Updated: Nov 18

How to purchase real estate in Ibiza? To purchase a property is a bold move, to do this in a foreign country can be scary. Here some assistance for this important decision. Every day we get these questions from our customers: “How do I buy that property in Ibiza?”, “How much will this process cost?” and “How long will it take?” In this article we will provide an all-encompassing rundown of the question. We’ll explain the process, how to make sure what you are buying and the legal aspects before signing the title deed, taxes and costs involved in the purchase. We cover also the yearly maintenance costs and taxes once the property has been bought.

We will provide practical suggestions if you’re new to property purchase, new to Ibiza or both. However, as every case is different, we strongly advise you to contact a local and independent lawyer who can assist you throughout the process, and who will ensure that your money and your rights are fully protected.

Step 1 - Assess Your Budget: What is Possible for me? To be able to select a property you need to assess your budget. You can either buy your property outright from funds you have or with the assistance of external funds: usually a real estate mortgage provided by a bank. Then, to get the asking price of the properties, you should deduct from your budget a sum to fix small things, say at least 5.000€. To initiate new design projects to ameliorate or personalize the property is another story, you can check the article about renovation in Ibiza.

Maybe you will move some or all of your belongings to your new property in Ibiza. In this case you will deduct these costs from your buying budget too. And finally, there are the process costs we discuss in this article, say for the moment 11% of the buying price. Armed with our resulting budget we are good to start the journey.

Step 2 - Select your property

For most buyers this is the fun part. We suggest you visit in person at least 3 properties. Consider that there are properties more adapted if you want to live in Ibiza the whole year, or spend the summer here, or the winters, of if you want to rent the property in the summer to short-term tourists stays. Once you have a favorite you should a second time on site at a different time of the day than the first visit to experience the various sun exposures.

See the properties PURE Real Estate Ibiza has currently on offer.

Step 3 Checks

Once your interest in a property is solid, you will select and draft-in a local lawyer familiar with Spanish real estate law.

Ask your real estate agent the paperwork of the property:

- a recent extract of the National Property Registry (nota simple)

- a recent extract of the Cadaster

- the authorization to live in the property (cedula de habitabilidad)

- the notary contract of the former sale of that property (escritura)

- copy of the last paid property tax

- copy of utility bills : electricity and water

- possible touristic license (short-term holiday rentals) Depending on the requirements of the seller, your real estate agent can ask you to issue a Letter Of Intent (LOI) to allow him to hand-out a copy of the documents. This LOI can be a short and simple email mentioning: the property name, the agent who presented the property to you and your interest to purchase the property in the foreseeable future. In any case, once you have got the documents, you will give these to your lawyer who will check the papers in detail and certify their validity. You can also ask your lawyer to contact the lawyer of the seller, requesting the legal documents of the property. Your lawyer will check: - that the property abides to the planning law, as well as any extensions or amendments built after the original building license.

- the title deeds of the vendor to confirm, among other things, ownership, charges, and that the property is accurately described.

- any registered debts, charges, liens and encumbrances in the land registry, and the situation of the property with respect to property tax and community fees, and any other running expenses.

- that the seller has presented the last and current receipt for the council tax (IBI).

Step 4 - Place Your Offer Once your lawyer agrees that your chosen property is legit, you can place an offer towards the asking price, conditions subject to a contract. Fingers crossed the seller will accept your offer!

Step 5 - Apply for a NIE number Now that your offer has been accepted by the seller, if you are non-resident in Spain, you have to apply for a Spanish NIE number (Identification Number for Foreigners). This is mandatory when you purchase any property in order to be recorded as an owner in the land registry. You will need to apply and obtain the NIE number personally at the police station, unless you grant power of attorney to someone to act on your behalf like your lawyer or an accountancy firm (gestoria). Note that the NIE number does not imply you are living in Ibiza, and your NIE it is not a social security number to get any benefits.

Step 6 - Raising a private contract It is now the time to determine the terms of payment. You lawyer will raise a private contract that will be signed with the seller. At that time there will be a deposit paid by you, the buyer. The amount paid upon signing a private purchase contract is normally 10% of the sales price.

In Spain normally the purchase price is paid directly to the seller in a bankers draft from your Spanish bank account. For the deposit it can happen to use a bank´s escrow account or accounts of the solicitors or notaries. There are various types of possible private contracts:

- “Option to Purchase” contract, where the seller is obliged to sell and the buyer can buy but is not obliged to buy, although he will lose the deposit he has paid

- “Private Purchase Contract”, which ties both parties. The seller can oblige the buyer to complete the purchase

- a deposit contract “Arras Penitenciales”, where if the buyer pulls out he loses the deposit, and if the seller pulls out he has to reimburse the buyer with double the deposit paid. It is important that this private contract includes all necessary provisions to preserve your rights as the buyer. The contract normally provides for a term between one to three months for completion and signing of the public deed in a Public Notary, where the balance of the purchase is paid and the vacant possession of the unencumbered property is granted. The funds for the payment of the taxes and expenses of the purchase are normally sent to the buyer´s lawyer account, who will take care of these payments after completion of the purchase. Once agreed with you and your lawyer, your contract proposal is sent to the seller´s lawyer for review. There can be some changes requested by the seller, which will be handled by your lawyer. Finally, once the selling party agrees, you have a deal!

Step 7 - Opening a Spanish account You as a buyer should open a bank account in Spain, where you will send the funds for the purchase. Note that, as per the European anti-money-laundering process, your bank, your lawyer and the Notary all have a legal requirement to check the origins of the funds for any real estate purchase. A process also known as KYC "know your customer".

Step 8 - Finally: meeting at the Notary for the Sales!

Change of Ownership

After a successful signature and payment meeting at the Notary, your lawyer will follow-up to get the owner change registered. In order to get registration of the public purchase deed, all relevant tax forms must be completed and paid into the Spanish Tax Authorities. Here a run-down of the Tax implications and costs:

If VAT applies, then the ITP transfer tax does not apply. VAT – Value Added Tax For any new building, as a first occupancy, there is a VAT of 10%. For second-hand properties there is no additional VAT as it was already charged once at the first occupation. ITP – Property Transfer Tax

In Ibiza the property transfer tax ITP (Impuesto sobre Transmisiones Patrimoniales) is a graduating scale from 8% to 10%, depending on the sales price (as per the sales contract) :

From 0 to 400.000 8%

From 400.001 to 600.000 9%

From 600.001 onward 10% In the case of purchasing a plot of land, the tax to be paid is 21% VAT with certain exceptions. Note that the tax office can appraise a property if the sales price is deemed under the tax value.

Notary and land registry fees

This should be approximately between 2.000 and 6.000 Euro in total. This will depend on the value of the purchase and the number of pages and complexity of the notarial deed.

Tax for the “Plusvalía Municipal”

This is a local tax paid by the seller based on the increase of the property value. In case the seller is non-resident in Spain, it is advisable for the buyer to withhold it from the purchase price and pay it into the tax office on account of the seller.

Seller´s Withholding Tax