Apart from
the actual cost of a property, you need to allow approximately
10% of the purchase price to cover for the fees and costs
of acquiring the property. This 10% will cover the solicitor's
fees, translator's fees, land registry cost, notary's charges,
stamp duty and VAT.
It is important
to seek professional advice, and to employ a solicitor (Abogado).
Most lawyers will tell you in advance what their fees will
be. The standard lawyer's fee for the purchase of a property
is 1% of the purchase price plus VAT. A small price to pay
for peace of mind (using a lawyer in your home country could
double or treble the bill). The Spanish legal system is very
different from other European countries and, to avoid misunderstandings,
disappointments and possible fraud, it is essential to seek
expert professional advice from the very beginning.
THE CONTRACT
Once you've
decided on a property, a contract will have to be drafted
and you need to make provisions for the deposit. The standard
deposit is 10% of the purchase price. The deposit is payable
upon signing the contract (Contrato de Compraventa), which
will include a completion date and the transaction conditions
which usually contains an assurance by the sellers that the
property is sold free of charges, tenants and mortgages.
Once both parties
have signed this contract and the deposit has been paid, you
have secured the property. This is a binding contract for
both sides with penalties for breaking it or for failing to
honour the terms of the contract.
After you have
signed and paid your initial 10% deposit on the property,
it is imperative to review the important legal details. Check
the receipt for the paid IBI, the Impuestos sobre Bienes Inmuebles,
the annual real estate tax. This receipt gives the all-important
Valor Catastral the official assessed value of the property,
on which your property owner's income taxes will be based.
Check with the local town hall that the receipts have been
paid. Any outstanding balance may be requested of the vendor.
Do not buy
Spanish property until you have obtained a current Nota Simple
(an extract from the title) from the Registro de la Propiedad.
PAYMENT
AND SIGNING OF DEEDS
The next stage
is to complete the purchase at the Notary's office, usually,
within a month or so, you will be ready to make the final
checks before signing the "Escritura Publica de Compraventa"
(title deed) in the presence of a Spanish Notario (Notary)
who certifies that the contract is officially made, the notary
does not certify that all statements are true, only that the
parties have sworn to them.There you will be required to pay
the balance of the purchase money, taxes and Notary's fees.
NOTARY
CHARGES
These are collected
by the Notary for preparing the deed and presiding over it's
signing. His fee is fixed by law, is on a set scale according
to the property value, and whether the property is mortgaged
or not, is not normally more then 1% of the purchase price
including VAT.
Please note
all professional fees including the notary's and land registry's
charges are subject to 18% VAT.
All property
in Spain should be registered in the Registro de la Propiedad
(the land registry), where you can obtain the full details
of the owner, the exact size of the property and full details
of any mortgages, debts or judgements against the property
will normally be registered. Only the persons or company named
on the Escritura Publica, the title deed, have the right to
sell the property, unless a notarised power of attorney has
been given to the third party.
When the title
deed is signed, you will automatically become the new owner.
The final step is to have the 'Escritura Pública' registered
in the Property Registry Office as soon as possible to prevent
a mortgage or other charge being registered against the property,
while it is still listed in the name of the seller.
Property
Registration Fees
Property Registration fees is charged by the property registration
office to inscribe the new deed into your name. These are
based on the official registered value of the property. The
length and complexity of the deed and other factors are also
considered. The fee does not exceed 1% of the registered value.
It is not advisable
to try and do this yourself unless you are experienced and
speak Spanish fluently.
Property
Transfer tax or IVA (V.A.T.)
Which of these
two taxes is levied will depend on the type of property you
are purchasing. The property transfer tax is levied on resale
properties and is charged at 7% of the new escritura value
(purchase price).
If you purchase
a newly built property from a developer you will pay a different
tax called I.V.A. (V.A.T.) is charged at 7% of the selling
price plus 0.5% stamp duty.
Plus
Valia (local municipal tax)
This tax is
based on an officially assessed increase in the value of the
land since the last time the property was sold. This can be
quite small if purchasing an apartment, but expensive on a
villa with a large plot, which has not changed hands for years.
Find out the exact amount from the town hall. Do not confuse
this tax with the seller's capital gains tax on his profit
on the sale.
In practice
"who pays what" is negotiated with the final selling
price and this must be stipulated, as well as listing the
contents/fittings to be included in the sale, when the owner
accepts your final offer (in writing).
BUYER
PAYS:
In accordance with Spanish law, the buyer is responsible for:
Transfer Tax or
(I.V.A. + stamp duty when buying from a developer)
Property Registration fees
Notary charges
THE
SELLER IS RESPONSIBLE FOR:
His own capital gains tax on any increase in escritura value
Plus valia tax
Notary fees
Selling agent fees
The normal
custom is for the seller to pay "Plus-Valia". If,
however, the buyer agrees to pay this tax, please remember
that it is registered against the land and you will have to
pay if the vendor fails to do so. This tax is often not demanded
until some time after completion.
New Properties
For new properties,
ask the seller to show you the Declaración de Obra
Nueva, the declaration of new construction, together with
a copy of the Declaración de Alteración de bienes
de naturaleza Urbana, the declaration of alteration of property
of an urban nature, which both demonstrate that the property
has been registered for eventual payment of I.B.I..
Withholding
Tax
If you buy
a property from a non-resident person or a company, you must
withhold 5% of the purchase price; The hacienda (tax office)
make it the buyer's responsibility that this amount is paid
to the tax authority on account of any liability by the vendor
to Capital Gains Tax.
Capital
Gains Tax
As the buyer
must ensure that 5% of the purchase price is paid to the Hacienda,
it is clearly in the interests of the seller to have this
value as low as possible.
If the seller's
original Escritura value shows he purchased the property at
80,000 Euros, and your Escritura is drawn up to show
that you paid 100,000 Euros - the buyer will show a profit
of 20,000 Euros, which is taxable. So the seller may
suggest that you pay 100,000 Euros, but 5,000 Euros
was for the furniture, giving an Escritura value of only 95,000
Euros.
It is obviously
in the seller's interest to show less than the real purchase
price. It is the buyers interest to show as much as possible
of the purchase price on the Escritura. A sensible compromise
is usually reached by mutual agreement.
Escritura values
that are clearly below any reasonable market value may be
penalised by the Hacienda at a later date. It is fairly reasonable
to allow 5.000 Euros for the furniture, thus, the Escritura
value will be 5.000 Euros below the actual price paid,
and this is acceptable to the Hacienda.
Outstanding
Debt
If there are
any debts, outstanding mortgages, unpaid Community fees etc,
then you should make sure that these are paid directly to
the debtors first, and the seller gets the balance of his
money once all other interests in the property have been settled
from the purchasers money. The conveyancer will help you ensure
that all of the various bank certified cheques required for
the different parties are drawn up by the buyers bankers -
ready to hand over at the notary office on the day of completion.
Property
Owners Association
If you purchase
an apartment in a block, townhouse or villa in an urbanisation,
you will automatically become a member of the property owners
association, with the right to vote at the AGMs, which administers
general maintenance of zones of common ownership, such as
streets, gardens, hallways and swimming pool etc. An annual
budget is calculated to cover these costs, which is divided
between all owners according to the size of their properties.
Fees depend on the services offered and are reflected in the
annual amount.
-
Check the
latest receipt for the payment of monthly or yearly maintenance
charges "cuotas de comunidad" and discover how
much you will have to pay. It is advisable for your legal
representative to obtain a certificate from the association
that there are no charges outstanding.
-
Ask the
president or the administrator for a copy of the meeting
minutes and the community regulations. The minutes should
highlight problems, such as failing water supply and the
regulations will confirm your rights.
-
Please
note as some communities have special rules it is advisable
to check up if there is anything special such as "no
dogs" etc. Other items such as domestic services,
electricity, water, & telephone are metered and charged
as used.
-
If the
building belongs to a community it is important that the
property has a public title deed Escritura in which the
plot as well as the house is shown. The community of owners
is the legally registered body that administers the urbanisation
or apartment building.
This becomes
your responsibility upon possession of the property. Normally,
Spanish insurance companies offer a split policy, whereby
the property and its contents are assessed separately. Please
note that in the case of some property owner's associations,
community fees may include cover on the building.
NIF
(Tax Registration Number)
All property owners in Spain, whether resident or not, must
obtain this number from their local tax administration office.
As you will not able to pay your taxes or register your property
without it. It is simply a fiscal ID number for non-residents.
You also need it for payment of your annual taxes to Hacienda.
Again your legal representative will advise you on this matter.
If you are
a non-resident in Spain for tax purposes, you will be taxed
on any income arising from a Spanish source. If you let your
property in Spain, the income arising will normally be charged
at 25% as Income tax.
Even if you
do not let your property, you are still committed to declare
and pay tax at 25% of the amount resulting from calculating
2% of the rateable value of the property (see an example below).
All non-resident
property owners are liable to annual taxes on their property.
Using either the valor catastral or the value in the escritura
pública whichever is higher.
1) I.B.I. "Impuesto sobre Bienes Inmuebles"
(the annual real estate tax)
2) IRPF (property owners income tax)
3) Patrimonio (wealth tax)
The IBI will show the Valor Catastral (rateable value). This
is the official assessed value of the property. (Your legal
representative should ensure that there are no debts due from
previous years).
The local authority will annually levy this tax on your property,
the rate being around 0.7% of the rateable value of the property
- but it can slightly vary depending on the municipality.
IRPF (property owners income tax) is calculated from the base
of 2% of the Valor Catastral (this 2% is considered to be
your income on the property) and you pay on this imaginary
income the rate of 25%. For example, a non-resident with a
property with a Valor Catastral of 35.000 Euros the bill
would be 175 Euros. per annum ( 35.000 Euros @2% =
700 Euros @ 25%= 175Euros)
Note : the Valor Catastral is normally much lower than the
real value of the property. The owner of the property on the
31/12 of the year is liable for the payment of these taxes.
E.g. 2008 tax is due any time from Jan'2009 to Dec.2009. Payable
in hacienda office. The first year you purchase you are only
liable for the proportionate amount.
You have to pay "Patrimonio" (wealth tax) paid annually,
it is calculated upon the value declared in the deeds and
charged at the rate of .002% on base of up to 150,000 Euros.
On 90,000 Euros. you pay a yearly rate of 180 Euros,
however a resident has exemption on the first 84,000 Euros
Currency
If the buyer wants to pay in a foreign currency, it is simply
a matter of fixing an exchange rate on the private purchase
agreement. This rate is used to calculate (i) the Escritura
value, which must be in Euros, and (ii) the 5% retention
if you are buying from a foreigner, which must be paid to
the Hacienda in Euros. After any other parties with an interest
in the property have been paid, the buyer can pay the seller's
balance in any currency the seller/buyer agree.
Bank Certified Cheques
This is the normal method of exchanging money at the Notary
office, on the day of signing. A bank certified cheque is
as good as cash. The bank has specially stamped the cheque,
which guarantees the bank will honour it when it is issued
to the recipient. Allow 2 working days for your bank to arrange
the cheque. They simply require the name of the recipient
and the amount. There will usually be a charge for the service.
Term |
Description |
| Abogado |
Solicitor |
| Actos
Juridicos Documentados (AJD) |
Stamp
duty |
| Community
Administrator |
Check
for any outstanding fees that need to be taken into account |
| Contrato
de Compraventa |
Contract
of sale, this is signed when the 10% deposit is paid,
check 'completion time', Escritura value, Furniture
inclusion and other conditions of the sale
|
| Copy
of Escritura |
This
will be certified copy of the title deed |
| Cuotas
de comunidad |
Community
service charges |
| Escritura
Publica de Compraventa |
The
title deed. This will show who the true owner/s are
and define exactly what is being purchased |
| Escritura
value |
Purchase
price of the property and content value |
| Hacienda |
(Tax
Office) Checks there are no outstanding taxes and that
previous wealth tax submissions were made |
| Impuesto
Sobre Transmisiones Patrimoniales (ITP) |
Property
Transfer Tax |
| I.V.A. |
VAT |
| Legal
Definition of the property |
Exactly
what is being sold - (bit embarrassing to buy a villa,
and then find the deeds don´t include the land it
stands on) |
| Liabilities
and debts |
The
extent of any borrowings or liabilities, if any, guaranteed
by the property and any outstanding debts on the property. |
| Nota
Simple |
An
extract from the title, which confirms current ownership
and shows any mortgages or embargoes on the property.
Available from the land registry
|
| Notario |
The
public impartial witness (Notary) |
| Plus
Valia |
Capital
Gains tax on land |
| Registro
de la Propiedad |
The
land registry |
| Town
Hall |
Checks
that the annual Municipal rates have been paid up to
date |
