LEGAL GUIDE FOR PERSONS PLANNING TO PURCHASE REAL ESTATE IN SPAIN

LEGAL GUIDE FOR PERSONS PLANNING TO PURCHASE REAL ESTATE IN SPAIN

We cooperate with a local law firm with many years of experience, which provides our clients with comprehensive legal services in the field of advice and legal assistance when purchasing real estate in Spain, helping Polish clients to complete the purchase in accordance with Spanish regulations. The subject of the service may be natural persons or legal persons (enterprises or companies registered in Poland).

Activities that make up the real estate purchase process:

• obtaining a tax identification number: the so-called N.I.E. number for natural persons or N for legal persons.
• opening a bank account
• signing a reservation agreement/private real estate purchase agreement
• verification of the legal status of real estate
• noarial real estate purchase and sale agreement with simultaneous translation during the purchase
• performing post-purchase activities (payment of taxes, entry in the real estate register, change of entity in service contracts)

ACTIONS BEFORE PURCHASING A PROPERTY

1_ OBTAINING A TAX IDENTIFICATION NUMBER IN SPAIN (N.I.E.)
Before purchasing real estate, an entity investing in Spain is required to obtain a tax identification number.
N.I.E. number (número de identi cación de extranjero), which is issued to natural persons, allows the identification of residents from EU countries in Spain, not only when purchasing, but also in subsequent obligations towards the Spanish owner. The application for a document (EX-15) is submitted to the police station (Policia Nacional) together with a copy of your passport or ID card. A stamp duty is charged for obtaining the number.
This document can be obtained by appearing in person at the police station on a previously agreed date (via online booking) or by proxy. Acting through a proxy makes it much easier to obtain it, because the visit dates are distant and difficult to coordinate with the stay of potential buyers in Spain.
N.I.E. number it may also be granted after submitting an appropriate application to the Consulate of the Kingdom of Spain in Warsaw. To do this, please contact the Consulate and make an appointment.
Legal entities that are the subject of the purchase of real estate or any other legal transaction (company under Polish law) are assigned an N number, i.e. a Spanish tax number. To obtain it, you must report to the Spanish Tax Office together with full company documentation, such as the company’s founding act, a current extract from the company register and a power of attorney to register the company in Spain, along with appointing a tax representative in Spain. All documentation must be apostilled (legalized) by the Ministry of Foreign Affairs in Warsaw and translated by a sworn translator registered at the Ministry of Foreign Affairs in Spain.

2_ POWER OF ATTORNEY
All activities related to the purchase of real estate can be performed in person or by a proxy (obtaining a N.I.E. number, concluding a bank account agreement, signing a private real estate purchase agreement, signing a notarial real estate purchase agreement, carrying out post-purchase activities). Depending on the needs, the power of attorney is established before or during the purchase (in the content of the notarial deed of real estate purchase for activities that must be performed after purchasing the real estate). The power of attorney may be any person the potential buyer trusts, and the scope of the power of attorney may be varied at the discretion of the potential buyer. Typically, the representative is a lawyer who performs a profession of public trust.
To do any of the above. activities, the power of attorney should take the form of a notarial deed and may be drawn up before a notary in Spain, during one of the visits of potential buyers or in Poland. If the power of attorney is granted in Spain, it is sufficient for the representative to take action. However, if a power of attorney is granted to Poland before a Polish notary, it should take the form of a notarial deed (powers of attorney that only contain the authentication of the principal’s signature are not recognized) and then be legalized through an apostille issued by the Ministry of Foreign Affairs in Warsaw and translated by a sworn translator registered in Spain .
Pursuant to Spanish civil law provisions, the attorney-in-fact acts within the scope to which the principal authorizes him in the power of attorney, and only performs the activities that have been entrusted to him.

3_ INTERNATION
Married buyers, depending on the marital property regime that binds them, may purchase real estate as part of their joint property (marital community of property) or personal property (marital property separation), determining the proportions in which the property is purchased by them. To do this, you must present to the notary on the day of signing the purchase agreement a notarial deed establishing the separation of property, the so-called prenuptial agreement, apostyled and translated by a sworn translator registered in Spain. On this basis, the clerk will enter the ownership in the real estate register according to the proportion agreed between the spouses.

4_ OPENING AN ACCOUNT IN A SPANISH BANK
Every property owner should have an account in one of the Spanish bank branches. Having an account is necessary not only to make payments for the property (detailed information on payments below), but also to make utility payments, because before signing the contract, suppliers require the account number of a Spanish bank from which the fees are charged automatically.

5_ VERIFICATION OF THE LEGAL CONDITION OF THE PROPERTY
In each situation, it is advisable to download a current extract from the Spanish real estate register (Registro de Propiedad) in order to verify the person who owns the property, as well as to obtain information whether the property is not encumbered with limited property rights, such as mortgage, easement, etc.
In a situation where the decision to purchase real estate in Spain concerns real estate from the primary market, before signing the notarial deed, it is necessary to check whether the real estate has an occupancy permit, namely a document in which the city hall certifies that the real estate is fit for habitation, and which will be the basis to obtain energy and water connections, as well as insurance for the so-called ten-year warranty (seguro decenal), guaranteeing the proper construction of the building and responsible for repairs during the warranty period. However, when signing a private contract for the purchase of real estate (details on the private contract below), when its construction is not yet completed or is only planned, information on land ownership, construction plans and a building permit is necessary.
In the case of purchasing plots of land, it is particularly important to verify the extract from the cadastre and the spatial development plan, which provides information on the land classification and the subsequent possibility of obtaining a building permit (cedula urbanistica).
In addition, it should also be verified whether the property has any arrears with respect to the city hall or taxes, in order to eliminate the possibility of purchasing a property in debt.
An equally important issue is the analysis of the statute of the housing community, which determines the rules for using the common parts of the property, but also the aesthetics of the entire building, the rules for using the common parts of the property, etc.
When it comes to verifying the technical condition of real estate, the Wasowicz Abogados Law Firm cooperates with architectural offices that, at the request of clients, prepare opinions on the technical condition of real estate, which mainly applies to real estate from the secondary market, because in the case of real estate from the primary market, the architect is the guarantor of the technical condition of the real estate. , which carries out the acceptance of the building.

PURCHASE OF REAL ESTATE
6_ RESERVATION AGREEMENT AND PRIVATE PROPERTY PURCHASE AGREEMENT
Before the property is purchased, the parties sign a reservation agreement and then may conclude a private property purchase agreement.
The reservation agreement provides the potential buyer with a reservation of the property, under which he is obliged to pay a specified amount and thus ensures the right to purchase it within a specified period. The parties should determine whether the funds are refundable or non-refundable if the buyer cancels the purchase.
The reservation agreement may take the form of a deposit agreement (so-called contrato de arras), which should be clearly specified in the agreement (in the title of the agreement or by indicating the relevant provisions of the Spanish Civil Code). If the buyer withdraws from the contract, the funds paid are not refundable, but if the selling party does not join the purchase contract, it is obliged to pay the buyer double the rate.
amount paid.
However, a private real estate purchase agreement is a binding obligation of the parties to purchase the real estate on the terms and conditions set out therein. Under Spanish law, a real estate purchase agreement that does not take the form of a notarial deed is valid and binding, unlike in Polish law, where such an agreement is invalid by operation of law (it is often called a “preliminary agreement” by Polish clients, which in fact it is not ). The content of the contract established at this stage is binding, the contractual clauses will be repeated in the notarial contract, and any changes may occur if both parties agree so.
That is why it is so important to determine the content of the contract at this stage of the investment implementation.
An important issue is determining the subject of the purchase, i.e. a description of the property, which should include information on the location of the property, square footage, ownership, land and mortgage register number, cadastral number of the property, etc. In the case of real estate on the primary market, the construction of which has not yet been completed, the contract a plan of the property should be attached, as well as information on the quality of its finishing, as well as information on the construction permit with an indication of the persons responsible for its implementation. The contract should clearly indicate the date of completion of construction and the approximate date of signing the notarial agreement.
The contract must include information on the price and payment schedule. While in the case of real estate from the secondary market, the rule is to pay a small reservation fee, and then, in the case of a private purchase contract, to pay at least 10% of the agreed price, in the case of real estate from the primary market, a payment calendar is established. Pursuant to the Spanish construction law, after obtaining a building permit, the developer must provide the buyer with bank guarantees for the amounts paid (so-called aval bancario) or an insurance policy, thus guaranteeing that the funds paid by him are intended for the construction of this specific property. In addition, the contract contains clauses regarding possible changes in the property, conditions for terminating the contract (which are usually negotiated with the selling party), as well as information on the place of resolving any disputes and information on the language version binding on the parties. Although the contract is often drawn up in two languages, the binding version is always the Spanish version, due to the location of the property.

7_ PURCHASE OF REAL ESTATE – NOTARIAL AGREEMENT
Pursuant to Spanish civil law provisions, a contract concluded without complying with the form of a notarial deed is a valid contract with all legal effects (information above).
However, in order for the property to be entered in the land and mortgage register (Registro de Propiedad), it is necessary to sign a notarial agreement. Upon signing the notarial agreement, possession of the property is transferred by issuing the keys. The contract is drawn up only in Spanish, but during the purchase it must be translated simultaneously by a translator appointed by the party. The translator may be any person who is fluent in Spanish and the language spoken by the contracting party. Typically, this function is performed by an attorney who previously agrees the content of the notarial contract with the notary.
During the meeting with the notary, the full payment for the property or its last part is also made. The most frequently used form of payment and the safest from the point of view of both parties is a nominal bank check, which from a formal point of view allows payment for the property at the time of signing the contract, i.e. at the time of taking possession of the property. It is an instrument through which the bank guarantees that the funds accumulated on the buyer’s account are intended to pay for the property and thanks to this, the transfer of possession and payment can take place at the same time. It is not recommended to make a transfer before signing the notarial deed of real estate purchase, as well as after signing it, because the contract is concluded on the condition of payment, which is recorded in the land and mortgage register, and removing this condition involves additional costs.
In the case of real estate from the secondary market, a tax on civil law transactions is charged, which ranges from 7% to 10% depending on its location (each voivodeship, the so-called Comunidad Autonoma, determines its own tax rate). In this case, the tax should be paid within 30 days from the date of purchase of the property.
If the buyers decide to finance the purchase through one of the Spanish banks, a notarial mortgage agreement is also signed during the meeting at the notary, which is also subject to entry in the land and mortgage register. The terms of the contract should be agreed in advance with the bank.
Another issue to bear in mind is that the purchase of property in Spain is subject to tax. In the case of real estate on the primary market, it is VAT (currently, in 2019, the rate is 10%), and in this situation, an additional tax on notarial deeds is charged in the amount of approximately 1.5%.
VAT must be paid together with the payment for the property when signing the notarial deed

8_ PAYMENT OF TAX AND REGISTRATION OF PROPERTY.
After purchasing the property, the buyer is obliged to pay the appropriate tax within 30 days from the date of purchase. Depending on whether the property comes from the secondary or primary market, the tax is:

• tax on civil law transactions in the amount of 7% to 10% for real estate from the secondary market (depending on the location), or.
• tax on notarial deeds in the amount of 1.5% for real estate on the primary market.
  VAT is added to the net price of the property and paid to the state treasury by the developer.
  Before submitting a notarial deed to the register with an application for registration of ownership, you must notify the city hall in which the property is located about the purchase. Then, the real estate purchase agreement should be entered in the appropriate real estate register, i.e. Registro de Priopiedad (the equivalent of Polish land and mortgage registers). Entry is subject to a fee.
  Moreover, the buyer should conclude appropriate contracts with energy and water suppliers, which is often done by the developer, while in the case of purchasing real estate from the secondary market, appropriate changes should be made to the entity in the service contracts.

9_ TAX FEES AND OBLIGATIONS RELATED TO OWNING REAL ESTATE
Every property owner in Spain is obliged to pay property tax, the so-called cadastral tax. This is a local tax collected in autumn by the city hall appropriate for the location of the property, and depending on the location, it may include a fee for garbage collection (in some locations, this fee is collected from the housing community).
Fees related to maintenance of the common parts of the property are collected by the housing community according to the arrangements made by the owners (once, twice or four times a year). The housing community determines the amount of fees according to the needs of the community, and also decides on the rules that apply in the real estate complex.
In both cases, benefits can be linked to your Spanish account and will be debited from it automatically.
In addition, non-residents are obliged to submit a non-resident tax return, especially when the property is rented and the owner receives benefits from
this title (non-resident income tax). Such a declaration should be submitted once a year by June 30 of each year, starting from the year following the purchase of the property. The height of it
tax depends on the cadastral value of the property determined by city offices

STARTING A BUSINESS IN SPAIN

The law firm we cooperate with also provides services such as: with establishing commercial companies in Spain and/or registering Polish companies in Spain. Depending on the individual needs of the client, the law firm provides advice on the choice of form of business activity, providing comprehensive business establishment services, namely:

• preparation of documentation necessary to establish a company,
• preparation of the company agreement, statute and legal services before a notary, including translation,
• carrying out activities aimed at registering the company in the commercial register after fulfilling all obligations towards the relevant tax office and public administration,
• brand registration and representation in the event of a conflict,
• carrying out legal activities related to with organizational changes of companies, transformations, mergers, divisions, suspension of activities, liquidation and dissolution of companies, etc.

1_ FOUNDATION OF A COMPANY IN SPAIN
To establish a company, you must appear before a Spanish notary in person or by proxy and sign an agreement constituting the company’s founding act along with the company’s statute, regulating the principles of its operation. The visit should be arranged in advance, and interested parties should have a certificate regarding the reservation of the company name issued by the Central Register of Companies. In addition, the partners should decide on the amount of the company’s share capital, as well as the amount and proportion of contributions made by each of them (the minimum share capital of a limited liability company, the so-called sociedad limitada, is EUR 3,000, while for a joint-stock company it is EUR 60,000). In the notarial deed, the partners also decide what form of management will be and who will exercise it. According to the Spanish law on capital companies, the management board may consist of one or two people (joint or separate representation), but if the management board is to be performed by more than three people, the so-called board of directors.
As for the registered office, it must be established in Spain. In addition, the subject of the company’s activities and its scope should be determined, along with an indication of which of the subjects is the leading activity.
If the subject of the activity is a regulated activity, it is necessary to obtain an appropriate permit.

2_ PARTNERS
If the partners are natural persons who are not residents, they should obtain a foreigner’s tax identification number, the so-called NO. , however, if the entity is another foreign company, it should be registered at the Spanish tax office and obtain an N number, i.e. a Spanish NIP number. For this purpose, an appropriate form must be submitted to the tax office in Spain, as well as the following documentation: founding act of the foreign company with an apostyle and a sworn translation, an extract from the National Court Register with an apostille and a sworn translation, a declaration of the real beneficiary of the company, a notarized copy of the document the identity of the person managing the company, information about the person who is the tax representative in Spain, and possibly a power of attorney to perform the above-mentioned activities on behalf of the manager of a foreign company.

3_ ACCOUNTING
Each company governed by Spanish law is obliged to keep accounts in Spain and to fulfill the obligations imposed by the law. VAT tax returns are submitted 4 times a year, i.e. by April 20, July 20, October 20 and January 31.
Moreover, by July 25 each year, each company is obliged to submit corporate income tax returns.

4_ BRANCH OF A FOREIGN COMPANY
In order to establish a branch of a Polish company in Spain, it is necessary to obtain an entry in the Commercial Register of Branches of Foreign Companies. To obtain such an entry, you must appear before a Spanish notary and present the documentation of the Polish company (as above in the case of obtaining an N number), as well as a decision of the management board of the Polish company to establish a branch office in
Spanish territory. A branch in the Spanish tax office is assigned an N number, which is the basis for carrying out commercial operations.
When a branch of the company starts operating in Spain, it is obliged to keep accounting in Spain, while in Poland these settlements are also
should be included in the parent company’s accounting.