Purchasing real estate in Spain has become increasingly popular among foreign nationals, particularly in tourist regions such as the Costa del Sol, Balearic Islands, Valencia and the Canary Islands. However, buying property in a foreign country involves specific legal and tax-related requirements that must be carefully considered. In this article, we explore the key legal aspects of property purchases by non-residents in Spain, including registration, fiscal obligations and compliance with local regulations.
Can a foreigner buy property in Spain?
Yes, both EU and non-EU citizens can legally acquire real estate in Spain without the need for residency. However, the procedure involves several legal steps and documentation requirements, which may vary depending on the buyer’s country of origin and the intended use of the property.
1. Pre-purchase requirements: NIE and Spanish bank account
a) Obtaining a NIE (Foreigner Identification Number)
The NIE is a mandatory identification number for any foreigner conducting transactions in Spain with tax implications, including property purchases. It must be obtained either in Spain or at the Spanish consulate in the buyer’s home country. As the process may take several weeks, it is advisable to start early.
b) Opening a Spanish bank account
Although not legally required, opening a bank account in Spain is strongly recommended. It facilitates payment of the property price, taxes, notary fees, utility bills and other expenses related to the property. Most notaries and sellers will expect funds to be transferred from a Spanish account.
2. Notarial intervention and legal due diligence
Property purchases in Spain must be formalised in a public deed before a notary. The notary is responsible for verifying the identity of both parties, checking the legal status of the property and ensuring all legal requirements are met.
a) Legal due diligence
Before signing any contract or deed, a thorough legal review of the property is essential. This includes:
- Verifying ownership and encumbrances in the Land Registry.
- Ensuring the property has an occupancy licence or first occupancy certificate.
- Checking for outstanding debts with the property owners’ association or unpaid local taxes.
- Confirming compliance with urban planning regulations.
This process should be conducted by an independent lawyer with expertise in Spanish property law, especially for foreign buyers unfamiliar with the legal system.
3. Tax implications when buying property in Spain
Property purchases are subject to various taxes at the time of the transaction and afterwards. Tax obligations differ depending on whether the buyer is a Spanish tax resident or a non-resident.
a) Taxes upon purchase: Only one of those two:
- Transfer Tax (ITP): Applicable to second-hand properties. The rate varies by region, typically between 6% and 10%.
- VAT and Stamp Duty (AJD): Applicable to new properties purchased from developers. VAT is 10%, and AJD ranges from 0.5% to 1.5% depending on the region.
b) Non-Resident Income Tax (IRNR)
Non-resident owners must file the IRNR annually, even if the property is not rented out. A notional income is imputed based on the cadastral value of the property.
c) Property Tax (IBI)
This is an annual municipal tax levied on property ownership. The buyer becomes liable for this tax from the year following the purchase.
4. Restrictions for non-EU buyers in strategic zones
One unique legal consideration for non-EU buyers (e.g. citizens of the UK, Russia, China) is the requirement to obtain military authorisation when purchasing property in certain strategically sensitive areas. These include parts of the Balearic Islands and coastal zones in provinces such as Cádiz.
This authorisation process can take several months. Without it, the property transfer may be considered null and void.
We advise on the drafting of all types of CONTRACTS AND LEGAL ACTS.
At AGAVE ABOGADOS we advise you on the entire purchase and sale process, especially the drafting of the earnest money contract.
5. Land Registry: legal security for buyers
Spain’s Land Registry system provides strong legal protection to property owners. Once the public deed is registered, ownership is presumed to be legally valid and enforceable. While registration is not compulsory, it is strongly recommended, particularly for foreign buyers who may face difficulties defending their rights remotely.
6. Common risks and mistakes made by foreign buyers
Foreigners often encounter pitfalls when buying property in Spain due to a lack of local knowledge or poor legal advice. Common mistakes include:
- Purchasing without verifying the property’s legal and urban status.
- Paying deposits without formal contracts or proper safeguards.
- Underestimating additional costs (taxes, notary, registry fees).
- Ignoring ongoing tax obligations after the purchase.
- Signing documents in Spanish without proper translation or understanding.
8. Best practices for a safe property purchase
To ensure a secure and legally compliant transaction, foreign buyers should:
- Hire an independent lawyer who specialises in Spanish real estate law.
- Have all documents translated and, if needed, request an interpreter for the notary appointment.
- Never sign documents or pay money without legal guidance.
- Comply with all tax and registration deadlines to avoid penalties.
Conclusion
Foreigners can legally and successfully purchase property in Spain, but the process is subject to specific legal and tax requirements that differ from those in their home countries. Failing to understand or comply with these obligations can lead to costly and time-consuming legal issues.
Proper planning, professional legal assistance and awareness of the legal particularities will ensure that the property purchase is safe, efficient and rewarding. Whether for personal use, rental income or residency purposes, investing in Spanish real estate can be a sound decision when done correctly.