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THE PURCHASER IS
RESPONSIBLE FOR:
His own capital gains tax on any
increase of value in the title deed, the
local municipal tax (Plusvalia) and real
estate agent’s fees.
The payment of the local municipal tax (Plusvalía)
is the vendor’s responsibility by law,
but if agreed between the parties, the
normal custom is for the purchaser to
pay it to assure that it is paid within
the time limit. If, however, both
parties decide that the vendor should
pay this tax, please remember that is
registered against the property and you
will have to pay if the vendor fails to
do so. This tax is often not demanded
until some time after completion this is
why, in most cases, the purchaser
prefers to pay this tax liability.
NEW PROPERTIES:
For new properties, ask the vendor to
show you the Deed of Declaration of New
Building (Declaración de Obra Nueva),
together with a copy of the Declaration
of Alteration of Property of an Urban
Nature (Declaration de Alteración de
Bienes de Naturaleza Urbana), which both
demonstrates that the property has been
registered for the eventual payment of
I.B.I. (Impuesto de Biene Inmuebles).
WITHHOLDING TAX:
If you buy a property from a
non-resident person or a company, you
must withhold a 5% of the value declared
on the deed and pay that amount to the
Spanish Treasury (Tesoro Público). The
Spanish Treasury makes it the
purchaser’s responsibility that this
amount (5% retention of the purchase
price) is paid to the Tax Authority on
account of any Capital Gains tax
generated by the vendor with the sale.
CAPITAL GAINS TAX:
As the purchaser must ensure that the 5%
of the declared value on the deed is
paid to the Spanish Treasury, it is
clearly to the vendor’s interest to have
this value as low as possible.
If the vendor’s original Title Deed
shows that he purchased the property at
36.060,73 € , and your Title Deed is
drawn up to show that you paid 60.101,21
€ – the vendor will show a profit of
24.040,48 € which is taxable at 35%. So
the vendor may suggest that you pay,
60.101,21 €-, but 18.030,36 € would
correspond to the furniture and
42.070,85 € for the property.
It is obviously the vendor’s interest to
show less than the real purchase price.
It is the purchaser’s interest to show
as much as possible of the purchase
price on the Title Deed. A sensible
compromise is usually reached by mutual
agreement.
Title Deed values that are clearly below
any reasonable market value may be
penalised by the Spanish Treasury at a
later date. In this case, it is
important that you consult with your
solicitor to determine the values to be
established in the Title Deed.
OUTSTANDING DEBTS:
If there are any debts, outstanding
mortgages, unpaid Comunity fees etc,
then you should make sure that the debts
are paid by the vendor before paying him
the purchase price and signing the Deed
of Purchase/sale, or you can deduct the
amounts owed by the vendor from the
purchase price to be paid and settle the
debts on his behalf. This should be
agreed between the parties.
PROPERTY OWNERS
ASSOCIATION:
If you purchase an apartment in a block,
townhouse or villa in an urbanisation,
you will automatically become a memeber
of the property owners association, with
the right to vote at the AGMs, which
administrates the 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 Minutes
of the Meetings and a copy of the
Regulations governing the Community. The
Minutes should highlight problems, such
as failing water supply and the
Regulations will confirm your rights.
Please note 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.
INSURANCE:
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 case of some
property owners associations, community
fees may include coverage on the
building.
SPANISH NOTARISED
WILLS:
It is strongly recommended that when
your purchase a property that a
Notarised Will is granted in front of
Spanish Notary, only related with the
assets situated in Spanish Territory.
This will avoid unnecessary costs and
delays for the heirs as they have 6
months from the date of death to meet
the payment of inheritance tax. Delays
in the payment of inheritance tax will
be subject to a late payment fine.
PURCHASER PAYS: (
Running Costs and annual taxes ):
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 be 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
the Spanish Treasury. Again your legal
repesentative 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 of the escritura
pública, whichever is higher.
Rates receipt - I.B.I. (Impuesto sobre
Bienes Inmuebles)
Income Tax (Property owners Income Tax)
- I.R.P.F.(Impuesto de la Renta de las
Personas Físicas)
Wealth Tax - Patrimonio
The I.B.I. will show the Rateable value
for the property (valor catastral). 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.
I.R.P.F. ( 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 42.000 € the bill
would be 210 € per annum.( 42.000 @ 2%=
840 € @ 25%= 210 € )
Note. The Rateable value (Valor
Catastral) is normally much lower that
the real value of the property. The
owner of the property is liable to the
payment of this tax to the Spanish
Treasury, on or before the 31st
December. E.G. 1998 tax is due any time
from 1st January 1999 to 31st December
1999. The first year you purchase you
are only liable for the proportional
amount.
You have to pay Wealth Tax (Patrimonio)
which is paid annually. It is calculated
upon the value declared in the deeds and
charged at the rate of .002% on base of
up to 150.253,03 € . On 90.151,82 € you
pay a yearly rate of 180,30 € , however
a resident has exemption on the first
102.172,06 €
GENERAL INTEREST:
If the purchaser wants to pay in a
foreign currency, it is simply a matter
of fixing an exchange rate on the
private purchase agreement. The rate is
used to calculate (1) the Escritura
value which must be in € , and (2) the
5% retention if you are buying from a
foreigner, which must be paid to the
Spanish Treasury in Euros.
BANK CERTIFIED
CHEQUES:
This is the normal method for paying the
balance of the purchase price to the
vendor at the Notary’s office, on the
day of completion. 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 reciplent. Allow
working days for your bank to arrange
the cheque. They simply require the name
of the reciplent and the amount. There
will usually be a charge for the
service.
NOTE:
The information provided here is purely
for educational and informative purposes
to assist you with appreciating the many
differences in method that exist between
Spain and other European countries. This
may seem very complex but NOT to the
people in the Spanish legal system who
are doing this everyday of their lives,
and in general the completion of a
property purchase in Spain takes much
less time than the U.K. As indicated
above, it is advisable that you consult
with a solicitor before purchasing a
property in Spain.
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