Key tips
* Find a regulated financial adviser experienced in offshore financed property transactions who can provide independent tax planning, currency and financial advice.
* Consult an international specialist mortgage and property broker
Buying a home in Spain: the tax and legal issues
Spanish fees and taxes
Before you can own a property in Spain, you will need a national insurance number, called an NIE number, which is a foreigner identification number.
You can obtain this by applying through the Spanish consulates in London, Manchester amd Edinburgh or by going in person to the nearest immigration office or police station in Spain.
You will need to take your passport, some passport photos, a copy of the property purchase contract and a completed application form. If you are planning to live in Spain permanently, you will also require a resident’s permit.
Permits can be temporary (for up to one year) or permanent (for five years.. If you are employed, self-employed or a student in Spain, it is not obligatory to obtain a resident’s permit, but it can make it easier when dealing with utility companies.
If you rent your property, you will be required to pay income tax on the rental income. If you are non resident, this will be charged at 25 per cent of the gross rent, subject to certain reliefs and allowances.
Even if you do not rent out your property and it is used purely as a second home, you will still be taxed as though it is being rented. This charge, called the IRNR is charged by the Spanish authorities at two per cent of the declared value of the property, and then taxed at 25 per cent.
Council tax is also payable and may have to pay a local community charge if you buy a property in a development or condominium.
Each time you file a tax return, you will be assessed for wealth tax as well. Residents and non-residents must pay this tax on their total assets in Spain (minus any Spanish mortgage) on a progressive scale from 0.2 per cent to 2.5 per cent.
Capital gains tax applies when you sell the property and since January 2007, CGT has been charged at 18 per cent bringing foreigners’ CGT liability in line with that of Spanish residents.
Certain allowances apply which may reduce your liability after about five years of ownership.
Inheritance tax is a major consideration for anyone buying a property in Spain. It is essential to write a Spanish will and it is a good idea to ensure that the existence of your overseas property is recorded in your UK will as well.
But always seek specialist legal advice on wills, land title, hidden costs, insurance and the home buying process before you start out.
