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Question -
What will my legal advisor / lawyer do?
Your legal advisor (or specialist acting on your instructions)
will verify that the property and / or piece of land is "free of debt". If it does
have a debt attached, it's normal for the lawyer to sort this out in front of the 'Notario'
(see below for "Notario").
Amongst other things they will check that the vendor
has good title to the property and is freely entitled to sell it and there are no legal charges which
need to be settled, Taxes and other debts due on the property have been paid, All permissions and licences
are held and the final contract is fair and has reasonable terms.
They will then take your
instructions for transferring the property title into your name, Payment of fees and taxes for which you
are liable and legal registration of your ownership of the property with the authorities.
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Legal phrases Explained 'Escritura' and 'Notario'
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A term you will come across during the purchase process is
'Escritura' the Spanish title deed, which is signed under your lawyer's
guidance when all other formalities are complete. Since the process leading up to the
signing of the Escritura can take several weeks, most people find it inconvenient to
sign this in person and therefore, even those living in Spain, appoint their lawyer as
their "Attorney", giving them "power of attorney" to sign the
Escritura on their behalf.
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IMPORTANT NOTE:
You should be given a copy of the Escritura, translated into
English, before you agree to your lawyer signing for you ... Signatures to the Escritura
are witnessed by a 'Notario' … a senior official who verifies that the deed is
genuine and understood by everyone signing it. The Notario is there to ensure that
everything is conducted fairly and properly … however they do not give legal advice.
Question - How Much to allow for fees and costs?
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Whether your purchase is for a new or re-sale property, the Spanish
Government require 7% (IVA for a new property or property transfer tax for re-sale).
In addition, as mentioned earlier, your legal costs are usually in the region of 1 to 2 % of
the total purchase price. Your lawyer will let you know what the actual figure when your
completion-date approaches. A Spanish bank account should be opened well in advance, to
enable you to put regular payments, associated with property ownership, on standing order.
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Question -
Who’s name ... Sole, joint or corporate ownership?
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Advice should be taken from your legal representative
regarding sole or joint, and in some cases, "corporate", ownership of your
Spanish property.
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Making a Spanish will
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Because the "inheritance law" in Spain is different to
the UK law, you may find that in the event of death, the property will not necessarily
pass to your surviving spouse, even for a life interest. It is therefore good advice
that if you own property in Spain you should make a Spanish will. This will avoid any
doubt about your intentions for this property upon your death and enable your wishes to
be carried out, which may not be possible if you rely upon your UK will. Lawyers in Spain
and specialists in Spanish law in the UK will be able to give you advice on this subject.
We Insist that you should make arrangements for a this. .
Spanish Law ‘different' not difficult'
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Laws and practices surrounding property purchase in another
country can seem very involved. Spain did once have a reputation for complex property
law, which did sometimes catch unwary foreigners out.
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However with more and more UK citizens purchasing in
Spain, the systems, although still "different" are far less complicated.
The formalities of purchasing in Spain have now become far more routine and straightforward,
provided good advice is obtained and followed.
Taxes on Purchases
If you are buying
a re-sale property you are obliged to pay Transfer Tax (ITP) at 7%. If you are
buying a new property or a property in the course of construction from a promoter,
developer or habitual trader, then you should pay VAT (IVA) at 7% plus Stamp Duty
at 0.5%
The VAT (IVA) rate increases to 16% if you are purchasing plots of
land, commercial premises or garage spaces.
‘Plusvalia'
is a tax levied by the local Town Hall based on the
particular area where the property is located, on the surface area of the land,
on the current value and on the date of the previous title deed. This tax may
range from a few approximately £12 to as much as £1,200 on larger properties
with a lot of land. By law the vendor is obliged to pay this tax but it is common
practise for the parties to negotiate on who is to assume this liability.
Useful information on rates and taxes payable
Annual Rates
(Impuesto sobre Bienes Inmuebles) This is the main
local property tax affecting owners of properties in Spain payable yearly to
the Town Hall. The amount of the tax is calculated by reference to the valor
catastral (official value of the property) registered in respect of all
properties in Spain. The percentage charged varies from area to area.
Refuse Tax
(Basura) A local tax related to rubbish
collection to be paid to the Town Hall every 6 months.
Wealth Tax
(Impuesto sobre Patrimonio) A owner of a Spanish
property must, every year, submit a Wealth Tax Return. This must show the value
of all of that person's assets located in Spain. The tax is based upon the
real value of the property. For values up to approximately £112,000 of assets,
the wealth tax is 0.2 %. Above this level, the rates of tax increase slowly.
Capital Gains Tax
(Impuesto sobre Incremento de Patrimonio)
Non-residents pay capital
gains tax of 35% on profits arising from the sale of their Spanish assets. The
tax is based on the difference of the value of the property when it was purchased
and the value on its sale. As a general rule, the authorities require that buyers
from non-resident sellers deposit 5% of the purchase price with the Spanish Tax Authorities.
The amount of capital gains tax lowers each year and after 10 years of ownership the amount
is zero, if you should purchase another property in Spain. We suggest property owners to appoint
a Fiscal Representative who will undertakes on behalf of the taxpayer all dealings with the Spanish
Tax Authorities.
Completing your purchase - ‘NEW BUILD’ -
see Purchase Process
After paying the reservation deposit usually 3,000 € you will
require evidence of the terms of purchase in writing. At this stage the developer /
lawyers will draw up the private contract. A further payment is required within 30 days
of the initial contacted date this usually is between 30% to 50%. If the vendor fails to
perform his obligations on build, you will be entitled to the resolution of the contract
and claim damages or either demand the obligatory fulfillment of the contract. Before your
lawyer exchanges contracts he will have completed his searches and investigations in the Land
Registry in respect of the property and the balance of the outstanding balance is paid.
Re-sale property - ‘PURCHASES’ -
see Purchase Process
Normally a 10% deposit is required
for the initial deposit, then the contracts are drawn up between the two
parties. The balance is usually paid on completion, which can be as quick as
14 days. Full legal representation should be taken on a resale property, as
some properties do have hidden debts, which are transferable to the new owner.
Finally on the day fixed for completion your lawyer will go to the Notary
Public to sign the Title Deed, making the final payment to the vendor who
will simultaneously pass over possession of the property to you, handing
you the keys. At this stage the sale is completed. Immediately after completion,
the notary will fax details of the title deed to the local Land Register to
inform them of the identity of the new owner so as to prevent the property
being sold twice. In this way the Notary and the Land Register act together
to protect and guarantee your interests. You will then have to pay the relevant
taxes and have the original title deed submitted to the Land Register for
registration of your title.
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