Buying Selling Mortgaging In Spain Simplified

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Velasco Lawyers presentation about Buying and Selling properties in Spain: procedures, tips, advices and things to take care of.
Presented in July 2007 in Hotel Salobreña in cooperation with Caja Rural

Published in: Real Estate, Business
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Buying Selling Mortgaging In Spain Simplified

  1. 1. http://www.velascolawyers.com/ Buying Selling Mortgaging your property in Spain simplified Explanation of legal issues and taxes without taxing your mind http://www.velascolawyers.com/
  2. 2. Presentation program –  Introduction –  Buying and selling process –  Organising finances –  Taxes and legal issues –  Question and answer session http://www.velascolawyers.com/
  3. 3. VELASCO LAWYERS TEAM http://www.velascolawyers.com/
  4. 4. BUYING AND SELLING PROCESS http://www.velascolawyers.com/
  5. 5. 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? http://www.velascolawyers.com/
  6. 6. 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   http://www.velascolawyers.com/
  7. 7. 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) http://www.velascolawyers.com/
  8. 8. 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? http://www.velascolawyers.com/
  9. 9. 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. http://www.velascolawyers.com/
  10. 10. 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 http://www.velascolawyers.com/
  11. 11. 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 http://www.velascolawyers.com/
  12. 12. 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. http://www.velascolawyers.com/
  13. 13. 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. http://www.velascolawyers.com/
  14. 14. 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   http://www.velascolawyers.com/
  15. 15. 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 http://www.velascolawyers.com/
  16. 16. 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. http://www.velascolawyers.com/
  17. 17. 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. http://www.velascolawyers.com/
  18. 18. ORGANISING FINANCES http://www.velascolawyers.com/
  19. 19. 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) http://www.velascolawyers.com/
  20. 20. 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 http://www.velascolawyers.com/
  21. 21. TAXES AND LEGAL ISSUES http://www.velascolawyers.com/
  22. 22. 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. http://www.velascolawyers.com/
  23. 23. 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 http://www.velascolawyers.com/
  24. 24. 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. http://www.velascolawyers.com/
  25. 25. 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). http://www.velascolawyers.com/
  26. 26. 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 http://www.velascolawyers.com/
  27. 27. APPENDIX http://www.velascolawyers.com/
  28. 28. 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? http://www.velascolawyers.com/
  29. 29. 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. http://www.velascolawyers.com/
  30. 30. 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 http://www.velascolawyers.com/

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