All foreign investors in Spanish property should know that, in order to make a safe investment, a preliminary search in the relevant Land Registry and verification of local planning permissions, is of paramount importance.
These prior searches are aimed at ensuring that the prospective seller has good title to transfer the property and that the property itself is not subject to any charges, encumbrances or tenants.
Unfortunately, it is too often the case that documents agreeing to purchase or pay a deposit are entered into before such issues have been checked by a legal advisor, thus triggering undesired consequences.
Once prior searches prove satisfactory, any purchase and sale agreement must be formalised by means of a notarial deed signed before a Spanish Public Notary. This is the only way which allows a purchase to be registered in the Land Registry.
Accordingly, it is very much in the best interests of the foreign purchaser to instruct Spanish lawyers to act on their behalf in order to ensure that all searches are properly done, that all relevant documents are correctly drafted, that the notarial deed of purchase is finally duly registered with the relevant Land Registry and that the change of name for the purposes of local taxation (Impuesto sobre Bienes Inmuebles) is completed.
Whenever a foreign individual purchases a property in Spain, considering whether a separate Spanish will should be made covering such property is also advisable in order that the property can pass to his/her heirs without difficulty.
Foreign individuals owning Spanish property are subject to Spanish Income and Wealth Tax in relation to such property, needing to file the appropriate tax returns on a yearly basis.
When the purchaser is a foreign company, GEBI (a specific tax charged to such foreign companies) will generally be applied instead of Spanish Income or Wealth Tax. GEBI is levied at 3% on the value assigned to the property by the local authorities. In certain circumstances, exemptions from this tax may be obtained.