Being fully prepared financially before visiting Spain will enable you to negotiate with sellers in the knowledge you are in the strongest position to buy and have the ability to move quickly without putting your deposit monies at risk.
Contact us today for information about mortgages in Spain:
Real estate purchases by foreign non-residents
Requirements for the purchase of real estate by foreigners:
1.- To have a NIE Number
The NIE is the so-called “foreigner identification number” and must be obtained for the completion of the purchase. In order to accomplish this:
You can apply in person or through an authorized representative at the Government Delegation or Subdelegation and at the Immigration Office.
It is possible to process this document from abroad.
The earnest money contract can be used to facilitate the NIE application process.
2.- To Open an Account in Spain
This is necessarry in order to meet home maintenance payments and pay those taxes necessary for the purchase of the property.
The opening of the account must be done in person.
What is known as IRNR, or Non-Resident Income Tax (information in spanish), is a Spanish tax levied on income earned in Spanish territory by individuals and legal entities.
You are considered a resident in Spain if you spend more than 183 days here during the calendar year. In this case, you will be taxed according to IRPF, the Income Tax paid by Spanish residents.
Mortgage applications for non-residents
In order for a foreigner to be granted a mortgage, he or she must meet the following requirements:
- A contribution to the purchase of between 30% and 50% of the value of property. This will depend on the financial institution where the mortgage is requested and the financial position of the client (that is, type of job, age, annual income, etc.).
- To cover the costs of the Title Deeds of Sale and Mortgage.
- The resulting mortgage payments must not exceed 40% of the client’s income, taking into account payments made in their countries of origin by way of mortgage or rent.
- Your documents must be translated by an official (or sworn) translator. However, more and more financial institutions now have translation departments at their disposal, which means that the cost of these translations can often be avoided.
Once the necessary documentation has been provided and noting that the customer will be granted the mortgage, the steps to be taken at the bank are the following:
- Upon receipt of the initial documentation:
The client will be registered at the bank – at this moment, the client’s bank account will be blocked until he or she accredits:
A professional activity.
An economic activity and its source – that is, a form of generating income.
- Once the above has been proven, the account will be reopened, although the client must then come and sign the necessary opening documents at the bank branch.
- After the documentation has been checked and the first transfer has been received, the bank will confirm:
That the transfer comes from the same client.
That the bank that has issued the transfer is located in the same country that the client initially confirmed.
At this moment, an authorization will be given to unlock the account.
Non-resident tax obligations: FAQS
Paying tax in Spain need not be a worry or a hassle, as long as foreign residents and non-residents have the right information at their disposal. With this in mind, we have compiled the following list of frequently asked questions (FAQs) that will give you all the information you need in order to stay tax compliant:
1.- What are the costs that owning a property in Spain entails?
Property owners are liable for the following expenses:
Community of Owner fees are the fees that the owner of a property located in an urbanization or block must pay for the maintenance of the common areas (garden, swimming pool, etc).
IBI (Property Tax) is an annual local tax that must be paid every year both by residents and non-residents and is based on the rateable value of the property. In some municipalities, rubbish collection tax is also paid. In different municipalities, these local taxes will be collected at different times.
Expenses related to utilities (water, electricity, gas, etc.) depend on the consumption (although some municipalities have fixed rates).
Non-residents Income tax expenses and fees related to maintaining the property. Residents are those persons living more than 183 days in Spanish territory.
2.- If I do not have an income in Spain (rental or otherwise), why do I have to pay non-residents income tax?
The mere fact of owning a property in Spain generates what is known as a “notional income” even for those people who do not lease their Spanish property or earn money in Spain.
It is very important to be up-to-date in these tax obligations, as the tax authorities often do not send reminders of payment to non-residents, who may find it difficult to sell or inherit property at a later date, due to overdue taxes that must first be settled.
3.- What about rental tax?
In addition to the above taxes, renting a property in Spain also gives rise to a new tax obligation. This “rental tax” is paid on a quarterly basis and is collected on the 20th of April, July, October and January.
4.- How is my non-resident tax statement made?
Before the 31st December, non-residents must make an annual tax statement covering the previous year. Failure to pay may result in unpleasant consequences, such as the freezing of bank accounts or the inability to sell property until outstanding debts are paid. It is worth noting that the tax authorities carry out periodic anti-tax evasion measures, which often reveal and sanction those non-residents who do not pay their taxes correctly. It is also becoming common for Spanish government bodies to investigate the use of utilities (water, electricity, etc.) in order to detect inaccuracies in non-resident tax statements.
5.- How can I stay on top of my tax obligations?
Avoiding sanctions can be a tricky business in Spain. While a letter may be sent to your Spanish address, there may be no one around to collect it. If this were to happen, the Spanish authorities would simply publish a bulletin in the Spanish State Gazette and this would be understood to constitute sufficient notice. You may then suffer the negative consequences described above (freezing of bank accounts, etc.).
6.- How can we help?
Having a local contact person at your disposal greatly simplifies matters. We would be permanently on the spot to receive and interpret state notifications, responding on time and alerting you before things get out of hand. Your taxes would be paid within the deadlines and without you needing to make trips to and form Spain. You would also be kept up-to-date on changes in the law, meaning that you would always be in the clear from a tax perspective and would have an expert at your service to answer any questions you may have.