[BUYING AND SELLING REAL ESTATE IN SPAIN] 218
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VII. COSTS FOR HOLDING REAL ESTATE What tax aspects are directly involved when holding a property, for example, yearly land tax after the transfer of ownership and what is the percentage of it? - Property Tax (“ Impuesto sobre Bienes Inmuebles –IBI ”) is a yearly paid tax, managed by the Town Halls and calculated using the property cadaster value estimated by the Cadastral Office (Dependent of the Ministry of Economy/Tax Authority). The effective tax rates vary from each Town Hall as they are entitled to fix their own final rates within the range from 0,4% to 1,1% of the cadastral value. - Special Tax on Property of Non-Resident Entities. Foreign entities holding real estate which do not fall within the following categories shall pay this annual tax. The taxable consideration is 3% of the real property cadastral value. Foreign entities exempt from this tax are: i) international public Institutions and foreign States, ii) entities entitled to apply a double tax treaty entered into with Spain containing information exchange clause, provided that the final individuals direct or indirectly holding the share capital of such entity are also resident in a country with a double tax treaty entered into with Spain containing information exchange clause, iii) foreign entities carrying out economic activities (other than mere holding or leasing of immovable property) in Spain on a regular basis; iv) listed companies and v) non-profit organizations recognized by countries with a double tax treaty entered into with Spain. - Wealth Tax ( “Impuesto sobre el Patrimonio” ). Under certain
marketability and value of the property. Occupancy Certificate (Cédula de Habitabilidad): Necessary for confirming that the property meets all legal standards for habitation, crucial for both residential and commercial investments. Title Insurance (Seguro de Título): While optional, it provides additional protection against title defects, an important consideration for foreign investors who may be less familiar with the Spanish legal system. Activity License (Licencia de Actividad): when the property to be acquired is not residential, e.g. a commercial premise or office building. VI. RECORDING REAL ESTATE DOCUMENTS Regarding the necessity of recording real estate documents, it is important to keep in mind that, despite having conveyed the real estate property according to the (teoría del título y del modo) system, the new owner of the property will not be able to enforce its legal title as holder of the property until the Public Deed of the property transmission is correctly registered in the Land Registry. Thus, the recording of the Public Deed grants erga omnes effect regarding the real estate property and the registered owner of it can enforce its position against any third party. To sum up, the Land Registry ensures that the buyer’s ownership is legally recognized and protects against future claims. The registration process usually takes fifteen business days. In the event of financing the operation, the mortgage registration is mandatory. Therefore, the creation of this lien on the property is not effective until the mortgage registration is fulfilled.
ILN Real Estate Group – Buying and Selling Real Estate Series
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