Buying Selling Mortgaging In Spain Simplified

http://www.velascolawyers.com/

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

Buyer Seller
•  Choose a lawyer •  Choose a lawyer
•  Sign a POA •  Sign a POA
•  Obtain a NIE number •  Obtain a NIE number
•  Sign a will in Spain •  Are you a fiscal resident
•  Think about finances in Spain?
(Cash or mortgage?) •  Sell Through real estate
or privately?


Buying Process
NIE

number
Organise

P.O.A.
ﬁnances
New

property?

Choose
a

Lawyer
Builder’s

Sign
a
will
ExisDng

property?
contract

in
Spain

LocaDon

Transfer
Private
Bank

uDliDes
in
contract
guarantees

your
name

InscripDon
in
Title
of

the
land
Taxes
deeds

registry


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
Direct
sale?

number
Estate
Sale
of

P.O.A.
You
should

Agent?
Rights
of
a

already
have
it

purchase

Choose
a
contract?

Lawyer

ExisDng

property?

start
CerDﬁcate
and

documents
to

provide
at
the

signing
of
the
deeds

End

Title
of

deeds

Taxes


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?

Taxing your mind?
Vendors only (2)
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.

Taxing your mind?
Vendors only (3)
•  (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

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (12)

Similar to Buying Selling Mortgaging In Spain Simplified

Similar to Buying Selling Mortgaging In Spain Simplified (20)

Recently uploaded

Recently uploaded (20)

Buying Selling Mortgaging In Spain Simplified