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10 de August de 2020
Home purchases in Spain by non-resident foreigners are mainly tourism-oriented. What requirements do they need to meet? What are the banks’ demands?
Spain remains one of the favourite destinations for home purchases by foreigners.
The climate, the geographical situation and the quality of the infrastructures are relevant factors in choosing our country as a second-home destination. From Gesvalt, we answer the main questions about valuation, taxation and requirements involved in housing acquisition for non-residents.
The first step is to have a Foreigner Identification Number (NIE). This number is personal, unique and exclusive, and it is mandatory for all foreigners who are related to Spain due to their economic, professional or social interests. It can be applied for to the General Directorate of the Police in the Spanish territory. In the event of not being in Spain at the time of the application, it can be requested from either the Embassy or the honorary consulates.
Every time a mortgage is signed, a tax must be paid on notarised documents (stamp duties, known as AJD in Spanish), which represents a percentage that varies according to the autonomous community where the loan agreement is signed.
Taxes derived from the property transfer in Spain must be paid for by non-residents. New construction properties are subject to VAT, whereas Property Transfer Tax (ITP) applies to second-hand properties.
IRNP: The Non-Resident Income Tax is charged to property owners in case they do not live permanently in the country. People are considered to be tax residents in Spain if they physically remain in Spanish territory for more than 183 days. In this case, the Personal Income Tax (IRPF) would apply.
IP: Even though homeowners do not live in Spanish territory, they are subject to payment of Wealth Tax. The state law establishes a € 700,000 exemption threshold which is also applicable to non-residents.
IBI: The Property Tax is a local tax fee charged by councils based on the cadastral value. The tax rate is established by each municipal administration.Who pays for the appraisal and how is the procedure followed?In addition to taxes, there are other expenses associated with the purchase of a home, such as notary, management, registration and appraisal fees.
The appraisals must be carried out by independent companies approved by the Bank of Spain, such as Gesvalt.
When investing in housing properties in Spain through a mortgage loan, whether it is granted by a Spanish or foreign institution, before the purchase transaction notaries request an official appraisal compliant with ECO Standard from an independent company.
The appraiser must have specific training in real estate appraisal and valuation and be supervised by an appraisal company approved by the Bank of Spain, such as Gesvalt.
On the other hand, foreign credit institutions may request an appraisal in accordance with their respective laws. In Europe and Anglo-Saxon countries, a RICS Valuation usually suffices to comply with this requirement. Some Spanish financial institutions accept RICS reports as a complement to ECO appraisals.
