Key Aspects to Consider When Buying a High-Value or Luxury Property in Costa Blanca, Spain
Purchasing a high-value or luxury property in Spain including the outstanding Costa Blanca (Dénia, Moraira, Jávea, Benissa, or Calpe) requires a detailed legal and tax analysis to ensure compliance with regulations and to optimize the investment as described below:
1. Legal Due Diligence
Before signing any agreement, it is crucial to conduct a thorough due diligence to verify the property's legal status, including but not limited to:
Ownership and charges: Confirm the seller's ownership and check if there are mortgages, liens, or debts.
Urban planning compliance: Ensure that the property meets all local urban planning requirements and has no pending legal issues.
Licenses and permits: Verify the habitation certificate (Cédula de Habitabilidad) or second occupancy license, when applicable, and other necessary authorizations, especially for new constructions or renovations.
Energy Performance Certificate (EPC): This is mandatory for any property sale.
Coordination Between Land Registry and Cadastre
If land registry data does not match the Cadastre, an administrative correction may be required to align the records which shall be requested to the selling party. This can impact taxes and urban planning approvals.
2. Tax Considerations
Buying a high-value property in Spain entails specific tax obligations:
Property Transfer Tax (ITP) or VAT:
ITP (6%-11%) applies to second-hand properties. The percentage varies by region.
VAT (10%) applies to new properties, along with a 1.5% Stamp Duty (AJD).
Annual Non-Resident Income Tax (IRNR): If the property remains vacant (not rented out) or even rented out, non-residents must pay a tax based on its cadastral value.
Wealth Tax (Impuesto sobre el Patrimonio): Spain imposes a wealth tax on assets above a specific threshold. Some regions offer exemptions or reductions.
Local taxes: Includes the yearly IBI (Property Tax) and garbage collection fees.
Filling of D2-A form which is the declaration of foreign investments regarding the relevant property. It is required by the Spanish Directorate-General for International Trade and Investments (DGCOMINVER), part of the Ministry of Economic Affairs and Digital Transformation.
3. Contractual Considerations
Deposit Agreement (Contrato de Arras): It is common to sign a preliminary contract requiring a deposit (usually 10% of the purchase price).
Public Deed & Notary Signing: The final transaction must be formalized before a Spanish notary, who ensures legal compliance.
Registration: The new ownership must be registered in the Land Registry to secure legal protection against third parties.
4. Financial Aspects
Bank Account: Non-residents usually required a Spanish bank account to handle the purchase and tax payments. However, if the purchaser is an EU resident, this should be easily handled with a EU bank account, unless there are AML objections.
Mortgage Options: Spanish banks offer mortgages to non-residents, typically covering 60%-70% of the purchase price.
In a nutshell
Buying a high-value or luxury property in Spain offers multiple benefits, stable real estate investment, and long-term profitability. However, it is crucial to work with expert legal advisors such as CB Legal Services to ensure a smooth transaction, tax efficiency, and compliance with Spanish regulations.
