Ø
Value added tax or IVA (Impuesto sobre valor añadido) at 7% is
charged on newly built properties. IVA
is charged at 16% on commercial premises and land bought directly from the
developer.
Ø
A further tax of 0.5%, called AJD (Actos Juridicos Documentados),
is also charged.
Ø A transfer tax (ITP – Impuesto de Transmisions Patrimoniales) on resale property. This is based on the value of the
property and is charged at 6%. The 6% rate also applies to the purchase of commercial premises or land, when the seller
is acting as a private individual.
(A word of warning here:- some unscrupulous agents don't distinguish between the different legal rates and
always charge their customers the 16% rate. On completing the deal for their clients, they pay out the legally
required
6% or 7.5% and pocket the difference. Please
be aware of your rights)
Other Costs
Notary Fees:
These are in the region of 50,000
- 80,000 pesetas (£185 to £310
approx.)
Registry Fees:
These are in the region of 30,000
– 60,000 pesetas £116 - £235 approx)
Water & Electricity
connection charges:
Ø With resale properties: This involves merely a change of ownership so combined costs are usually about
10,000 pesetas.
(£38 approx)
Ø With new properties: Because of the necessity to draw up contracts etc., the cost of supplying the utilities is
usually about 50,000 pesetas
(£185 approx)
Municipal
Tax (Plus Valia):
Ø This can vary considerably, as it depends on a variety of factors which have given rise to the increase in value of
the land on which the property is situated, but generally amounts to between 5,000 and 60,000 pesetas.
(£19
- £235 approx)
Ø Management fees for administration and paperwork: You should expect to pay in the region of
50,000 pesetas. (£185 approx)
Annual
Costs:
Ø Community fees: Depending on the amenities of individual residential complexes, these vary between 10,000
and 250,000 pesetas.
(£38 - £975 approx)
Ø Property tax (SUMA): This is paid for the various services supplied by the council and costs between 15,000
and 40,000 pesetas. (£58 - £155 approx)
Ø Water, Electricity & Gas Rates: one cubic metre of water costs about 50 pesetas. (19p approx)
One kilowatt hour of electricity costs 15 pesetas (.05p approx) and a bottle of butane gas costs about 1,350 pesetas.
(£5.25 approx)
Ø
Wealth Tax:
This is charged at 0.2% of the
property's declared (registered) value.
Ø Income Tax: This is charged at 0.5% of the property's catastro value (the catastro is the government's statistical
register of property). This value is normally less than the registered value.
Ø Financial Consultancy and Support: Among other things, this includes dealing with your annual tax returns.
Average figure for this is
around 15,000 pesetas (£58 approx) per couple.
Ø Insurance: For the average holiday home, this costs between 10,000 (£38 - £155 approx) and 40,000 pesetas.
Property
Purchase in Spain
Legal
Information — April 2001
The
following information is intended to be a general guide in terms of what can be
expected when purchasing a property in Spain.
Costs
Having
found the property of your choice, you should add 10% to the purchase price for
the costs involved in the actual purchase.
There are a number of things that have to be done in order to effect the
purchase of your property as indicated below, comprising the 10% you need to add
on:-
Transfer Tax
This
is the most expensive item of all the costs.
If you purchase resale property you will pay 6% of the value, on new
build there will be 7% IVA (VAT) of the value plus 1½% Stamp Duty payable on
the new property and 16% payable on the purchase of the land.
If it is your intention to have a garage or pool built it would be
advisable to have it included in the sale of the property because if you
build later, it will attract tax at the higher rate of 16%
Solicitors Fees
Never purchase a property without the assistance of a solicitor. His fees are likely to be in the area 2% of the purchase price.
Notary Fees
A Notary
witnesses the signing of contracts and is there to protect the buyer as well as
the seller. He will make sure that
all of the documentation is legal. His
fee is set on a fixed scale by law and you should expect to pay a minimum of
50,000 ptas (approx £200). This
can rise significantly if other factors are included such as a mortgage.
Registration
Having
property deeds inscribed in your name will cost anything between 20,000 to
50,000 ptas (approx £80 - £200).
Who pays what
Unless stipulated
otherwise in the Contract, Spanish Law states that taxes and fees are divided
between the buyer and seller as follows:-
The Vendor pays:-
Plus Valia Tax,
which is calculated on the increased value of the land since the last sale.
Notary fees for
drawing up the new deeds.
Estate Agency Fees
The Purchaser pays:-
The
Transfer Tax or IVA
Registration Fees
Notary Costs
These
rules are not always followed strictly to the letter of the law and often the
purchaser ends up paying most of the costs.
Something that is important to note is that in Spain, any debts on the
property remain with the property when it is sold which is another good reason
to employ the services of a solicitor who will
make the necessary searches to ensure that your chosen property is free
from encumbrances and debt.
There
are a number of books published, and widely available from bookstores, relating
to Spanish Property purchase which are useful as guides but it cannot be
stressed enough that the paperwork involved in property purchase in Spain is
extremely complex. For this reason
only the people who write the laws and Spanish solicitors have a full
understanding. Therefore, under no
circumstance should you purchase a property without the assistance of a
solicitor.
Location of your chosen property
Each plot of land containing your chosen property has its own characteristics in relation to its physical location within the total land area delineated a town or city (municipality), which defines its municipal zoning. This means that the ultimate use of the land is predetermined (e.g. building with x storey, family home with a maximum of two storeys, green area, road, ecosystem, reservation, maritime zone excluding building etc). Therefore it would be advisable to investigate the municipal zoning of the land you have chosen. This can be done by visiting the local Town Hall or you could ask your solicitor to do it for you. Obviously if you purchase an apartment in a building located in an urban center, which was built many years ago, it would not be entirely necessary to investigate municipal legality as it would be virtually impossible that such a building would exist unofficially, or that it would be violating the municipal zoning laws. However, it would be useful to investigate the planned use of the area for future development. If there is a property under construction on the land or one has recently been built, and generally with new developments as well as rustic land or land with low building density, it is essential to acquire information regarding its municipal zoning in order to determine whether or not the planned use for such a property is compatible with the purchaser's requirements.
Separate consideration should be given to land close to the beach. With this type of property you should additionally consult with Demarcacion de Costas (Coastal Authorities) whose offices will be located in the provincial capital. This body controls planning permission for coastal zones. Meanwhile, the planning information provided by the Town Hall will inform the purchaser whether or not the plot in question is located in such a zone. An advisable precaution would be to obtain a report from the Demarcacion de Costas, to protect the purchaser. In the case of any dispute between the two authorities, the Coastal Authority's decision rules.
Ownership of property
The Registro de la
Propiedad records the rights and obligations affecting every property or piece
of land in Spain. Significant
information relating to the ownership and burdens of a property is
chronologically and permanently registered in a database.
This system offer absolute protection to whoever need to validate such
rights before a third party, and offers exact and irrefutable security to the
purchaser/owner. Although there is
public access to this database, only certain technically qualified people, known
as Registradores de la Propiedad, may amend the contents of the database using
documents and records of unquestionable authenticity.
The simplest and most
fundamental right related to a property, recorded in the Registry, is the actual
ownership of the property. That is why the first fact that stands out when one consults
the Registry, is the identity of the owner of the property in which you may be
interested. However in Spain, like
in any other country, there are circumstances which could modify, condition,
restrict etc. the rights an individual may have, including the one of real
estate property ownership. For
example, a mortgage in favour of a bank, a right of way or an embargo
declaration in favour of the Tax Authorities are all such circumstances which
will be stated in the Registry. However,
the analysis and interpretation of this information could be quite complicated
to someone not versed in the matter. This
is another reason why you need a
solicitor, who can handle this type of verification for you.
Purchase of a property by a non-Spanish resident
When you have found a
suitable property and the above mentioned verification has been undertaken, the
property must be purchased from its rightful owner by means of a purchase
agreement.
Such
purchase agreement must be a document signed both by the buyer and the seller
before a notary public and it is called an escritura de compraventa or public
conveyance deed. It is precisely to
this document that the law grants
the characteristics of authenticity previously mentioned and, once signed by the
seller, the purchaser and the notary (in a simultaneous act) is entered in the
Property Registry. Once completed,
the ownership (or purchase) is unquestionable and the position as new owners of
the real estate property is irrefutable.
It
is however, common practice to take some preparatory steps, prior to the Public
Conveyance Deed, such as paying deposits in order to reserve the property etc.,
initially signing only private contracts between seller and buyer, the
preparation of which should be left in the hands of a Spanish lawyer.
These contracts, generally have the purpose of beginning the purchase
process and eventually culminate in the previously mentioned Public Conveyance
Deed and its subsequent registration. In
order to sign these contracts, as well as to sign the Public Conveyance Deed, it
is possible to be represented by attorneys, to whom notarial power of attorney
has been granted (a power of attorney signed before a Spanish Notary Public is
just as valid as one signed before a Spanish Consul or Ambassador in any
country, or before any notary public in any country other than Spain).
Some important matters to
note about contracts
In cases where there is a private contract, or when it comes to the Public Conveyance Deed, it is important to control all the various points. Once again, it is worth every penny you spend to leave this job in the hands of a Spanish lawyer.
In
Spain, it is common practice for the seller to suggest the possibility of
officially declaring a price which is lower than the real purchase price.
This is a method designed to lower the seller’s capital gains tax
liability, since this is based on the difference between the amount originally
paid by the seller at the time the property was purchased by him/her and the
amount received on the current sale. Although
a very normal practice this is a violation of a tax law and consideration should
be given by the prospective purchaser to the time when he/she wishes to sell the
property in that if the declared purchase price was too low, the taxes to be
paid for capital gains would be higher. For
further information on this aspect of sale and purchase please contact Cellton
and we will discuss the matter fully with you.
We
have mentioned previously that any burdens, loans and mortgages remain with the
property when it is purchased. It
is therefore important to ensure that the property is sold free of burdens and
encumbrances and free of tenants or occupants of any kind. If this is not done
prior to the purchase, the buyer becomes responsible for these debts
and
obligations and the seller relinquishes them.
I cases where the buyer purchases the property with an agreement to take
over the mortgage payments on a property this would have to be specifically
mentioned in the contract and deed expressing the exclusion of any other burden.
The only safe way of making sure that everything is in order is to employ
the services of a Spanish lawyer.
Checks
must be made to ensure that the current expenses attached to the property have
been paid by the seller and up to date at the time of completion.
In order to be able to do this, the seller must provide corresponding
receipts of at least the last two billing period.
The expenses would include:-
A)
Each year’s Land rate taxes (known as Impuesto de Bienes Inmuebles or
I.B.I.)
B)
Community fees where applicable
C)
Services such as water, electricity, rubbish collection, telephone etc.
where applicable.
Expenses related to
property purchase
Local
Tax on the increase in value of the land (also known as Plus Valia), which
should not be confused with capital gains tax.
Plus Valia is calculated on the theoretical increase in the value of
land, regardless of whether or not there is construction on it.
Generally, the longer a person has owned the property, the higher this
tax would be, since all the annual revaluation scales would be applied on the
land. This expense corresponds to
the seller but it is not unusual for both parties to agree that the purchaser
pays all of the expenses, including this one.
It is therefore advisable to enquire of the Town Hall the amount due
before agreeing who will pay. Your
lawyer can do this for you. On
rural property this tax is not always applicable.
Bank accounts and methods
of paying
Non
residents can open accounts in any Spanish bank. Generally and additionally, they can have such accounts in
any type of currency they wish and can use the account to transfer and deposit
any amount from outside Spain. It
is also permitted to transfer any amount of money from the referenced account to
any country other than Spain.
Control Regulations with
regard to money
The
following control regulations apply, specifically designed to prevent laundering
of illegal money:-
i) Each non-resident importing cash or banker’s drafts to
Spain (made out to cash) for an amount higher than 1,000,000 pesetas (Approx £4,000)
must declare this at the Spanish frontier when entering the country.
If this is not done, there could be problems at the time of depositing
the referenced cash or banker’s draft (made out to cash) in any bank account
or at the time you might want to utilise these funds for an investment payment.
ii)
Each resident or non-resident who takes an amount of cash or banker’s
draft (made out to cash) higher than 1,000,000 pesetas (Approx. £4,000) out of
Spanish territory, must also declare it at the Spanish frontier when leaving
Spain. If this is not done and it
is detected, a file would be opened with sanctions that could be quite
substantial.
For
more information on legal matters please contact Cellton's legal department by
telephone or email for details:-
Inversiones
Cellton S.L. 0034 950 413 441
Email: cellton@teleline.es
whilst
we take every precaution
to ensure that information given is correct we strongly advise clients to obtain
verification from their solicitor