How to Acquire Real Estate in Spain

Why is navigating a property purchase in Spain so different from Czech practice?

Thanks to the long-established ARROWS International network, lawyers from the Prague-based law firm ARROWS deal with property purchases in Europe on a daily basis. They help their clients identify all relevant risks, provide sound advice on choosing the right type of ownership, and, most importantly, organise the process to be safe and efficient. Their experience will save you months of time and minimise the risk of financial loss.

The basic legal structure of property ownership in Spain

If you are considering buying a property in Spain, you must first understand that the local legal system places enormous emphasis on a public deed (Escritura Pública) and subsequent registration in the Property Registry. Although you theoretically become the owner upon transfer of the property based on a title under the Civil Code (Código Civil), you are not protected against third parties without registration in the registry.

In Spain, you can acquire ownership in several ways: by direct purchase as a natural person, through a legal entity, or in the form of co-ownership. Choosing the right form of ownership is not just a matter of preference – it can save you thousands of euros in taxes or, conversely, expose you to unexpected financial obligations.

The lawyers at the Prague-based law firm ARROWS have extensive experience with international property purchases and can design a tailor-made ownership structure to optimise your tax situation. If you are deciding on the right way to buy, do not hesitate to contact consultation@arws.cz. 

Preparing for the purchase: What you need to do before the transfer

Before you even sign a reservation contract, there are a number of steps you must take. First, it is essential to obtain an extract from the Property Registry, the so-called Nota Simple Informativa, which is managed by the Registrars of Spain. This document will reveal the owner, mortgages, easements, or enforcement orders, and its interpretation requires expert knowledge of Spanish legal terminology.

Then there is the Due Diligence process – verifying the legal and technical condition. In Spain, it is critical to verify not only debts but also the urban planning legality, i.e., whether the house has an occupancy permit (Licencia de Primera Ocupación). Many properties, especially on the coast, were built illegally ("načerno") or in violation of the zoning plan in the past. The real estate agent may not point this out to you, as they primarily represent the seller. 

Before the purchase itself, it is also important to understand the tax obligations. Non-residents must take into account the Double Taxation Treaty between the Czech Republic and Spain, and they also have specific tax obligations in Spain. Failure to comply can lead to penalties of 50% to 150% of the amount owed.

The lawyers at the Prague-based law firm ARROWS will provide you with comprehensive legal and tax advice before you make the decision to buy. They also help with finding and vetting business partners – that is, verifying the credibility of the seller, the agent, and the entire transaction. Contact us – we are at your disposal. 

Legal steps in the transfer of ownership

Once you have decided to buy and have chosen a property, the transfer process in Spain has established phases.

First, a reservation contract or a deposit agreement (Contrato de Arras) is usually signed, where the buyer pays a deposit. This document is crucial because it fixes the price and conditions of the transaction. If you withdraw, you will lose the deposit, but if the seller withdraws, they must return double the amount to you, according to the Spanish Civil Code.

This is followed by the signing of the public deed (Escritura Pública de Compraventa) before a notary. The notary is a public official associated with the General Council of Notaries, who verifies the identity of the parties and the legality of the transaction. The notarial deed is necessary for the subsequent registration in the registry.

The transaction concludes with registration in the Property Registry (Registro de la Propiedad). Until the registration is complete, your ownership right is vulnerable to the debts of the previous owner. Your lawyer or notary will ensure that taxes are paid and the deed is submitted to the registry.

The lawyers at the Prague-based law firm ARROWS will ensure that all these steps are carried out correctly. Our services include drafting contracts, representation before the notary (including by power of attorney), and securing the registration. Without their assistance, you risk errors in the process. Get advice – contact consultation@arws.cz.

Tax obligations – What taxes await a Czech buyer?

The tax aspect of buying property in Spain is the area where mistakes are most common. It is necessary to distinguish whether you are buying a new property from a developer or an older one (resale). Detailed information is provided by the Agencia Tributaria.

For older properties, you pay a property transfer tax (ITP), which ranges between 6–10% of the purchase price. In the case of new properties, you pay value-added tax (IVA) instead of ITP, usually at a rate of 10%, plus stamp duty (AJD), which is 1–1.5%.

For non-residents, there is also a non-resident income tax (IRNR). When renting out the property, the tax is 19% of the net profit, and you can deduct costs for maintenance or utilities. If you do not rent out the property, you must pay tax on so-called imputed income.

Many Czech investors mistakenly believe that tax obligations in Spain do not apply to them. The Spanish tax administration exchanges information with the Czech authorities based on international agreements, and upon the sale of a property, it withholds 3% of the price from a non-resident as an advance on taxes.

The lawyers at the Prague-based law firm ARROWS will provide you with advice that protects you from penalties and double taxation. 

Protecting your funds

When buying property abroad, there is a risk of fraud, such as sending a deposit to a seller's account who then disappears. Another common scenario is discovering that the property is subject to an enforcement order only after the money has been sent.

In Spain, the purchase price is most often paid in the form of a banker's draft (Cheque Bancario), which the buyer gives to the seller directly at the notary's office when signing the contract. An alternative is to use a lawyer's escrow account, if the parties agree, although this is not as automatic as in the Czech Republic. The rules are governed by the Spanish Law Ley 10/2010.

A major mistake is to send large sums of money in advance without a legal basis or to private accounts without verifying the account owner.

The lawyers at the Prague-based law firm ARROWS will oversee the flow of funds. They will verify that the conditions for releasing the purchase price have been met, for example, that the seller's previous mortgage is being cancelled. We are insured up to CZK 350,000,000, so your matter is in safe hands. If you are looking for specialists in this area, write to consultation@arws.cz.

Special situations: Family businesses and investment companies

If you are buying property as part of a corporate portfolio or through a family business, you need to think about the ownership structure. It is possible for a Czech limited liability company (s.r.o.) to buy property in Spain, but it requires the Czech company to obtain a Spanish tax identification number (NIF) and its executive director to obtain an NIE.

You also need to consider the wealth tax, which in some regions may also apply to shares in companies holding real estate. The so-called "Impuesto de Solidaridad" for large fortunes can significantly affect the profitability of the entire investment.

If you plan to commercially rent out the property, you need to deal with obtaining a tourist license (Licencia Turística). In many areas, new licenses are suspended, and buying an apartment for short-term rental without verifying the possibility of obtaining a license is a crucial mistake.

The lawyers at the Prague-based law firm ARROWS understand these complex situations. We are also happy to connect clients who have interesting business or investment opportunities. If you have a project and are looking for a partner, you can contact consultation@arws.cz.

Common mistakes that cost Czech investors millions

Based on many years of practice, we can identify recurring mistakes:

• Underestimating the "Nota Simple": Investors rely on photos and the agent's word, but without an analysis of the registry extract, you don't know what you're buying.

• Ignoring the need for an NIE: Czechs often start dealing with the NIE just before signing, which can jeopardise the contract deadline and lead to forfeiture of the deposit.

• Failing to declare non-resident tax (Form 210): Many do not know that they must pay tax even on their "own use" of the property, which the tax office can claim for up to 4 years retroactively.

• Unresolved utility debts: In Spain, debts to the homeowners' association are attached to the property, so you must request a certificate of no debt.

• Buying without a tourist license: Believing that "it will be sorted out somehow," but in many zones, it cannot be sorted out, and the fines are drastic.

Executive summary for management

• A property purchase in Spain requires expert supervision: The process is more formal than in the Czech Republic. The role of the notary and the property registry is very important. Without legal Due Diligence, you risk buying an "illegal building" or a property with debts.

• Tax burden upon purchase: Expect costs of 10–13% on top of the purchase price (ITP 6–10% or VAT 10% + AJD, plus notary and registration fees).

• Ongoing taxation for non-residents: Czech owners pay 19% on rental income (costs are deductible) or a tax on imputed income if they do not rent out the property.

• Protection of your funds: The standard is payment by banker's draft at the notary's office upon signing. Deposits (arras) must be legally secured by a quality contract so that they are not forfeited if the deal falls through.

• The lawyers at the Prague-based law firm ARROWS have proven procedures for the safe transfer of property in Spain. Their assistance minimises risk and ensures that your investment is legally protected in both jurisdictions.

Conclusion

Buying a property in Spain is an investment that can bring long-term returns and joy. However, without proper legal and tax advice, it can become a source of frustration. The reality is that every stage contains details that a layperson cannot see.

The lawyers at the Prague-based law firm ARROWS ensure that your transfer proceeds safely and in a legally correct manner. From preparing contracts and negotiating with the notary to communicating with the Spanish authorities.

If you do not want to risk mistakes and want to be sure of the correct procedure, start with a consultation at the ARROWS law firm. Contact us at consultation@arws.cz, and we will help you with your investment.