| This
is a guide to property purchase on the Costa Blanca.
It is a guide to acquaint you with the Spanish property system -
it is NOT legal advice! Our strong recommendation is
that you seek legal advice at ALL stages of any purchase &, by
so doing, protect your own interests at all times!
Appointing
a Fiscal representative i.e a solicitor (abogado in Spain)
Whilst
it is not totally necessary to have a solicitor when purchasing a
house in Spain, it is highly recommended. They will be able
to check out any outstanding debts which exist on the property as
well as help with contracts, wills and NIE numbers. You are
free to appoint a solicitor of your choice, or if you prefer
we can recommend one.
NIE
number(Numero de Identificacion de Extranjeros).
It
is essential to have an NIE number for any financial dealings you
may have in Spain. This is a simple, but sometimes lengthy process
which involves filling in a form with your solicitor, you
also need to supply a colour ‘passport’ photo, a
photocopy of your passport and your passport, the solicitor will
then obtain your NIE number from the local police station.. The
NIE number can take anything from 1 week to 6 weeks to be obtained
and our advice is to apply for one as soon after you arrive in
Spain as possible. The price for this is generally included in the
fee for the conveyancing however, if you wish to apply for one
earlier the fee is normally around 55 Euros.
Bank
Accounts
Whilst
it is not a necessity to have a Spanish Bank Account to purchase a
property in Spain we strongly recommend it. We can help you
to open an account at the bank of your choice. The cost of
opening a bank account for ‘non-residents’ is around £10 for
the administration fee.
Mortgage
You
can choose to apply for a mortgage in Spain or from the UK.
Mortgage rates in Spain tend to be lower than those in the UK
currently around 5%.
Applying
for a mortgage in Spain is a straight forward process, as in the
UK. You will need to prove that you have an income or
sufficient funds to pay the mortgage. The level of mortgage
offered is directly dependent on your financial status and also
the declared value of the property you wish to purchase.
There
are generally 2 levels of mortgage offered, one for residents and
one for non-residents. For non-residents the mortgage offered is
generally around 60% of the declared value, for residents it is
usually around 80% of the declared value of the property.
Purchasing
a Property
Once
you have decided on the property you wish to purchase and the
terms and conditions have been negotiated with the vendor then a
deposit of 10% of the purchase price is required to secure the
property. This acts as your official confirmation that you
intend to proceed with the purchase of that property. The
remaining 90% is payable on the signing of the title deeds before
the Notary.
If
you are purchasing a new construction then it is usual for
the constructor to ask for stage payments to be made on the
property. These will vary dependent on the individual constructor.
In
the case a new building, the Option Contract reserves the plot of
your choice allowing 30 days to carry out the necessary searches,
after which the Main Contract is signed. This would state the
payment structure at the different stages of construction. The
Main Contract is the document that protects the purchaser´s legal
status to the property. It clearly lays out both the purchaser's
and the vendor's (in this case, the developer) contractual
obligations and responsibilities.
In the case of a resale or
ready-built property this is called an Option Contract or
Reservation Contract. It acts as a signed receipt for the deposit
and is normally valid for 30 days, or longer by agreement with
both parties. Once the agreed time limit has passed the Title Deed
(Escritura) is signed by both parties before a Notary. If it is
difficult for either party to attend it is quite in order for them
to sign a Power of Attorney enabling either the Agent or their
Lawyer to sign on their behalf.
The Option Contract has
conditions which protect both the purchaser and the vendor. Should
the purchaser decide to withdraw from the sale, his deposit would
be forfeited in favour of the vendor. However, should anything
arise in the conveyancing, to dispute the legality of the
property, the purchaser will have the option of cancelling the
contract and the deposit will be refunded.
The
solicitor you appoint will carry out all necessary searches on the
property; to ensure that it is owned by the vendor, it has
planning permission, there are no outstanding debts or charges on
the property, and other legal encumbrances.
Once
the searches on the property are satisfactorily completed and the
deposit has been paid in accordance with the terms and conditions
of the contract, then, as previously stated, the title deeds are
signed by both the buyer and the seller before the Notary.
Completion and
Escritura
Upon final or main payment,
in the case of a resale property, the vendors together with the
purchasers or their representative will sign over ownership of the
property before the Notary. This document is known as an Escritura.
The original signed
document is kept by the Notary and he will issue a first legalised
copy which he signs and stamps. This is then sent to the Land
Registry where it is registered in the purchasers´ name, “free
of all charges and encumbrances”. Some time later the deeds are
ready for collection fully legalised. Should these deeds ever be
lost or misplaced, the Notary will issue a second legalised copy.
The Transfer Tax, in the case of a resale property, will be paid
at the time of signing the Escritura.
The
Notary (Notaria)
Abogados
must not be confused with Notaries. The Notary (Notaria) is
a solicitor appointed by the Spanish government to witness the
signing of all legal public documents before their inscription in
the property registry. In this case the title deeds (escritoria in
Spain) of the property. He receives the Transfer Tax
(applicable only to resale properties) on behalf of Hacienda (the
Spanish Tax Authorities). He represents both the buyer and
the seller.
The
Notary fees are around 2% of the purchase price of the property
and must be paid at the time of the signing of the deeds. The
Original signed document is retained by the Notary who will apply
for a formal change in the land registry. The purchaser will
receive an initial legal copy of the title deed which is signed
and stamped by the Notary. The official title deed can take a
while to be processed and until then this is your official proof
of ownership and must be kept in a secure location.
Land Registry (Registro
de la Propiedad)
The Land Registry Office is
where all Escrituras are registered. All local Land Searches are
carried out here and any charges or encumbrances relating to the
property will be registered here. Registry fees vary according to
the Land Registry. The charges are similar to that of a Notary and
will seldom exceed 500 euros.
Taxes
You
should definitely allow for a sum of around 10% of the price of
the property to cover payment of purchasing fees such as land
registry fees, notary fees, legal fees and taxes.
VAT (IVA in Spain)
VAT is known as IVA in
Spain and is applicable to the sale of all new property.
There are different ratings
which are as follows:
Plot only 16% VAT, Plot
with construction 7% VAT (assuming that the landowner and the
developer are one and the same), new ready-built properties 7% VAT
Resale properties are not
subject to VAT
Plus
Valia
Plus Valia is a local tax
calculated as a percentage of the difference in the increased
value of the property from when it was last sold. The calculation
is based on the Rateable Value (not on the real value) of the
property and is a one off payment charged when property changes
hands and due within a few months of purchase.
Each Town Hall defines the
percentage and it varies according to municipality. Not all Town
Halls enforce Plus Valia. Normally the vendor accepts
responsibility for the payment of this tax
Transfer Tax
All resale property bears a
7% Transfer Tax but is exempt from VAT. The Transfer Tax is paid
to the Notary at the time that final contracts are signed.
The Notary receives these funds on behalf of Hacienda. (Transfer
Tax is not paid on new property although a duty of 0.5% is imposed
when a newly built is declared on a plot).
Capital
Gains Tax
Although, this is not a tax
that purchasers need to pay at the moment of purchase, it is
nevertheless a tax that they should be aware of. This
tax is generally paid by the owner when they sell the property.
The tax is currently 7% of the declared value of the
property.
The Capital Gains Tax will
be calculated and the vendor will either have to make up or claim
the difference from the 5% deposited. If overpayment has been
made, Hacienda is obliged to return the difference to the vendor
within 6 months.
The rate of tax is 35% of
the gain made although a reduction is made if the vendor has owned
the property for more than 2 years. If the property has not
changed ownership for more than 10 years, any gain will be exempt
from tax. However, up to a period of 20 years of ownership, the 5%
retention will remain as an enforcement by Hacienda so that it may
ensure that the non-resident has complied with his tax obligations
whilst in Spain.
Transfer
tax is calculated on the increase in the value of the land from
when it was last sold. The calculation is based on the
ratable value of the property and is a ‘one-off’ payment.
Tax
on Rental income
Britain
and Ireland have a double taxation treaty with Spain. The
standard rate of tax in Spain is 25% and is paid on the declared
income from the property. The minimum declaration is 2% of
the value of the property. The rental income must also be declared
to the inspector of taxes in Britain or Ireland. You can obtain a
tax clearance certificate from the Spanish tax authorities which
is then passed to the inspector of taxes in your country, this can
be obtained by your solicitor. You will be asked to pay full
tax on the property in Ireland but the 25% already paid in Spain
will be refunded. It has been law since April 1998 that
residents of the Irish Republic declare all foreign assets.
Rates
This
is like the old English rates system and is based on the declared
value of the property. The average price paid is well below UK
Council Tax levels being around 140 Euros per year.
Community
Fees
These
are payable yearly and the average price is around 130 Euros per
year. These are paid in respect of services ie. Street lighting,
refuse collection, police.
Water
If
your property has a mains supply then there is a standard charge
for water which is approximately 12 Euros payable every 3 months.
The charges for consumption are in addition to this.
If
you have a supply from a balsa, underground store, then the fees
are dependent on consumption and are payable when the water is
delivered.
Electricity
This
is very dependent on how much you consume, there is a standard
charge of around 12 Euros payable every 2 months and then a charge
for consumption in addition to this.
Telephone
The
standard charge for a telephone line installation from Telephonica
is around 180 Euros. The line rental and call charges are then
payable every 2 months and are very similar to the BT rates. |
