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In this section we have tried to answer and provide information regarding the more common questions. Please refer also to the Glossary of Terms and to the section on published articles.
What is the process of buying a property? As we have previously mentioned, historically, the property market in Spain was slow. We did not have the tradition of often moving house and trading up to a bigger property, which meant that property inflation was very low. Our inheritance laws meant that property would always be left to the children and it was common for several generations to be born and to die in the same house. When we did want to sell we would probably sell the property ourselves and with the purchaser, go to the Notary and to register the documents. Because everyone probably knew each other or were related, this process worked. If an Estate Agent (inmobiliaria) was used, they would perform the conveyance duties and ensure the transfer or the deeds. A Lawyer was not usually needed. Today it is totally different. Property inflation is high; we have seen prices doubling in this area. The buyer and seller do not know each other and very often as the buyer is from another country, they cannot speak Spanish. As in any boom situation there are people who will take advantage of the current situation, so it is essential that Legal advice is sought. The majority of property purchasers in Spain do so through a Real Estate Agent. Registered real estate agents are obliged to check the situation of the properties they sell, but normally they do not do it. In Spain any person or company can open an office and sell properties as no license is required. This does not mean that there are no Estate Agents inscribed in the API (Association of Estate Agents) and many of them are very professional. Keep in mind that the Estate Agent is interested in the sale and because of the lack of properties for sale in some areas and the large number of Estate Agents; they are keen to sell the properties that they have before one of their competitors does it for them. There are not normally exclusive contracts for the sale of properties, so various estate agents can have the same property for sale, and surprisingly, on sale at different prices. At Velasco Lawyers we provide the legal guarantees for the purchase of the property ensuring that Spanish legal requirements are met and that the property is bought free of encumbrances, charges, liens or debts and up to date in all its payments of local contributions and community charges. We will take charge of the whole buying process from the moment that you decide to make an offer to buy a property. Our team will make contact with the estate agent to request documentation which will accredit the ownership of the property (sales purchase deeds), and other relevant documentation like the utility receipts and the latest receipt for the local rates. It is normal practice in Spain to include with the offer, a sum of money to reserve the property prior to the exchange of the private purchase contract, in order to show the vendor that there is a real intention to go ahead with the purchase. This deposit is not usually refundable, but this point can be negotiated with the estate agent. Once the deposit agreement has been signed Velasco Lawyers will prepare the private sales purchase contract in both English and Spanish, you should be aware of the following:
Keep in Mind:
Our office can arrange for the payment the taxes (i.e. VAT, transfer tax or stamp duty which must be made within thirty days from the signing of the deeds at the Notary) as well as direct debits, for annual taxes, such as the local rates or IBI. We can also apply for the connection of utilities. This can be a bureaucratic process, as we have to present all the correct documentation to each of the respective companies and can take up to 2 weeks to get the electricity, water, gas or telephone connected. Once the deeds are included in the data bank at the Notary Office they have to be inscribed at the Land Registry. The registration can take anything from two weeks to three months depending on the Registry. The Land Registry fees are paid on collection of the deeds.
I estimate that the additional costs will be around 10% of the purchase price, but what are the costs exactly? If the property is a new build the costs involved will be:
If the property is second hand (Resale) then the costs are the same except that you do not have to pay the Stamp duty (Impuesto de Actos Jurídicos Documentados) at 1% of the property price or 7% VAT but instead you have to pay 7% as Transfer tax. (Refer to Table 1 for costs of two properties with a sales price of 150,000 Euros and 250,000 Euros respectively.) What is a NIE and where do I get it? A NIE is a Numero Identificacion de Extranjero or a foreigner’s identification number. You must have one of these to buy any property or a car in Spain. It is relatively easy to obtain but the process can be long as you have to go to the foreigners department of the local police station and queue. You will need to complete a form and after a few days you can go to collect the number. In some instances you will only need to give the number but when buying a property you will need the original. Obtaining the NIE is included in our fees when purchasing through Velasco Lawyers. Do I need to come to Spain to sign any papers? There is no reason for you to come to Spain to sign anything if you give your Lawyer a Power of Attorney. The POA can be sent to you in England and once signed and given an apostille, it can be used for the signing of public documents. Is it really necessary to sign over a Power of Attorney? You do not have to sign a POA but it is strongly advisable to do so. You may believe that you will be able to travel to sign the deeds for your new property, but there is always the unforeseen: Your money may not arrive in time, your plane may be delayed, the vendor may have problems arriving at the Notary, the Notary may be off sick, there are numerous reasons why the signing might not take place on the agreed date. If your lawyer has a power of attorney, then they can reschedule the signing. The POA will also allow them to apply for your NIE number, check the property register, register the property in the Land Registry, pay taxes, open a bank account, and deal with the utility companies. A Notary Public is the person whose signature and stamp make statements legal. He will not certify that the said statements are true, only that the people signing the statements agree to them and therefore it is official. Once he signs a document then it is stored in the official data bank, he is not the same as a Solicitor and will not be looking after your interests. Private taxation and vat If I buy a property what property taxes will I have to pay? If you are resident or not but you own property in Spain, you are subject to Personal Income Tax, Property Tax and local Real Estate Tax. When I sell what are the Capital Gains Tax implications? Residents over 65 years of age and who have lived in the property for more than 3 years are not subject at all to capital gains tax when they sell the property. Residents and non-residents, including those over 65 years of age, living in the property for less than 3 years are liable for a maximum of 18% capital gains tax. Residents are exempt to the first 108,000 euros of the valuation for wealth tax; non-residents are liable from the beginning. Am I liable for Inheritance or gift taxes? Yes, you are. Generally, foreign people will only pay inheritance tax on the assets left in Spain. Be aware, however, that the estate value may also have to be included in deceased person's estate in their home country, with any tax paid in Spain reducing that tax payable by the existence of any double taxation agreement. The tax schedules are the same for inheritance and gifts, and remember it is the person who receives the inheritance that has to pay the tax. What Tax planning should I be considering? There are various ways in which tax can be mitigated by tax planning. As circumstances vary it would be prudent to seek the advice of our firm. In the case of a husband and wife they may be able to take advantage of the 95% deduction applicable to the principle residence and where the beneficiaries are directly related. This deduction is limited to €122,606.47 each person. The only provision is that the property is not sold for 10years. Residency permits I plan to live in Spain for more than 6 months. What implications will this have? Must I become a resident? The current Spanish law states any individual intending to remain in Spain longer than 183 days in any one period throughout the calendar year, should apply for a ‘Residencia’. (A Spanish tax year is the same as a calendar year: 1st January to 31st December, unlike the UK tax year which is from 6th April to the following 5th April.). If you are resident in Spain you will be liable for income, capitals gains and succession duty (inheritance tax) on your worldwide assets. I am a pensioner and a non resident; can I get free prescription drugs like I do in England? Yes you can. You will need an E111 or its equivalent (this is changing at the moment and new applications will be issued with a card). You go to your local doctor’s surgery with your passport and a photocopy, your E111 and a photocopy, plus proof that you are a pensioner. You will have to complete a form: BDU solicitud de uso multiple. You will have to say where you live in England, your address in Spain and for how long you will be needing the drugs. It is always a good idea to show the packets of the drugs that you normally take to the doctor and your English prescriptions. Wills and probate Is it really necessary to have a Spanish Will? Yes, because if you haven’t already done so you run the risk of your heirs losing their rights to your assets if they do not claim their inheritance in time, or if your last Will and testament do not appear in the Central Registry of Wills in Madrid. Under Art. 9.8 of the Spanish Civil code: Inheritance by cause of death will be regulated by the National law of the deceased in question, at the time of their death, whatever the nature of their possessions and whatever country they may be in. Our Wills are drafted in both Spanish and English. Finance and mortgages How easy is it to get a mortgage in Spain? If you decided to take out a mortgage in Spain, Velasco Lawyers will help you look for the best deal by contacting several banks in the area. In Spain there are good mortgage rates and some banks have special products designed for non-resident borrowers. We may have to open an account at the bank that you decided to have the mortgage with. The bank will send a surveyor to the property to value it. The surveyors bill will be around 500-600 € for a property valued at around 200.000 €, although these costs are variable. The bank will lend a percentage of the value of the property, normally around 70%, although they could go up to around 80% in some cases. The bank will ask for the following information and documentation: A photocopy of your passport, home address, marital status, a copy of your last P60, the last three salary receipts, a copy of the contract with the builder or the vendor which shows the purchase price. Insurance Yes, this is an area often overlooked by some buyers. Once the property is purchased then it is prudent to find insurance from a reputable company at the best price. At Velasco Lawyer we can help you find quotations. Motor and marine law I want to bring my vintage car to Spain. Can I? Yes, you can, but for tax implications will be better if you ask Velasco Lawyers for a quotation. I am thinking of importing my speed boat. Can I? Yes, you can, but for tax implications will be better if you ask Velasco Lawyers for a quotation. Do I have to be a resident to buy a car? No you do not, but you do need an NIE number. What documents must I have in the car?
Yes. In accordance to Spanish law, the Spanish Courts and Tribunals are competent in matters of personal and patrimonial relations between couples, marriage annulment, separation and divorce, when both parties reside in Spain, or at least one, at the time of placing the demand for separation/divorce. Various Spanish Tribunals have confirmed this right in their resolutions, based on articles 24 and 13 of the Spanish Constitution, article 27 of the Civil Code and articles 6,8,14 of the European Convention for the protection of Human rights and fundamental freedom. What law applies if we separate, English or Spanish? In most cases it is Spanish law which applies. Not if you are from the EEC. What papers do I need to employ someone outside the EEC? You cannot employ someone from outside the EEC if they do not have a work permit. The procedure to get the permit is long and complicate, please contact us. Is it advisable to set up a company? As in the UK the decision to form a company will depend on various factors such as turnover, risk etc. As in the UK a member of the company enjoys limited liability, however, unlike the UK formation costs are high and this requires careful consideration. Any person or legal entity has the right to form a limited company as a founder member. The society of limited responsibility is formed by the members with a public deed, certified by a Notary. The information that the constitution has to contain:
While all cases are different, the process of litigation in Spain can be slow and expensive and where possible, we try to negotiate and settle disputes out of court. If you have any doubts in this respect please do not hesitate to contact us so that we can study the individual case, and take comfort in the fact that we are also barristers and can represent you in court should the need arise. We are registered with the International Bar Association. |
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Tel: +34 958 630 114 |
