benefits for foreigners as a whole, rather than just being merely investors and tax subjects.

By registering the local community will receive more subsidies from the national and regional governments, better facilities for the local post office, more telephone lines, more pharmacies etc. This will improve the area and the quality of life, giving you both mutual benefits.

We suggest you use a licensed estate agent who is a member of a professional body such as “API” (agente de la propiedad inmobiliaria), or a “GIPE” (associacion profesional de gestores intermediarios en promociones de edificaciones). These agents should have professional indemnity cover provided by their professional bodies automatically.

If you use an unlicensed estate agent, check that they have professional indemnity.

Please be aware that the number of properties on their books is no way an indication of professionalism.

Never be pressurised to buy or complete a purchase if you are unsure by an agent or salesperson.

The notary acts as a legal judge is only responsible for putting a contract into the public domain. The notary does not represent your interests in purchasing a property in Spain. Nor he is responsible for checking local developments that may affect the value of your property or check the condition.

Employing a lawyer can save you from making an expensive mistake. Use a Spanish lawyer who is knows Spanish law rather than one in your own country.

Do NOT use any solicitors recommended by the agents, vendor, the developers, or which has any connection with these parties.

Contact your local embassy in Spain, for a list of lawyers who speak your language nearest to where you are looking to buy. They may cost slightly more but they are cheaper than using lawyers in your own country.

Ensure that your deposit goes to your Spanish solicitor to pass on directly to the vendor or developer after your solicitor has made his checks on the property and paperwork.

Escrow accounts to hold deposits are not legally recognized. If you must use an estate agent to hold money, make sure that their professional indemnity policy covers misuse or misappropriation of any monies paid on deposit.

The lawyer can sign documents on your behalf when you are not to be in Spain under a Power of Attorney (Poder). This may be useful when you cannot attend meetings.

This very much depends on whether you wish to live in the country or in town or by the coast. Generally they can be summed up as follows:-

Apartment: Easy to maintain, low maintenance costs, less privacy and more noisy – suitable for non-residents not staying permanently in Spain.

Semi-detached home: More privacy, less noise, but with slightly higher maintenance costs.

Villa: Highest degree of privacy and very quiet if you are not on a noisy road, but with higher maintenance costs and a higher risk of being broken into when you are away.

Farm or a village-house (Fincas): Normally low price and low maintenance costs.

They can either be fincas rusticas or fincas urbanas dependent on their location.

Urbanizaciones can refer either to a housing estate or several apartment blocks, where there are sharing communal facilities such as garden, pool or a golf course.

Compulsory registration for all new developments and most urbanisation properties situated on urban land has existed since 1997.

On rural areas and villages where there has been no development most properties are not recorded and have no title deeds.

Older properties in towns and villages tend to be larger internally but without much external area. Plumbing and electrics should be checked to remove iron water pipes and modernise wiring.

Most Spanish properties have freehold title, which means an owner is entitled to absolute possession of the property for an indefinite time.

Buying a property in Spain normally amounts to 10% of the property value.

Transfer Tax (Impuesto de Transmisiones Patrimoniales - ITP) - 6% of the property value of a paid on completion applicable only on second-hand property OR

VAT (Impuesto sobre el Valor Anadido - IVA) - 7% of the property value applicable only to new properties.

VAT (Impuesto sobre el Valor Anadido - IVA) - 16% when purchasing land, commercial premises, or garage spaces.

Stamp Duty (Impuesto de Actos Jurídicos Documentados- IAJD) is 0.5% of the property value to be paid upon signature of notarial document.

The fees are set by the Government and are dependent on the value of the property.

• Up to 6,010.12 euros you pay 90 Euros.
• For each 1000 Euros between 6,010.12 up to 30,050.60 you pay 4.5 Euros (0.45%)
• For each 1000 Euros between 30, 050.61 up to 60,101.21 you pay 1.50 Euros (0.15%)
• For each 1000 Euros between 60,101.22 up to 150,253.03 you pay 1 Euros (0.1%)
• For each 1000 Euros between 150,253.04 up to 601,012.10 you pay 0.5 Euros(.05%)
• For each 1000 Euros between 601,012.11 up to 6.010.121.04 you pay 0.3 Euros (.03%)
• If it is above 6,010,121.05 Euros, the notary is free to agree the amount with both parties.

For example if a property costs 120000 the fee will approximately be 258 Euros plus IVA at 16% = 300 Euros.

The land registrar office will charge you a fee to transfer the new deeds into your name. They are also set by law and are normally about 42% of the notary's fees.

• Up to 6,010.12 euros you pay 24.04 Euros.
• For each 1000 Euros between 6,010.12 up to 30,050.60 you pay 1.75 Euros (0.175%)
• For each 1000 Euros between 30, 050.61 up to 60,101.21 you pay 1.25 Euros (0.125%)
• For each 1000 Euros between 60,101.22 up to 150,253.03 you pay 0.75 Euros (0.075%)
• For each 1000 Euros between 150,253.04 up to 601,012.10 you pay 0.3 Euros(.03%)
• For each 1000 Euros above 601,012.11 you pay 0.2 Euros(.02%)

For example if a property costs 210000 the fee will approximately be 189 Euros plus IVA at 16% = 219 Euros.

Based on the increase of the value of the land since the last sale. The exact amount depends on the size of the land and the years since the last valuation and on the property's valor catastral. Each town has a different procedure regarding payment of this plusvalia.

This is officially supposed to be paid by the vendor but in many contracts it is specified that the buyer have to pay.

Officially the vendor should pay the plus valia tax and traditionally the Notary fees as well, since he making the profit on the lands value increase. The buyer pays the ITP and the registry fee, as he is the one interested in making sure that the property is truly registered to his name. Do not let the vendor or solicitor discriminate or take advantage of you being a foreigner into paying the plus valia.

However, if you buying from a non-resident in Spain, you the buyer are obliged by Spanish Fiscal Law to retain 5% of the sum declared in the escritura and pay it through a bank on Form 211 to The local Tax Office (Hacienda) within 30 days, as a guarantee for the eventual tax obligations of the non-resident vendor.This is to ensure that the seller does not take sale proceeds and run. The Notary will check this.

Banks may charge an arrangement fee of 1% for mortgage loans.