What to know before buying in Catalonia

Steps into buying a property in Catalonia

Steps into buying a property in Catalonia

Formal offer and good faith deposit

The first step when you find a property that you want to buy is formulating an offer in writing and putting down a good faith deposit. This deposit is held by the real estate agency and the amount varies depending on the property price as well as other factors. If your formal offer is accepted and signed by the Seller, then it becomes a reserve agreement, and the property is taken off the market. The reserve agreement will provide conditions and timelines for the next contract. We always advise our clients to use a solicitor for the purchase.

The private arras contract

This is a simple agreement between the Buyer and the Seller in which the Seller agrees to sell the property, and the Buyer agrees to buy the property at the price agreed. The Private Arras Contract will contain all the relevant details such as a description of the property, the purchase price, the payment structure and the completion date. At this stage the Buyer will be expected to make a downpayment, which is normally paid to the Seller’s bank account and is usually 10% of the agreed purchase price.

Completion of the public deed of conveyance

On the completion date the balance of the purchase price (sales price minus any amounts paid to date) must be paid. The Seller and Buyer then sign the Public Deed of Conveyance, which is equivalent to the title deeds of the property.

Costs involved ON purchase

When buying a new build property from a developer

VAT and Stamp Duty apply - for residential properties that have never previously been occupied and building plots of land. At present VAT is 10% of the purchase price for new residential properties (villas, apartments etc.) and 21% for building plots of land.

When buying a resale property from a private individual

Transfer Tax applies - if it is a resale property that has been used before. The general ITP rate varies from region to region, between 6 % and 11% (e.g.in Catalonia it is 10 % for properties with a value of up to €1 million and 11% thereafter).

Costs involved AFTER purchase

After purchase, a series of costs are involved:            

Local taxes: calculated on the cadastral value of the land assigned by the Spanish Tax Office.

Community fees: only applicable when purchasing an apartment or a terraced house within a community of neighbours, not when purchasing a detached house.

Non-resident income tax: paid if you are not a tax resident in Spain and applies if you own a property in Spain.

Wealth tax for non-residents: current legislation prescribes that whoever 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. Residents must also include all worldwide assets. The base for the applicable tax is the net value of your property and other assets in Spain with a large tax-free allowance.

The property is exclusively for personal use, and you do not rent it out:

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 annual income tax. The base for the applicable tax rate is generally 2% of the cadastral value of the property.

You rent out the property and therefore pay tax for the periods during which it is rented:

The base for the applicable tax rate is the income that you receive from renting out the property. Various costs can be deducted if you are a tax resident in the EU.