We are receiving an increasing number of inquiries from international clients interested in investing in the Spanish real estate market. Spain remains one of the most attractive investment destinations thanks to its legal security, quality of life, and profitability. In this article, we explain all the necessary steps to buy a property in Spain if you live abroad.
1) Decide what to buy and where
There are options for all tastes: from the centers of large metropolises like Barcelona or Madrid, to coastal areas or charming villages. The decision depends on your objective:
- Profitability: If you're looking to invest, the ideal options are usually one or two bedroom apartments in urban centers with high rental demand.
- Capital preservation or personal use: If you're looking for a second home or to protect your savings, the choice will depend on your personal tastes and space requirements. In all cases, it's crucial to consult with a team that understands your financial goals to determine which property and location best suit your needs.
2) Choose your trusted team in Spain
Your team could consist of a real estate agency, a business consultancy, or a law firm. You can also have a trusted contact in Spain to coordinate the necessary professionals. This is the most important step: much of the success of your investment depends on the proven experience of those representing you on the ground.
3) Obtain the NIE for non-residents and open a bank account
To carry out any real estate transaction, it is mandatory to obtain a Foreigner Identity Number (NIE).
- You do not need a residence permit to apply for the NIE for non-residents.
- It can be processed at the Spanish consulate nearest to your home or through a notarized power of attorney to a representative in Spain.
- Note for EU citizens: Being a citizen of the European Union does not change the obligation to carry out these procedures.
Although opening a bank account in Spain isn't strictly necessary for purchasing a property if you live in the EU, it's highly recommended to do so beforehand. You'll need it to set up direct debits for taxes, fees, and utilities once you become the owner.
4) Election, Simple Note and negotiation
Your team will search for properties that fit your budget and visit them on your behalf. Before deciding, it's vital to carry out two checks:
- Legal Status: It is essential to request a Property Registry Extract (Nota Simple). This will verify the actual owner and whether the property has any encumbrances, debts, mortgages, or liens. Under Spanish law, the buyer accepts any registered encumbrances, so ignorance of them cannot be claimed later.
- Technical Status: We recommend that a building engineer review the building and the ITE (Technical Building Inspection) report, which is mandatory for buildings over 30 years old.
Once everything is confirmed to be in order, the price is negotiated. Generally, negotiation margins in Spain do not exceed 10%.
5) Choice of Notary
In Spain, the buyer has the right to choose the notary. Notary fees are regulated by law, so the selection criteria should be honesty, efficiency, and speed in handling the paperwork. A good legal team will know which notaries work best with international clients.
6) Signing of the Earnest Money Contract
Unlike in other countries, in Spain the step prior to signing the deed is the Arras Contract. This is a private document where the price is agreed upon, a deposit is paid (usually 3% or 10% of the total), and a deadline for the final signing is set.
- If the buyer changes their mind, they lose the reservation.
- If the seller cancels the sale, they must return double the amount received to the buyer.
7) Preparation and purchase expenses (Taxes)
The process up to signing usually takes between one and two months. Before going to the notary's office, the buyer must make a provision of funds (between 10% and 15% of the sale price) to cover:
- Property Transfer Tax (ITP): For used homes. It varies depending on the Autonomous Community (from 4% in the Basque Country to 11% in Catalonia).
- VAT (10%): Only for new homes being delivered for the first time.
- Notary and Property Registry fees.
8) Signing of Deed and delivery of keys
On the agreed-upon date, the parties meet at the notary's office. The buyer completes the payment by bank check, OMF transfer, or instant transfer. The notary reads the Public Deed of Sale, the parties sign, and the keys are handed over. It is not essential for you to travel to Spain for this; your representative can sign on your behalf with a highly secure power of attorney.
Tax obligations after the purchase
Once you own property in Spain, you must comply with certain tax obligations:
- Residents in Spain do not pay personal property taxes on their real estate. But non-residents who keep the property unoccupied must pay between 1.1 and 2% of the cadastral value per year, depending on the municipality in which the property is located.
- Property Tax (IBI): This is an annual municipal tax (often paid quarterly). It's a low cost; for example, a €300,000 apartment in Barcelona pays around €500 per year.
- Rentals are not subject to VAT, but the income earned is taxed.
- IRNR (Non-Resident Income Tax):
– If the home is for your personal use, you pay a small imputed annual rent.
– If you rent the property, the general tax for non-EU residents is 24% on the income. Not on the total rent, but on the amount exceeding the tax-free threshold. - Double Taxation: Spain usually has agreements with most countries to prevent you from paying twice for the same thing, although each particular tax situation should always be analyzed.
- If you live in Spain for six months plus one day, you will be considered a tax resident in Spain. This will determine which taxes and what tax rate you will pay in each country.
Comprehensive management and advice with MBT Abogados
If you decide to buy a property in Spain, at MBT Abogados we offer a specialized service for foreigners in Barcelona, Madrid, and their surrounding areas. We take care of:
- Housing selection.
- Check the documentation (Simple Note and other documents) and building condition.
- NIE management for non-residents
- Price negotiation.
- Preparation of documentation for the notary.
- Accompaniment at the time of signing.
- If it will be rented, advice on the choice of the property manager.
- Tax advice regarding taxation in Spain and in your country.
- Advice on opening a bank account in Spain and how to bring money from your country.
- Preparation of powers of attorney if necessary.
- Advice on obtaining a mortgage in Spain.
You can find more information about the service in this post from our website
We are a law firm specializing in services for foreigners in Spain. Our main office is in Barcelona, and we also offer in-person appointments in Madrid periodically. You can contact us by email or Whatsapp.
