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Property Law and Taxes in Spain
| Date post: | 09-May-2015 |
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Index• Purchasing a Property in Spain
• Purchasing taxes
• Local Property Taxes
– Real Estate Tax– Waste Collection Fee
• Personal Taxes
– Non-Residents Property Income Tax– Property Wealth Tax
• The Spanish Will
• About Us
Purchasing a Property in Spain
• Purchasing a property in Spain is a straight forward transaction, so long as certain procedures are followed and understood correctly. The recommended steps are to:
– Always use a reputable Real Estate Agent; and– Engage legal counsel as early on in the purchase procedure as possible,
preferably before any exchange of funds or reservation deposits take place.
• Once a reservation deposit has been delivered to the Real Estate Agent or to the Seller’s lawyer, your lawyer will carry out a full due diligence on the property, to inspect any possible liens or defects on the title.
• Once a satisfactory search of the property has been made, legal counsel will then prepare a purchase and sale agreement, which will specify the terms and conditions of the sale, including price, payment terms, completion date and any covenants of the parties or existing liens on the property.
Purchasing a Property in Spain (2)
• The standard procedure for the resale of a property is that 10% of the purchase price is delivered to the seller upon execution of the private purchase and sale agreement, the balance being due on completion, time at which the Title Deeds (“Escritura Publica”) are signed before the Notary Public, and the buyer takes possession of the property.
• When purchasing a new property, the form of payment may be as follows; (i) payment in two instalments e.g.: 30% + VAT at the time of execution of the purchase and sale agreement and 70% + VAT upon completion, or (ii) payment in monthly instalments throughout the construction period.
• Upon execution of the Title Deeds before the Notary Public, taxes are paid to the Local Tax Office and the Title Deeds are registered with the Local Property Register.
Purchasing a Property in Spain (3)
• Costs
– In general terms, one should anticipate that the total costs involving the purchase of a property are approximately:
• 11% to 13% for resales, depending on purchase price.• 14% for new properties.
• Power of Attorney
– To formalize a power of attorney, the client should do so before a local Notary Public during a visit to Spain, or alternatively back in their home country either before a licensed Notary Public or before the Spanish Consulate abroad.
• Other Requirements
– According to Spanish applicable law, parties involved in the purchase or sale of a property in Spain are required to obtain a N.I.E. (Foreigner´s tax Identification number).
Purchasing Taxes
• VAT when purchasing a new property:
– Residential 10%;
– Commercial 21%; and
– Stamp duty 1.5% (in both cases).
• Transfer Tax when purchasing a resale:
– 8% for properties with a total value below 400,000 €;
– 9% for properties with a total value equal or above 400,000 €; and
– Properties in excess of 700,000 € will pay 10%.
Real Estate Tax
• This tax is calculated based on the property’s “valor catastral” (the official rated value),and can vary widely from town to town for the same type of property because it is a municipal tax.
• This real estate tax is known as the “IBI” (which stands for the “Impuesto sobre Bienes Inmuebles”). The tax is raised every year, as a result of inflation.
• The cadastral value (“valor catastral”) is usually much lower than the market value of the property. The cadastral value of a property is identified on municipal property tax receipts (IBI).
Waste Collection Fee
• Depending on the municipality where the property is located, you will be required to pay a fixed amount for the rubbish collection.
Non-Resident Property Income Tax
• You pay this version of income tax in Spain if the following conditions apply: (i) You do not reside in Spain, (ii) You own property in Spain, (iii) The property is exclusively for personal use and you do not rent it out, (iv) You have no other source of taxable income in Spain.
• Although you do not earn an income from the property, in the eyes of the Spanish tax authorities you still derive a benefit from owning a property in Spain and therefore have to pay an imputed income tax at the flat rate of:
– 24.75% of the rental income, for the periods that the property is rented out.
– 24.75% of an imputed income, for the periods that the property was for personal use.
Property Wealth Tax
• Everyone who owns real estate property in Spain (residents and non-residents alike) must pay an annual wealth tax based on the net value of their assets in Spain, after permitted deductions such as mortgages. This tax is collected by regional governments. Depends on the autonomous region where your property is located. There is no wealth tax payable in most regions, when the net value of your property does not exceed €700,000.
• The tax is based on the net value of you property (less mortgage, if any) or another value deemed appropriate by the tax authorities, with a tax-free allowance of up to €700,000. The tax rate works on a sliding scale with marginal rates starting at 0.2% and rising to 2.5%
Spanish Wills
• Upon acquiring a property or assets in Spain, although a Spanish Will is not a legal requirement, we highly recommend that you have a Will in place.
– In the event of intestate death (without a Will), the heirs or distributees would be required to follow an intestacy proceeding in the deceased’s country and obtain a resolution by such country’s court declaring who the legal heirs (or distributees) to the deceased’s Estate are (Intestate property).
– If however, there is a Will in place at the time of the testator’s death, which contains provisions and/or specifications regarding the Spanish assets, a Grant of Probate must be obtained in the Testator’s country ratifying who the legal heirs to the Spanish Estate are.
• A foreign Will can be enforced in Spain, but not without a possibly very costly and time consuming legal procedure for the deceased’s beneficiaries, due to the involvement of different legal jurisdictions and applicable international regulation.
Spanish Wills (2)
•However, when a Spanish Will is in place for a foreigner, governing assets located in Spain, there is no involvement of the foreign courts and the content of the Will will be applied. As a result, the inheritance process for the assets located in Spain becomes a simple one step process.
•The International Law provisions of the Spanish Civil Code (Article 9) provides that when a foreign property owner passes away, even when holding an official Spanish Residence permit, the disposal of any of the deceased’s assets in Spain will be governed by his own national law, and not by Spanish applicable law.
•The Will is a personal and individual act of the testator, which must be signed personally by the Testator and not by means of a power of attorney or proxy. Spanish legislation does not authorize for two testators to execute one same joint will, therefore separate wills are required for each testator. Wills can be drafted in double column to include Spanish and the native language of the testator, and is then formalized personally by executing it before a Notary Public in Spain.
•Inheritance Tax must be paid to Spanish Authorities for assets located in Spain.
About Us
• BSA LAW IN SPAIN is a boutique multilingual law firm located in Marbella.
• We specialized in conveyancing for non residents in Spain and all aspects of real estate transactions, including the sale and purchase of real estate properties throughout the Spanish territory, contract law, compliance and sales of properties by developers, real estate project finance, off-plan sales, negotiating developments and promotions, real estate management agreements and disposals, among others.
• In addition we assist our clients in setting up companies, formalizing Spanish wills,
tax representation and optimization.
• Our multidisciplinary practice allows us to offer other practices of law either by our own partners or through our network of national and international legal associates.
• Our commitment to our clients is to provide a personal and reliable professional
advice which we have accomplished successfully since the year 2000.
Contact Us
Jaime Montoro (Managing Partner)
T: +34 951 31 97 55
F: +34 951 31 97 30
Urb. La Alzambra 3-1 Melior Vasari
29660 Marbella (Spain)
www.bsa-lawinspain.com
This presentation was prepared by Bartolome & Associates Abogados S.L., trading as bsa-lawinspain. Information provided on this presentation is for general guidance only and is often simplified. It is not intended as legal advice. Actual legal and tax procedures in Spain are complex, and you should obtain professional assistance prior to concluding a real estate transaction.
© bsa-lawinspain all rights reserved. 2014.
