The purchaser of property in Spain is responsible for all expenses relating to the transaction, as well as all expenses relating to the property being purchased from the moment the transaction is completed. All expenses that relate to the property prior to completion of the purchase are the responsibility of the seller. That said, there's often negotiation as to whether the purchaser or the seller will be responsible for part or all of those expenses.
Purchase expenses - IBI
For instance, there's a property tax to be paid annually, similar to council tax. It's referred to as IBI. That tax liability is generated on the 1 January each year, although the order for payment may not be issued by the town hall until July or August. Strictly speaking, the person responsible to pay the tax is the person who owned the property on 1 January. If you're buying the property in February, there'll probably be some negotiation as to whether you as purchaser should pay that tax for the whole year or at least a large part of it. Typically, the property tax ranges from as low as €50 Euros per year to a few thousand Euros, depending upon the value of the property. Usually it will be no more than €1,000 Euros. That said, you'll not want to make that payment unless you really have to. The way around making the payment even if the tax demand hasn't been issued yet is to retain an amount of money from the purchase funds so that you can pay the IBI when you receive the demand. Remember, once you own the property it'll be your responsibility to pay the IBI.
Purchase expenses - Stamp duty
The main cost of purchasing a Spanish property will be the stamp duty or the VAT payable. Depending upon whether you are buying a property from a developer, from a bank that foreclosed on a mortgage the developer had failed to pay, or a resale property, you may pay Spanish VAT known as IVA as well as an element of stamp duty, or you may just pay stamp duty. What's important is not the type of tax that you are paying which is for your representative to consider and advise you on, but the amount of tax payable. You may be buying an apartment in Tenerife, a house in Marbella, or a country property close to Barcelona, and the total tax payable upon purchase may vary from between 6.5% to 11.5%. Tax rates are susceptible to frequent change so it's important to determine how much tax you will have to pay before you agree on a final purchase price, as that may affect the affordability of the transaction.
Purchase expenses - Notary's fee
Although hopefully you'll have taken advice from indepedent advisors, each property transaction must be signed before a Notary. The Notary will charge a fee for his or her involvement despite the fact that the Notary is not acting for either of the parties. The Notary's fee is calculated according to a number of factors, including the nature of the transaction, in this case a property purchase, the value of the transaction, so the purchase price, and perhaps surprisingly the number of pages that are used in the completion documentation. A friendly Notary may agree to use smaller type and to print the documents on both sides of each page. A not so friendly Notary may insist on including in the completion documentation copies of all documents used in the purchase, such as full copies of all powers of attorney and similar documents. This is not always strictly necessary but does increase the Notary's fee. Unless you or your legal advisor knows the Notary well, it's difficult to negotiate the price. What you can do is ask your legal advisor to use a Notary that he or she knows well which hopefully will help to keep the price down. The Notary's fee is likely to be anywhere from €400 Euros to €800 Euros for the purchase of a house or an apartment. A default position is that the purchaser pays the Notary's fee, although that's open to negotiation in some circumstances.
Property expenses - Property registry fees
Once the Notary has been paid and tax has been paid in relation to the purchase, you'll need to register the purchase. In Spain there's not one Land Registry as in other countries, such as in England & Wales or in Scotland. There are a great number of property registries, each one dealing with property located in a different part of Spain. For example, in the city of Madrid alone there are 44 property registries because there are a lot of properties, as one would imagine in a large city. In Marbella there are 7 registries because, although Marbella is not a very big place, a great deal of houses and apartments have been built there since the 1970s. In a small town there may be only one property registry. Each property registry is owned and run by a registrar, although each registrar has a public function. The fees that you'll pay tend to be approximately two thirds of the amount that you'll have paid to the Notary, but that is only a guide. Again, the property registry fee is calculated based on factors, such as the type of transaction, the value of the property, and the number of pages in the documentation.
Property expenses - Municipal Tax
Depending on from whom you've purchased the property and whether or not it's a resale property, part of the tax that you pay will be VAT, known in Spain as IVA. That'll be paid directly to the seller. Any other tax to be paid upon purchase will be paid to the tax agency corresponding to the autonomous region in which the property is situated. So for a property located in Marbella, you'll pay tax to the Junta de Andalucia. And for a property located in Barcelona, you'll pay tax to the Generalitat de Catalunya. Usually the last tax to be paid in relation to a property transaction is the Municipal Tax, which is calculated according to the notional increase in value of the land on which the property is built, even if it's an apartment. I say the notional increase in value because the tax is charged even when there's been a drop in value of the land since the last time the property was transferrred. The Municipal Tax is payable by the seller, but if the seller is a non resident and is nowhere to be found then the liability for that tax will attach to the property itself. Hence you, the purchaser, will remain liable for it. Take care not to be lumbered with the Municipal Tax by insisting that the seller obtain a certificate from the town hall in the area in which the property is located, stating exactly how much will be payable. You can then deduct that from the purchase monies and make the payment yourself, thereby ensuring that it's been paid. That said, your legal advisor may have other suggestions as to how to deal with that issue.