How is the Real Estate Market in Marbella & Benahavis? Newsletter by Alfonso Lacruz - December 2017
How is the Real Estate Market in Marbella & Benahavis? Newsletter by Alfonso Lacruz - October 2017
How is the Real Estate Market in Marbella & Benahavis? Newsletter by Alfonso Lacruz - August 2017
How is the standard purchase process of a property in Spain (I)?
The process to buy a property in Spain is quite straight forward and, although it may vary, even a lot, for special cases, the idea of these articles is to establish the general case. The starting point would be when the price and additional conditions (time frames, furniture, etc.) for a purchase are agreed between the parties. The process includes the reservation (or taking the property out of the market while the due diligence is performed), a Private Purchase Contract, the signature of a Public Purchase Deed in front of a Notary and the Land Registration of the property on the buyers name. Although the steps are simple, I am going to dedicate an article to each one of those to try to cover as many general aspects as possible.
1.– RESERVATION OF THE PROPERTY
Usually the first step is to take the property off the market with a deposit while the due diligence on it is performed. That deposit is in most of the cases held by the real estate agency or the lawyer representing the seller on a escrow account. In general, the document establishes that if the legal and physical situation of the property is correct for the sale, the buyers should proceed to the following step or they will lose that deposit. If something is not fully legal or a physical defect that makes the property unsalable appears during the due diligence process, the party holding the deposit should released back to the buyers.
a) What documentation is checked during the due diligence process:
- Nota Simple: it states who is the owner, the description of the property and the liens on the property.
- The property can be in the name of more than one individual or in the name of a company so in the first case, all owners should agree with the sale and sign the proper documentation or for the second case, a proper official of the company should be the one signing all documentation for the sale.
- The description of the property at the Nota Simple (including and not limited to address, sizes and neighbors) has to match with what the buyer is has been told it is buying.
- The properties are sold, in general, free of liens. If any lien appears on the Nota Simple, the seller is liable to remove it from the record of the property at the Land Registry prior to the closing (that may include mortgages, embargos, urbanistic liens, etc.)
- Planning permission: that should be checked, specially in Marbella where the planning situation is not fully clear, to see if the property complies with the planning regulations of the area/urbanization/complex. This is not an easy step and should be dealed by a an expert on this issues like a lawyer, an architect or an experience real estate agent.
- Payment of the taxes (mainly council tax—IBI—and rubbish collection) and community fees: those expenses are charged against the property and should be checked that are up to date on payments.
b) A physical check by an expert technician or an experienced real estate agent to establish if the property has any defects that can or not be corrected or, or not, compensated. In case of major defects, like serious structural damage, the deal will be broken.
* Since each particular case is different, it is fully recommended that you check your own details with your lawyer.
Tips for Successfully Marketing Your Property
I have found this interesting video for those that are trying to sell their properties. It gives a general idea of all the selling process.
http://www.youtube.com/watch?v=Z4NLcYGqqJo
http://www.youtube.com/watch?v=Z4NLcYGqqJo
VISA Residence for Real Estate Investors. Spanish Golden VISA.
The new law giving Spanish residence to those buying properties in Spain was passed in September. There are lots of rumors and interpretations so thought it was a good idea to ask Ms. Blanca Loring, an expert on immigration law, to produce a brief note with the most important points that law refers to. This article is what she produced for me:
For additional advice, please contact Ms. Blanca Loring:
LORING INTERNATIONAL
T.: 95 282 89 43
E.: info@loringinternational.com
www.loringinternational.com
The legislation granting non-EU
nationals the Spanish residency via property investments has now officially
been made law. The residency visa will:
- Initially
entitle foreigners buying properties for 500.000 euros or more to stay in
Spain for a maximum of one year.
- Entitle
investors to obtain a further two-year Residency permit, renewable every 2
years as long as the investment threshold of 500, 000 Euros is maintained.
- Enable
investors to travel without a visa within the 26-country European
“Schengen zone”.
- Allow family re-unification.
The spouse and children under 18 can apply for Residency at the same time
as or after the initial application.
- There
is currently no minimum stay period in Spanish territory, but the holder
of the Spanish Residence Permit
must travel at least once to Spain during the period preceding each
renewal.
Procedure, requirements and documents:
The application for the Residence Visa must be submitted to the competent
consulate of Spain in the country where the foreigner lives and
the following documentation will be needed:
1. Photocopy of all pages of the passport.
2. Not being found illegally at Spanish territory.
3. Of age.
4. Not having criminal records in Spain and the countries where the
aplicant has previously lived during five years.
5. Not appear as objectionable in countries with which Spain has signed an
agreement to that effect
6. Proof of having public or private insurance authorized to operate in
Spain.
7. Having sufficient economic means to cover personal and family living
expenses.
8. If the family is being reunited, proving the family ties (marriage/birth
certificates)
9. Proving the ownership of one or more immovable properties in Spain with
an overall net investment contribution above 500.000 euros. Financing is
possible for amounts in excess of 500 thousand euros. The proof of the
investment must be made through a Registry of Property certificate attesting
ownership. Or, if the ownership title is not yet registered, via a copy of the acquisition
public deed and proof of filing the deed in the Registry
10. Proof of having paid the Visa´s fee.
The investor visa application
will be studied and solved in 10 working days.
For additional advice, please contact Ms. Blanca Loring:
LORING INTERNATIONAL
T.: 95 282 89 43
E.: info@loringinternational.com
www.loringinternational.com
Are you aware of the obligation to declare worldwide assets and income by Spanish residents? Who is considered Spanish resident? (2)
Following with the same matter I discussed last month on the obligation to declare world wide assets by Spanish residents and as I mentioned on last month’s article, this newsletter is going to discuss who is considered a tax resident in Spain. The article is based on a presentation prepared by Mr. Francisco Velazquez Cueto from the Spanish Tax Office.
The matter of the residency in fundamental because the Income Tax Regulations establish that taxpayers have to pay in his country of residence for the total world wide income independently of the international agreements of double taxation that may reduce or eliminate that taxation. What it is clear is that when a taxpayer is considered resident a in a country, his taxes are regulated by the legislation of the residency country (here I refer to the article of last month on the obligation to declare world wide assets and income by Spanish residents).
In accordance with the Spanish Law 35/2006, individuals are deemed to be tax residents in Spain if they meet any of the following conditions:
a) They spend more than 183 days per calendar year in Spain. Occasional absences shall be taken into account to calculate the period of residence, except when said individuals prove they have their tax residence in another country. In the case of countries or territories classified as tax havens, the Spanish tax authorities may request proof of residence in the tax haven for 183 days per calendar year.
b) Their main or central place of business is directly or indirectly located in Spain.
Unless there is evidence to the contrary, an individual shall be deemed to be a resident of Spain if, in accordance with the aforementioned criteria, his or her legally non-separated spouse and dependent minor children have their principal residence in Spain.
* Since each particular case is different, it is fully recommended that you check your own numbers with your lawyer or tax advisor.
The matter of the residency in fundamental because the Income Tax Regulations establish that taxpayers have to pay in his country of residence for the total world wide income independently of the international agreements of double taxation that may reduce or eliminate that taxation. What it is clear is that when a taxpayer is considered resident a in a country, his taxes are regulated by the legislation of the residency country (here I refer to the article of last month on the obligation to declare world wide assets and income by Spanish residents).
In accordance with the Spanish Law 35/2006, individuals are deemed to be tax residents in Spain if they meet any of the following conditions:
a) They spend more than 183 days per calendar year in Spain. Occasional absences shall be taken into account to calculate the period of residence, except when said individuals prove they have their tax residence in another country. In the case of countries or territories classified as tax havens, the Spanish tax authorities may request proof of residence in the tax haven for 183 days per calendar year.
b) Their main or central place of business is directly or indirectly located in Spain.
Unless there is evidence to the contrary, an individual shall be deemed to be a resident of Spain if, in accordance with the aforementioned criteria, his or her legally non-separated spouse and dependent minor children have their principal residence in Spain.
* Since each particular case is different, it is fully recommended that you check your own numbers with your lawyer or tax advisor.
More information can be found following these links:
Are you aware of the obligation to declare worldwide assets and income by Spanish residents?
I have receive a couple of queries and calls about this current issue and I thought that some insight was needed. I have, therefore, asked Mr. Juan Antonio Espinosa, tax advisor, to write this article to try to clarify the actual situation.
A new obligation with tax implications has been recently approved in Spain that requires the submission of the new tax 720 form called “Declaración informativa de bienes y derechos situados en el extranjero” ( I will translate it as Informative Statement of Foreign’s Assets and Rights).
Who has to declare: Individuals and legal entities who are Spanish residents and own assets or rights located in foreign countries (in my next article I will address who is considered Spanish resident).
What is to be declared: bank accounts; securities, assets, shares or rights representing the share capital, shares or equity on any kind of legal entity, assignment of rights to third parties; life or disability insurances or lifelong or temporary income resulting from capital allocations; personal and real properties located in foreign countries.
What information is to be provided: Identification of the assets owned as per the approved regulation. Regarding bank accounts, there is no obligation to declare any account when the sum of the amounts by December 31 does not exceed 50.000 euros. In respect to real estate properties, the information should include the type of property, location, address, acquisition date and purchase price.
How is to be declared: via internet by the tax payer or by an authorized third party.
Deadline: in general, the deadline ends on March 31 for the declaration of assets of the previous natural year. However, in 2013 and for the 2012 accounting period, the deadline has been extended to April 30.
Penalty regulations: The Law establishes strong penalties for those not submitting the statements, or not doing it in full or after the deadline. The penalties vary depending on the incompletion. If the submission is done after the deadline, the penalty is 100 euros for each piece of data submitted after the final date with a minimum of 1.500 euros. If there is information missing or no information at all, the penalty is 5.000 euros per each main category of information not submitted or incomplete wit a minimum of 10.000 euros. Those main categories are: bank accounts; shares, bonds or equity; and real estate properties.
* Since each particular case is different, it is fully recommended that you check your own numbers with your lawyer or tax advisor.
A new obligation with tax implications has been recently approved in Spain that requires the submission of the new tax 720 form called “Declaración informativa de bienes y derechos situados en el extranjero” ( I will translate it as Informative Statement of Foreign’s Assets and Rights).
Who has to declare: Individuals and legal entities who are Spanish residents and own assets or rights located in foreign countries (in my next article I will address who is considered Spanish resident).
What is to be declared: bank accounts; securities, assets, shares or rights representing the share capital, shares or equity on any kind of legal entity, assignment of rights to third parties; life or disability insurances or lifelong or temporary income resulting from capital allocations; personal and real properties located in foreign countries.
What information is to be provided: Identification of the assets owned as per the approved regulation. Regarding bank accounts, there is no obligation to declare any account when the sum of the amounts by December 31 does not exceed 50.000 euros. In respect to real estate properties, the information should include the type of property, location, address, acquisition date and purchase price.
How is to be declared: via internet by the tax payer or by an authorized third party.
Deadline: in general, the deadline ends on March 31 for the declaration of assets of the previous natural year. However, in 2013 and for the 2012 accounting period, the deadline has been extended to April 30.
Penalty regulations: The Law establishes strong penalties for those not submitting the statements, or not doing it in full or after the deadline. The penalties vary depending on the incompletion. If the submission is done after the deadline, the penalty is 100 euros for each piece of data submitted after the final date with a minimum of 1.500 euros. If there is information missing or no information at all, the penalty is 5.000 euros per each main category of information not submitted or incomplete wit a minimum of 10.000 euros. Those main categories are: bank accounts; shares, bonds or equity; and real estate properties.
* Since each particular case is different, it is fully recommended that you check your own numbers with your lawyer or tax advisor.
Juan Antonio Espinosa Guerrero
Rafael Espinosa Asesores Asociados
T.: 952 460 358
E.: juanantonio@rafaelespinosaasesores.com
** For more information from the Spanish Tax Office: http://www.agenciatributaria.es/AEAT/Contenidos_Comunes/No_residentes/Tributacion_de_no_residentes/Folletos_divulgativos/irnringles.pdf
Are you aware of the taxes you have to pay when you sell a Property in Spain? (2)
There are mainly two taxes involved when selling a property in Spain: Capital Gain Tax and Plusvalia (Council) Tax. This article is going to refer only to the Plusvalia Tax as the Capital Gain Tax was covered on my previous article.
The Plusvalia (Council) Tax is a local tax in urban areas levied by Spanish Town Halls on property transactions (houses, commercials, plots, etc.) of whatever type (sale, inheritance, donation, etc.) based on the growth in the value of urban land. By law, the tax is payable by the vendor although in some cases, and by mutual agreement, the buyer may pay it.
The Plusvalia is a tax that requires an agreement of the Plenary Session of the Town Hall where applicable coefficients, tax rates, reductions, exceptions will be fixed inside certain margins established by law (Ley Reguladora de Haciendas Locales). On Inheritances and donations, it is the beneficiary the one obliged to pay while, in sale transactions, it is the seller (if the seller is non-resident in Spain, it is recommended that the buyer retains the Plusvalia tax amount that will be required to him if the seller does not pay) the liable party.
The Plusvalia is calculated as a function of the catastral value of the land and the number of years of ownership (up to a maximum of 20 years). The higher the catastral value and the number of years of ownership, the higher the tax.
Plusvalia tax = Catastral value of the land x Yearly percentage of value’s increase x Number of years of ownership x Tax rate
The yearly percentage of value’s increase and the tax rate are fixed by the Town Halls. They are established locally as:
Marbella: Yearly percentage of value’s increase: 2,4% Tax rate: 30%
Benahavís: Yearly percentage of value’s increase: 2,3% Tax rate: 20%
Up to now, when a Town Hall had updated the catastral values, usually with really high increases of the values compared to the existing ones, article 107.3 of the Law had established that on the following five years after the revision of the values, the Town Halls had to apply a deduction of 40 to 60 % to the catastral value. If a Town Hall had not that deduction established, 60% will be applied. Marbella’s Town Hall was exactly in this situation. However, a new Law passed in 2012 changed that situation allowing the Town Halls to eliminate those deductions. We will see how Marbella reacts to that new option.
Since each particular case is different, it is fully recommended that you check your own numbers with your lawyer.
The Plusvalia (Council) Tax is a local tax in urban areas levied by Spanish Town Halls on property transactions (houses, commercials, plots, etc.) of whatever type (sale, inheritance, donation, etc.) based on the growth in the value of urban land. By law, the tax is payable by the vendor although in some cases, and by mutual agreement, the buyer may pay it.
The Plusvalia is a tax that requires an agreement of the Plenary Session of the Town Hall where applicable coefficients, tax rates, reductions, exceptions will be fixed inside certain margins established by law (Ley Reguladora de Haciendas Locales). On Inheritances and donations, it is the beneficiary the one obliged to pay while, in sale transactions, it is the seller (if the seller is non-resident in Spain, it is recommended that the buyer retains the Plusvalia tax amount that will be required to him if the seller does not pay) the liable party.
The Plusvalia is calculated as a function of the catastral value of the land and the number of years of ownership (up to a maximum of 20 years). The higher the catastral value and the number of years of ownership, the higher the tax.
Plusvalia tax = Catastral value of the land x Yearly percentage of value’s increase x Number of years of ownership x Tax rate
The yearly percentage of value’s increase and the tax rate are fixed by the Town Halls. They are established locally as:
Marbella: Yearly percentage of value’s increase: 2,4% Tax rate: 30%
Benahavís: Yearly percentage of value’s increase: 2,3% Tax rate: 20%
Up to now, when a Town Hall had updated the catastral values, usually with really high increases of the values compared to the existing ones, article 107.3 of the Law had established that on the following five years after the revision of the values, the Town Halls had to apply a deduction of 40 to 60 % to the catastral value. If a Town Hall had not that deduction established, 60% will be applied. Marbella’s Town Hall was exactly in this situation. However, a new Law passed in 2012 changed that situation allowing the Town Halls to eliminate those deductions. We will see how Marbella reacts to that new option.
Since each particular case is different, it is fully recommended that you check your own numbers with your lawyer.
Are you aware of the taxes you have to pay when you sell a Property in Spain? (1)
There are mainly two taxes involved when selling a property in Spain: Capital Gain Tax and Plusvalia (Council) Tax. This article is going to refer only to the Capital Gain Tax while the Plusvalia Tax will be discussed in a coming Newsletter.
Spanish capital gains tax is complex. It is paid by residents of Spain on their worldwide assets and by non-residents on property that they own in Spain. The main home of Spanish residents can be exempt depending on your situation.
Capital Gains Tax Rates
From 2007, gains made on the sale or transfer of assets, whether moveable or immovable assets, are taxed as “savings income” – so gains are added to your other savings income for the year and then taxed accordingly. From 1st January 2010 the tax was 19% on the first €6,000 of savings income and 21% thereafter. As part of Spain’s austerity measures an additional contribution has been added to the tax rates for 2012 and 2013. The total savings income (including gains) tax rates for 2012 are therefore: up to 6.000 € the rate is 21%, from 6.000 € to 24.000 € the rate is 25% and over 24.000 € the rate is 27%.
Capital Gains on the Sale of Property
In addition to the cost of acquisition, lawyer and real estate agent invoices, expenditure on improving or enhancing the property are allowable as a deduction when calculating the net gain (selling price minus acquisition cost), and there is an "indexation co-efficient" that increases the allowable costs for inflation, based on how long the property has been owned.
Reductions
There may be reductions available depending on whether you acquired the property before or after 31 December 1994 and whether or not it was sold after 20 January 2006. If you bought your property after 31 December 1994, the gains are taxed in full (subject to the main home relief/exemption – see below). Where a property acquired before 31 December 1994 was sold prior to 20 January 2006, the full gain was reduced by 11.1% for every year (or part-year) owned prior to 31 December 1994 - so property acquired before 31 December 1986 was wholly tax free. Where the asset was acquired before 31 December 1994 and is disposed of on or after 20th January 2006, the gain needs to be time-apportioned into: the gain arising before 20 January 2006, and the gain accruing from that date. The reduction is only available on the portion of the gain accruing before 20 January 2006. Gains accruing from 20 January 2006 are taxed in full. Gains are treated as accruing evenly throughout the period of ownership.
Main home relief/exemption if under 65
Reinvestment relief is available to Spanish residents when they sell their main home and invest in a new one. To qualify for this relief, the property must be your main residence and you must have lived in it continuously for at least three years (less if you had to sell because of a change of job, marriage etc.) from the date of sale or completion. You must then buy a new main residence within four years, starting two years before the sale. The tax relief is based on the proportion of the sale proceeds reinvested into the new home. If the new home costs more than the sale price of the old home, then all of the gain is exempt. If only 50% of the sale proceeds are reinvested, then only half of the gain is exempt. If the property being sold has a mortgage on it, then it is the net sale proceeds that need to be fully reinvested to escape capital gains tax. In order for the reinvestment relief to apply, the taxpayer must declare the gain on their Spanish tax return together with their intention to reinvest the proceeds into a new main home. If the required declarations are not made, the relief is likely to be denied by the Spanish tax authorities. Note that reinvestment relief is only available to Spanish tax residents (you will need to have registered as a resident and be paying tax locally). However the main residence does not need to be in Spain to qualify for the relief, nor does the new home.
Main home exemption if over 65
If, as above, you have lived in the property as your main home for three years or more, if you are over 65 years of old when you sell it, the gains are exempt from capital gains tax even if you do not buy a new property. Again, you must be able to show you have been tax resident in Spain.
Sale of property by non-residents
When property is sold by a non-resident of Spain, purchasers must withhold 3% of the purchase price (not the gain) and pay it over to the Spanish tax authorities as an advance payment of capital gains tax on behalf of the vendor. If this is not paid, the purchaser can be fined and the unpaid tax becomes a charge over the property itself. If this 3% exceeds the tax due on the gain, a repayment will be made of the excess; however, if the tax due is more than the retained amount, further tax will be due in Spain. The vendor must file a Spanish tax return on the transaction within three months of the sale before any repayment can be made. If a person is not resident in Spain, tax may also be due in the country where they are resident, subject to any Double Taxation Treaty Relief.
Since each particular case is different, it is fully recommended that you check your own numbers with your lawyer.
Spanish capital gains tax is complex. It is paid by residents of Spain on their worldwide assets and by non-residents on property that they own in Spain. The main home of Spanish residents can be exempt depending on your situation.
Capital Gains Tax Rates
From 2007, gains made on the sale or transfer of assets, whether moveable or immovable assets, are taxed as “savings income” – so gains are added to your other savings income for the year and then taxed accordingly. From 1st January 2010 the tax was 19% on the first €6,000 of savings income and 21% thereafter. As part of Spain’s austerity measures an additional contribution has been added to the tax rates for 2012 and 2013. The total savings income (including gains) tax rates for 2012 are therefore: up to 6.000 € the rate is 21%, from 6.000 € to 24.000 € the rate is 25% and over 24.000 € the rate is 27%.
Capital Gains on the Sale of Property
In addition to the cost of acquisition, lawyer and real estate agent invoices, expenditure on improving or enhancing the property are allowable as a deduction when calculating the net gain (selling price minus acquisition cost), and there is an "indexation co-efficient" that increases the allowable costs for inflation, based on how long the property has been owned.
Reductions
There may be reductions available depending on whether you acquired the property before or after 31 December 1994 and whether or not it was sold after 20 January 2006. If you bought your property after 31 December 1994, the gains are taxed in full (subject to the main home relief/exemption – see below). Where a property acquired before 31 December 1994 was sold prior to 20 January 2006, the full gain was reduced by 11.1% for every year (or part-year) owned prior to 31 December 1994 - so property acquired before 31 December 1986 was wholly tax free. Where the asset was acquired before 31 December 1994 and is disposed of on or after 20th January 2006, the gain needs to be time-apportioned into: the gain arising before 20 January 2006, and the gain accruing from that date. The reduction is only available on the portion of the gain accruing before 20 January 2006. Gains accruing from 20 January 2006 are taxed in full. Gains are treated as accruing evenly throughout the period of ownership.
Main home relief/exemption if under 65
Reinvestment relief is available to Spanish residents when they sell their main home and invest in a new one. To qualify for this relief, the property must be your main residence and you must have lived in it continuously for at least three years (less if you had to sell because of a change of job, marriage etc.) from the date of sale or completion. You must then buy a new main residence within four years, starting two years before the sale. The tax relief is based on the proportion of the sale proceeds reinvested into the new home. If the new home costs more than the sale price of the old home, then all of the gain is exempt. If only 50% of the sale proceeds are reinvested, then only half of the gain is exempt. If the property being sold has a mortgage on it, then it is the net sale proceeds that need to be fully reinvested to escape capital gains tax. In order for the reinvestment relief to apply, the taxpayer must declare the gain on their Spanish tax return together with their intention to reinvest the proceeds into a new main home. If the required declarations are not made, the relief is likely to be denied by the Spanish tax authorities. Note that reinvestment relief is only available to Spanish tax residents (you will need to have registered as a resident and be paying tax locally). However the main residence does not need to be in Spain to qualify for the relief, nor does the new home.
Main home exemption if over 65
If, as above, you have lived in the property as your main home for three years or more, if you are over 65 years of old when you sell it, the gains are exempt from capital gains tax even if you do not buy a new property. Again, you must be able to show you have been tax resident in Spain.
Sale of property by non-residents
When property is sold by a non-resident of Spain, purchasers must withhold 3% of the purchase price (not the gain) and pay it over to the Spanish tax authorities as an advance payment of capital gains tax on behalf of the vendor. If this is not paid, the purchaser can be fined and the unpaid tax becomes a charge over the property itself. If this 3% exceeds the tax due on the gain, a repayment will be made of the excess; however, if the tax due is more than the retained amount, further tax will be due in Spain. The vendor must file a Spanish tax return on the transaction within three months of the sale before any repayment can be made. If a person is not resident in Spain, tax may also be due in the country where they are resident, subject to any Double Taxation Treaty Relief.
Since each particular case is different, it is fully recommended that you check your own numbers with your lawyer.
Source: angloinfo.com
Current Situation of the Real Estate Market from the Point of View of a Lawyer. (Part I)
As I mentioned in my previous letter, during the coming months I will be sending you useful information about the real estate business, as many owners or potential buyers are unsure of the exact process of the sale of their properties in Spain, the real estate market and/or information of interest for your property. Many times the selling or buying process of real estate is not a standard procedure and there are some important items to be checked. I have requested the collaboration of the reknown lawyer, Mr. Arturo Perez Gonzalez from Martinez Echevarria, Perez and Ferrero Lawyers, to give us an insight on the matter:
CURRENT SITUATION OF THE REAL ESTATE MARKET FROM THE POINT OF VIEW OF A LAWYER (PART I)
We know that the purchase or sale of a property must be made through a Notary Public, that it will generate certain expenses and taxes, that it is very convenient the registration of the operation at the relevant Land Registry, that the property must hold its municipal first occupation licence, etc. And in general, that it is equally very advisable the intervention of a real estate and/or legal professional, able to give you certain guarantees on what you are buying or selling, and its formalization.
However, independently from these generalities or what is obvious, from a legal point of view, as lawyer working in this field, I would like to highlight some other points which are not that obvious, that are not as “known” by the public in general, but which are not less important or decisive, to bear in mind, when you are going to buy or sell. And so, we can outline – in summary – the following:
A.- Urban Regulation General Plan (PGOU).-
The PGOU, as urban regulation instrument of a town or village and its municipality, whose temporary currency period is of a minimum of eight years, shall indicate to us at any given moment which urban qualification does our property have or that we wish to buy, and – very important – the surrounding area. And as the urban reality does change, as the Laws do constantly, it is very important to know, specially every time when a PGOU of a town or village is revised, what does that PGOU state for our property, in order to have the possibility of presenting a plea as may correspond regarding our rights and interests, within the legal deadline as established. All of this, without detriment to the Urban Regulation Law of Andalusia (LOUA), to which is subject each PGOU in Andalusia.
B.- Tax value.-
Every property has got a tax value, which is different from its cadastral value - which we can find in the annual Real Estate Property Tax receipts (IBI) – or from its market value.
Right now with the crisis, when the effect of sales with great discounts in the price is happening, we are going to find situations where, once declared in the public deeds the real price –market value- of the real estate transaction, this price is less or much less the tax value of the property being purchased. So, in these cases, the relevant Tax Office in charge of the Transfer Tax and Stamp Duty (ITP-AJD), prior payment of that Tax via self-declaration, shall issue to the buyer a complementary bill of that Tax for the difference between the declared price –market value- and the tax value corresponding to that property.
We will have to know then that tax value before formalizing the purchase or the sale, in order to quantify exactly the total figure of expenses and taxes that this operation will generate for the buyer.
Arturo Pérez González (Martinez Echevarría, Perez y Ferrero Abogados)
Capital Gain Tax -- An overview
As I mentioned in my previous communication, during the coming weeks I will be sending you useful information about the selling process, as many vendors are unsure of the exact process of the sale of their properties in Spain. For this reason, the following is a brief description of the capital gain tax to be paid by the seller:
CAPITAL GAIN TAX
Any non resident -individual or entity- who sells his Spanish property is liable to pay Spanish Capital gain tax at a rate of 19%.
3% retention.
As guarantee against this tax the buyer must withhold 3% of the purchase price and deposit it with the Tax Office in the seller’s name. This deposit must be done within 30 days after completion using Form 211. If the buyer fails to do so, the property will be liable for this 3%.
If the seller is tax resident in Spain, he will not suffer the 3% retention. In order to prove it, the seller must provide the Notary, at completion, with a tax residency certificate issued by Hacienda. The residence card issued by the Police is not enough for this purpose.
How Capital Gain Tax is calculated?
Roughly, Capital gain tax is 19% of the sale value minus purchase value.
The “Purchase value” is the sum of the following concepts: Purchase price; Expenses and taxes inherent to this purchase (Lawyer fees, Notary and Land Registry fees, transfer tax, stamp duties, mortgage costs); Annual 3% Special Tax for off shore companies and; Improvements, not mere reforms (i.e. swimming pool or a home extension).
In order to bring the above sums to today’s values it is necessary to apply an inflaction correction which amount will depend on the years of purchase and sale.
The “Sale value” is much simpler to calculate: total sale price minus taxes and expenses incurred (lawyer fees, real estate agent fees, plusvalía tax, and notary fees if any).
Transitory rules.
Those who purchased the property before 31/12/1994 can apply a reduction factor to reduce the gain.
How to settle the tax?
The vendor must settle the capital gain tax within 4 months after completion using Form 210. The 3% deposit will be deducted from the amount of tax owed. If this 3% deposit is greater than the tax due, Hacienda will refund the excess by bank transfer to the account mentioned in Form 210. Hacienda will deduct any other outstanding taxes (i.e. annual income tax) before refunding the money.
Legal tips.
Make sure you keep records of all expenses and taxes paid as well as any home improvements as they will reduce the capital gain tax significantly.
When buying a property make sure that the vendor deposited the 3% (previously 5%) if he purchased the property from a non resident. He must show you Form 211. Otherwise you property can be found liable for this deposit.
Adolfo Martos Gross
Gutiérrez del Alamo y Martos, Abogados