The legal and tax formalities when buying a home are the step we have to take when we have found the home of our dreams. For many it is the most cumbersome and dreaded step in the process of buying a home. For this reason, from Imont Legal & Taxes we want to make it easier for you with some tips.
This is a particularly delicate step in the purchase of a property, and for which you need the help of specialists. The legal and fiscal paths to buy a house are not so thorny and slippery when we have an expert to help us.
The law firm and the formalities involved in buying a home
Tax experts in Real Estate Law can help us with the earnest money contract, and also to check the ownership and encumbrances of the property. They can also advise us on the terms of the mortgage contract (if necessary) and the signing of the title deeds.
The real estate lawyer is indispensable in these matters. Once the deeds for the purchase of a house have been signed, it will be the Tax and Accounting Department that will be responsible for processing the formalities. These are particularly delicate when the buyer is a foreigner who is not a resident in Spain.
In the latter case, having experts in International Real Estate Law is of vital importance. Having a lawyer in Spain, and even more so if it is a lawyer for foreigners, is necessary to carry out these procedures smoothly. Fundamentally, when the buyer does not have the Spanish nationality and is not a resident.
Tax formalities involved in the purchase of a home
In good legal and fiscal real estate advice, it is always necessary to make clear beforehand the formalities involved in the purchase.
These are as follows:
- Value Added Tax (VAT: IVA). This is one of the main legal and fiscal formalities in the purchase of a property. In this specific case, it will be 10% of the purchase price of the new property, and 21% if it is a commercial property. What does this mean? That 21% applies to commercial premises, regardless of whether or not part of it is used as a dwelling. There is also a special super-reduced rate of 4%, applicable to social housing (VPO) of special regime or public promotion. In the Canary Islands, an area of high real estate and tourist activity, a special tax is applied: the IGIC. In the archipelago, the purchase of housing is taxed at 7%.
- The AJD (Impuesto de Actos Jurídicos Documentados). This tax must be paid, in addition to VAT, when buying a new or first transfer property. The buyer must pay this regional tax, which varies between 0.5% and 2% of the value of the purchase. Be careful in this case, because each Autonomous Community sets its own percentage of this tax.
- Transfer Tax (Impuesto de Transmisiones Patrimoniales, ITP), when buying a resale property. While VAT and IGIC are regressive and indirect taxes, this is a direct and progressive tax. For this reason, it will depend on the price of the property, which will vary according to each Autonomous Community. For example, the general rate of the tax is 8% in the Region of Murcia and 10% in the Community of Valencia.
- In addition, it is advisable to register the property in the corresponding Land Registry. With the registration, the absolute ownership of the rights of the property is obtained, and greater legal security is achieved. It protects the new owner from the hidden charges of the property, frees him/her from the debts of the seller, and also guarantees judicial protection. It is also useful for the bank to be able to register the mortgage if it is taken out. And furthermore, to obtain a copy of the title deeds in case you have lost them, all you need to do is request a land registry report (nota simple) from the Registry.
The legal and fiscal formalities involved in the purchase of a property can be complicated and costly, but they are much better handled and resolved with the help of professionals. At Imont Legal & Taxes, we have lawyers specialized in International Real Estate Law, who can advise you in a professional manner.