When buying a property in Spain, you rarely pay the full purchase price to the selling party. This article provides more information on the payment of the purchase price when the notarial deed is executed.
Which taxes are for the seller?
When selling property in Spain, there are two types of capital gains tax.
There is the national capital gains tax based on the capital gains actually realised. Regardless of the balance of this tax, you as the buyer are required to deduct 3% from the purchase price and pass it on to the Spanish treasury.
In addition, there is a municipal capital gains tax based on the cadastral increase in land value. As a buyer, you should also calculate this tax and deduct it from the purchase price.
An example. You buy a €400,000 property. The municipal capital gains tax, for example, comes to 3,800 euros. The retention of the capital gains tax is 12,000 euros. So in total, you deduct 15,800 euros from the purchase price.
Buying a property in Spain: how to avoid debt?
As a rule, you deduct outstanding debts from the purchase price and pay creditors directly. Think of a mortgage loan, municipal debts or outstanding utility bills. On top of that, you also deduct expenses to pay the debts.
An example. You buy a €400,000 home with a mortgage loan with a balance of €150,000. You deduct the debt of 150,000 euros. In addition, you deduct, for example, 1,000 euros for the cost of cancelling the mortgage in the sellers' name. So you deduct 151,000 euros from the purchase price.
You can also agree to deduct other costs from the purchase price until the seller meets some obligations. For example, if you agree that the seller will apply for a regularisation permit, you can deduct a retention amounting to double the cost of the application. Or if the seller has yet to carry out certain works, you can withhold a certain amount to ensure that the seller delivers those works.
An example. You agree with the seller that he will still carry out some repair works. At the time of execution of the notarial deed, it turns out that for some reason these works have not yet been carried out. The repair works have an estimated value of +/- €20,000. You can then agree that the seller will still carry out these works within one month. To guarantee this commitment, deduct €25,000 from the purchase price. If the seller does not carry out the works within the agreed period, you can keep the 25,000 euros permanently.
The effective payment
At time of deed, you pay by means of a Spanish bank cheque. You literally hand over the cheque to the seller and in return you receive the keys. All this in the presence of the notary. In order to last minute discussions, it is advisable to regulate the possibility of deducting funds in the private sale agreement.
So in the 400,000-euro example, you effectively pay 208,200 euros to the seller by bank cheque. You deduct the remaining 191,800 euros (= 15,800 euros + 151,000 euros + 25,000 euros) from the price so that you can buy your property free of charges.
To buy a property in Spain, it is important to agree on the retentions beforehand. Therefore, you can mention these retentions in the private purchase agreement or compromise. Confianz assists you with the entire process and our lawyers in Spain make sure you can buy safely.