Spain has always been a popular destination for Brits looking to purchase a holiday home abroad. The country has year round sunshine, stunning beaches, fine food and wine and is rich in culture.
The good news is that buying a property in Spain is not restricted to EU nationals only. Anyone can purchase a property there so from that perspective nothing has changed. Furthermore, the cost of buying a property in Spain is the same whether you are a Spanish national or live overseas.
The associated fees that you have to be aware of also remain the same in a post Brexit world. The main costs of buying a property in Spain are the purchase tax, the legal and Notary's fee, the property registry fee and some small miscellaneous expenses.
The process of buying property in Spain is relatively simple and your abogado or lawyer will guide you through the specifics steps but it is useful to be aware of the taxes.
As a property owner in Spain you are expected to pay a form of purchase tax. This is the biggest tax you will incur and the amount of tax you will pay will depend on the area of your property and also whether the dwelling is a new build or an old property.
For example, if you were buying an old property in Valencia the purchase tax is 10% versus Andalucia which is 8% of the total purchase price. The purchase tax also depends on the purchase price too. So for example a €100,000 property would be taxed at 10% but a €500,000 is taxed at 9%.
If you are buying a newly built holiday home in Spain that has never been sold before, a different purchase tax will apply. New builds in Spain incur tax that will usually be split into a VAT equivalent called IVA and the purchase tax, called AJD.
So, if you are buying a new build in Andalusia for €100,000 then you will pay VAT of 10% and purchase tax of 1.5%. This means that the total tax that you will pay will be €11,500. If you purchase a new property in Madrid for €100,000 then you will pay VAT of 10% and purchase tax of 0.75%. This means that the total tax that you will pay will be €10,750.
These taxes do not discriminate between nationals and non EU nationals and therefore Brexit has not changed anything on this front.
The next cost to consider is the notary fees. In Spain, the completion of a property purchase must be in the presence of a Notary and they will obviously charge a fee for their services. Notaries are subject to strict guidelines that govern the fees that they are permitted to charge but generally speaking the Notary's fee for an averagely priced property is between €800 and €900. Be aware that if you are purchasing a more expensive property in Spain then you may find that the Notary's fee to be higher.
Property registry fees when buying property in Spain is also worth mentioning. In Spain, the property you buy officially becomes yours at the completion meeting with the notary however, the property still needs to be registered in your name and this is usually done online and costs around €500.
Legal fees will also need to be accounted for. It is good to do you research to find a local lawyer or someone that is recommended by others. Ensure the company you use is established and verify the qualifications and regulations that they are under for greater protection.
It is also worth budgeting a further €350 in relation to minor these expenses when buying a property in Spain. Such as your application for Spanish tax number (NIE), bank fees and courier fees for your hardcopies of the official documentation.
Finally, please note that inheritance tax is also applied in the the same way as pre Brexit. Inheritance tax varies according to the community in which property is located and currently there are 17 in Spain. UK residents pay inheritance tax at the same rate as Spanish residents or other EU residents.
Once you own a property in Spain you have the right to rent out it out during the times you are not living there. In fact, property owners can do as they wish in Spain there are no restrictions on who can reside in your property. However, one thing to note is that there is tax to pay on the rental income generated from your property and Brexit has made non EU national worse off from that perspective.
At the time of writing, EU residents pay tax on rental income in Spain at a rate of 19%. Brexit means that UK residents are obliged to pay tax at the same rate as non EU citizens which is higher, currently 24%. It is also worth noting that this is 24% on your gross rental income. You cannot net off any property expenses against the income which before Brexit was possible.
Remember though that you will still be able to offset the tax paid in Spain against your UK tax bill for the same income.
There is a lot of concern about the frequency and ease of visiting Spain post Brexit. Previously, when the UK was part of the EU there was freedom of movement. This concept applied to goods, services and people. No visas were required or any other travel documents, simply a passport.
In a post Brexit world there is still little clarification of the new requirements regarding travel. At present and under the current rules, UK nationals can travel to Spain at any time as tourists, provided they do not stay longer than 90 days in any 180 day period. However, at this stage we do not know what additional paperwork will be required in addition to carrying a passport.
The bottom line is that yes there are some question marks regarding travel to Spain however, if you have made the decision that owning a home in Spain is for you then Brexit need not deter you. Almost none of the fundamental elements of buying property in Spain have changed as a result of Brexit however, there is one thing to keep in mind and that is the foreign exchange movements when sending money to Spain.
Depending on how the UK economy fares once the transition period is over will obviously affect the value of pound sterling against the euro. There could even be the opposite where the British pound weakens and there may be considerable volatility in the exchange rate.
So when sending money to Spain, it is important to do your research to save money on your international transfer and get the best exchange rate to purchase your property abroad and the associated fees. Find foreign exchange companies that are fair and transparent with the fees they charge. Look for companies that offer you the best exchange rate (also known as the interbank spot exchange rate) and give you the interbank exchange rate to benchmark against on every international transfer. Remember, banks and many other foreign exchange brokers will take their margin from the interbank exchange rate and hide their fees in the rate of exchange they offer you on the transaction, so remain savvy.
The Currency Club is a fully online automated global payments platform. Sending money to Spain is easy, quick and can be up to 3-4% cheaper than using your high street bank. You also get the best exchange rate, as they offer access to the live interbank exchange rate online before confirming their best exchange rate.
If you would like more information of sending money to Spain feel free to contact the dealing desk at The Currency Club on 0207 723 7000 today.
We have made every effort to ensure that the information published here is correct and accurate, however you should check and confirm the latest exchange rates with The Currency Club directly prior to making a decision. The information published is general and does not consider your personal objectives, financial situation or particular needs. Full disclaimer available
A page for us to share with you our thoughts on everything to do with with foreign exchange and much more. From new product launches and widgets to political announcements, market insights and even where to head on your next holiday look no further, you'll find it all here.
The Currency Club's mission has always been to reduce the cost of foreign exchange for everyone. We launched our business ten years ago with this intention,and we deliberately focused on the retail travel money sector..Read More
As a new year begins and the January blues sets in, many will return to their desks attempting to tackle their backlog of emails but at the same time distracted by which destination they should escape to next..Read More
According to Mintel research, 43% of holidaymakers used a debit or credit card last year and this seems to be on the rise with the 30-45 year age group.Read More