Lucas Fox Guide to buying Commercial Property in Spain

Purchase / Sale Process

Stage 1: Agreement on terms and conditions 

Once a suitable property is found, seller and buyer agree a price, any other conditions of the sale/purchase and timescales for completion (normally one to two months but can depend on different situations, e.g. the seller may wish to close sale before or after year end.We always advise our clients to use a solicitor for the purchase and can recommend several solicitors in Barcelona that speak English and have experience of commercial property transactions.

Stage 2: The pre-agreement – Contrato privado de compraventa

It is possible to go straight to completion but most buyers / sellers prefer to enter into a Contrato privado de compraventa (essentially a preliminary sales contract).  This is normally a simple agreement in which the Seller agrees to sell the property, and the buyer agrees to buy the property at the price agreed.  This will contain all of the relevant details such as a description of the property, purchase price, and date of completion.

At this stage you will be expected to pay a deposit, this is normally at least 10% of the agreed purchase price but can be as much as 25% depending on the period agreed to completion.

Included within the contract there will be an arras clause. Should the seller decide to withdraw the buyer is entitled to twice their deposit as compensation, should the buyer decide to withdraw their deposit is usually lost. Of course, the buyer and seller may choose another type of agreement if they prefer.

Prior to entering the contract, at least the following checks will need to be carried out:

(a)     Check on planning status

(b)     Check on title and whether the mortgage is being sold free of debt  

Stage 3: Final Contract - Escritura de compraventa

On the completion date the balance of the purchase price (sales price minus deposit) and any fees payable by the buyer must be paid.  The seller and buyer then sign the Escritura de compraventa contract, which is equivalent to the title deeds of the property.

The buyer is then issued with the public deed of conveyance (escritura) in front of a Notary Public, who certifies the transfer, and a copy will be passed to the tax office and on to the property registry.

The Notary Public in Spain is a public official who will be required to witness the deed of sale, however expert, independent legal advice should be taken to protect your own interests.    

Costs related to buying a commercial property in in Spain

Solicitor’s fees – normally a fixed fee. The fee can vary due to the amount of work required to be done by the solicitor.

Notary's fees and land registry fees – Depends on the complexity of the deed. Normally between €1000 and €2000 euros.

Agent’s fees – % of final sale price depending on type of property and price.

As a private individual:

Transfer Tax (ITP) - The buyer is required to pay 7% of the purchase price in property transfer tax.

Stamp Duty (AJD) – 1%. In the case of a private individual buying this only applies to new build properties, not to re-sales

As a company:

Value Added Tax (IVA) – 16% VAT can be recovered by a company in the normal way.

Stamp Duty (AJD) – 1% paid on the purchase price. 

General Running Costs:

Local Taxes – IBI - Payable annually. Calculated on the rateable value (catastral) of the land assigned by the Spanish Tax Office. It is advisable to ascertain annual local rates for a property before purchase as this differs from town hall to town hall.  

Non resident income tax (IRNR) Private individuals pay this version of income tax in Spain if the following conditions apply: 1) You do not reside in Spain, 2) You own property in Spain, 3) The property is exclusively for personal use and you do not rent it out, 4) You have no other source of taxable income in Spain. Although you do not earn an income from the property, in the eyes of the Spanish tax authorities you still derive a benefit from owning a property in Spain and therefore have to pay an imputed income tax. The tax base for IRNR is 2% of the cadastral value of the property, or 1.1% if the cadastral value has been revised since 1st January 1994. Tax rate: 24% (25% for 2006 and before). Tax payable annually. The cadastral value of the property is much lower than the actual value. This tax normally equates to approximately 0.2% of the property value. 

Corporation tax – Companies pay corporation tax on their net rental income. This varies between 25% and 30%. 

Community fees - The fees are usually calculated on the pro-rata size of the unit. Expenses can vary substantially, according to the services required.  

Insurance - In a building, the responsibility for insuring the building usually lies with the Community. If this is adequately covered, the individual's insurance policy need only to cover damage to the interior of the property, contents, and third party liability.