Buying Selling Mortgaging In Spain Simplified

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Buying Selling Mortgaging your property in Spain simplified

Explanation of legal issues and taxes without taxing your mind



Presentation program

–  Introduction – Buying and selling process – Organising finances – Taxes and legal issues – Question and answer session


VELASCO LAWYERS TEAM


BUYING AND SELLING PROCESS


Buying and Selling Process

Buyer •  Choose a lawyer •  Sign a POA •  Obtain a NIE number •  Sign a will in Spain •  Think about finances

(Cash or mortgage?)

Seller •  Choose a lawyer •  Sign a POA •  Obtain a NIE number •  Are you a fiscal resident

in Spain? •  Sell Through real estate

or privately?

The process for buying and selling is similar but with key differences


Buying Process NIE

number Organise finances

Choose a Lawyer Builder’s

contract

Taxes

P.O.A. New property?

ExisDng property?

Private contract

Bank guarantees

Title of deeds

InscripDon in the land registry

Transfer uDliDes in your name

LocaDon

Sign a will in Spain


Choose a Lawyer

•  Your lawyer should guide you through the process and protect your interests.

•  Your lawyer should be independent and not serving the interests of an estate agent

•  You should be able to communicate with your lawyer in your own language (or a language you understand perfectly)


Sign a P.O.A in favour of your lawyer

–  What is a Power of Attorney? –  How to sign one in Spain –  How to sign one in your own country –  What are the benefits? –  Can I cancel it later?


Obtain a NIE number

•  NIE stands for Número identificativo de Extranjero

•  You can get one at the police station in the area where you will buy the property (you will have it in a few days)

•  Alternatively you can get one at the Spanish Consulate in your country (it will take around 2 months)

•  You need to apply for it in person with the corresponding form, a valid passport plus a photocopy.

•  NIE number has permanent validity.


Making a Spanish Will

•  Who can make a will in Spain? •  What is the process for making a will? •  Can I change my will? •  Scope and share of heirs •  Acceptance and repudiation of the

inheritance


Buying a new property? (1) Contracts •  Seller and buyer information. •  Seller and buyer legal capacity to make a contract. •  Description of the property •  Agreement on jurisdiction or submission to arbitration. •  Payment terms while the apartment is under

construction, until completion. •  Penalties to be applied for the buyer or the seller. •  Completion date. •  Plans of the property and specifications •  Copy of the building permit. •  Copy of bank guarantee /insurance policy


Buying a new property? (2) Other considerations when you are buying a property off plan. •  The Partial Plan: It is the plan of building plots, which must

be approved by the town planning department. •  Building conforming with the Coastal Law: •  Is your property going to be built near the beach? •  To issue the building license the Town Hall will ask the

builder for a report from the Coastal department and the department of the environment of the Junta de Andalucía, (authorities must restrict building within 100 metres of the beach and establish a zone of influence up to one kilometer inland).

•  The developer must provide you with the habitation license, which is issued by the Town Hall.

•  You should not sign the title of deeds until you have a copy of the habitation license, you will also need this to change the contracts for the utilities.


Resale property? •  Signing a private sales/purchase contract or an option to buy

contract. •  Contents of a private contract:

–  Details of buyer, vendor, legal representatives. –  Description of the property (from the land registry). –  Architect’s report with actual description (some cases) –  Inventory if any –  Debts or charges on the property –  Place and time for the signing of the deeds –  Price and form of payment. –  Expenses involved and who will pay them.(Notary fees/land

registry fees/transfer tax, capital gains). –  Penalty clauses:

•  * Articles 1504 of the Civil Code and 59 of the Regulations of the Mortgage Law.

•  * Article 1454 of the Civil Code.


Selling Process NIE

number You should

already have it

Direct sale? Estate Agent?

Choose a Lawyer

Taxes

P.O.A. Sale of

Rights of a purchase contract?

ExisDng property?

CerDficate and documents to provide at the

signing of the deeds

Title of deeds

start

End


Sell privately or through a real estate

If you use a Real Estate –  Sign an agreement for commissions and the

form of payment What documents the seller has to provide

•  Copy of the title deeds •  Copy of the latest “nota simple” •  Copy of your passport and NIE •  Copy of the latest IBI •  If you are resident: Fiscal residence certificate

from the tax office •  Copy of the last payment of the community fees •  Copy of the POA if your lawyer will sign on your

behalf


What documentation the seller needs at the notary

•  Residence card or residence certificate from the Police Station.

•  Passport. •  P.O.A •  Title deeds •  Lastest I.B.I receipt(council tax) •  Certificate from the residents association showing

there are no amounts due for community fees. •  “Certificado de deuda” from the bank (in cases

of a preexisting mortgage). •  Fiscal Residence certificate from the Tax office. •  Latest electricity/water/gas receipts to transfer

the utility contracts into the buyer´s name.


Process until the inscription of the property at the land registry

•  Bank Survey and valuation of the property •  Getting a fiscal residence certificate (seller) •  Signing the sales/purchase deeds and the mortgage deeds at

the notary. Payment of the remainder of the property price (no cash allowed!)

•  Cancelation of the existing mortgage. •  Getting the keys. •  Signing insurance. •  Payment of the notary fees. •  Payment of the taxes: •  * New property taxation. •  * Resale property taxation. •  Changing the utility contracts to your name and setting up

direct debits. •  Payment of the land registry fees.


ORGANISING FINANCES


Organise finances

•  Can you afford to pay in cash? •  Do you need a mortgage to purchase the

property? –  Ask your lawyer for advice –  You will need:

»  A copy of your Passport »  Proof of income. (tax papers, e.g. P60 for UK) »  Statement of income if you are retired »  Tax returns, accounts and balance if you are

self employed (certified by a chartered accountant)


Mortgaging your property

Advantages: •  Lower interest rates at present than in most of

European countries. •  Asset & Liability in Euros •  Rental income and mortgage payments in euros •  Taxation advantages for residents and non

residents: Non resident’s tax and resident’s tax Inheritance tax

Disadvantages •  Set-up cost •  Repayments have to be made in Euros in Spain


TAXES AND LEGAL ISSUES


Advantages & disadvantages of buying off plan properties (1)

Advantages – Price: discount between 10% and 30% off the

current market price for a comparable property.

– Quality of building and materials. – Period of guarantee for the construction,

(possibilities of claiming against the architect/technical architect and builder).

–  Sell the option to buy contract to a third party if possible, and make a profit on it.


Advantages & disadvantages of buying off plan properties (2)

Disadvantages •  Risk of insolvency of the developer. •  No appropriate bank guarantees. •  Differences between the plans and the

property, change in materials, poor finishing… •  Time until possession: Around two years. •  Further problems with local administrations:

Town Hall and the habitation license/Coastal department/Department of the Environment


Property taxation for buyers on the purchase

•  New property: •  * Value added tax (IVA) 7% of the total price. Is

paid during the building process and when the final payment to the developer is made.

•  * Stamp duty 1% in Andalucia. Within 30 days of the signing of the title of deeds.

•  Mortgaging the property? •  * Stamp duty 1% in Andalucia of the mortgage

responsability. •  Resale property: •  * Transfer tax 7% : Within 30 days of the signing

of the title of deeds.


Property taxation for sellers (1) •  Tax rate: For property transfers from 1 January

2007, 18%. •  Form: 211. •  Deadline: Three months counting from the end

of the period that the new owner has to deposit the tax withheld.

•  Place: The tax office corresponding to the place where the property is situated.

•  Withholding of tax by the buyer •  By law the buyer has to withhold and pay the

Public Treasury an amount of 3% of the purchase price agreed on (for acquisitions made from 1 January 2007).


Property taxation for sellers (2) •  Then the buyer has to provide the nonresident

vendor with a form 211 •  Deadline: 1 month after the date of transfer of

the property. •  Form: 212. •  Refund of excess amount withheld •  In the case of capital losses or when the

withheld amount is higher than the tax due, the taxpayer is entitled to a refund of the excess amount. The procedure is initiated by filling in the tax return Form 212.

•  The refund is made by bank transfer to the account indicated on the tax return


APPENDIX


Taxing your mind? Vendors only (1)

Example: •  Mr and Ms. White, residents in U.K, bought an

apartment in Salobreña on 1 January 1991 for an amount equivalent to 100,000 Euro :

•  On 1 January 2007, they sold the apartment for 200,000 Euro.

•  The buyer Ms. Pedersen retained the amount of 6,000 Euro ( 3% of the purchase price).

•  How do you work out the amount of Capital Gains which should be paid?



Solution: • Transfer value: 200.000 Euro. • Updated acquisition value: 100,000 x 1.2162 = 121,620

Euro. • Capital gain: 78,380 Euro. Number of days between the

dates of purchase and 19/01/2006: 5498 days •  Gain to be reduced (3): 73.726,82 euros. •  Nº of years of ownership to 31/12/1996: 6 years. •  Reduction by abatement coefficients (4): 32,764.20 Euro. •  Reduced capital gain (5): 45,615.80 Euro. •  (1) In the solution, expenses and taxes inherent in the acquisition and transfer have not been taken into account, which generally are also included in the acquisition and transfer values.



•  (2) This updating coefficient of the acquisition value is established in section 60 of the General State Budget Act 42/2006, of 28 December (Official State Bulletin of 29 December), for the year 2007. •  (3) (5,498 / 5,845) x 78,380 = 73,726.82 Euro. •  (4) 73,726.82 x 11.11% x 4 = 32,764.20 Euro. •  (5) 78,380 – 32,764.20 = 45,615.80 Euro. •  Tax rate 18% •  Tax payable 8,210.84 Euro •  Withholding 3% 6,000.00 Euro •  Differential charge (8,210.84 - 6,000.00) 2,210.84 Euro

Buying Selling Mortgaging In Spain Simplified

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