INVESTING IN SPAIN
Q : Is the conveyancing process in Spain similar to that in England?
A : No. The Spanish legal system is very different from the English. Generally speaking, however, there is hardly any more need to worry about buying a house in Spain than about buying one in England . Please also note that the Spanish Notary Public ("Notario") - in front of whom all land transfers in Spain have to be signed - is not there to give legal advice to either the Buyer or the Seller. His or her function is to witness the signature of the title deeds and to deal with certain administrative matters.
Q : What should I look out for when finding a property?
A : Sometimes in today's "boom" climate you may have no option but to sign some form of preliminary reservation contract or risk losing the property. When you sign this preliminary contract you are likely to be asked to pay a preliminary deposit. This is typically €3,000. Once the preliminary contract has been signed there is usually a period of 2 - 3 weeks to carry out checks on the property before you to sign the main contract.
Q : What is the ”Escritura”?
A : This is the title document transferring ownership of the property. Under Spanish law it is necessary for the “escritura” to be signed before a Spanish Notary Public.
Q : Who is the Notary?
A : The Notary is a public official who is there simply to put on the public record the fact that the title deed recording the sale/purchase has been signed in his or her presence and understood by the parties concerned.
Q : Where should the money be paid?
A : When the escritura is signed in front of the Notary either the purchase price is, in his or her presence, handed over to the person selling the house or the Seller confirms that the money has already been handed over. Proof of such payment is then incorporated into the title deeds of the property. Usually the price may be paid wherever in the world the parties agree.
Q : Do I have to be in Spain to complete the transaction?
A : The person buying the house may attend in person before the Notary, but, if this is inconvenient, arrangements can be made for a Power of Attorney to be granted enabling another person to attend on their behalf. This must be in the Spanish form and signed in front of a Notary. Our clients usually appoint our associate in the area to sign on their behalf.
Q : What about paying the taxes due?
A : Once the purchase formalities with the Notary have been completed you must pay any taxes due in relation to the transaction.
Q : Is there a Land Registry system in Spain ?
A : Yes. After the Escritura has been signed in front of the Notary it will be presented to the appropriate Land Registry for the payment of the Land Registry fees. Please note that several months can elapse before the process of registration is concluded.
Q : Are there any special points for new properties?
A : By law, where you pay all or part of the price before the property has been fully built, the property must have the benefit of a bank guarantee to ensure that, if the developer goes bust before he or she completed the building work, you do not lose your money. You must also make sure that the property specification is agreed in detail with the builder and that the property will be delivered to you complete with the necessary licence to occupy it as a home. Ideally you should not pay the final instalment of the price until this is produced but, because of bureaucratic delay it is common for the deeds transferring ownership to you to be signed - and the price paid - several months before this paperwork is issued by the Town Hall.
Q : In whose name should I purchase the property?
A : There are a number of ways to purchase the property : in your own name, in the joint names of you and your wife or co-purchaser(s). in your children's names or in the name of somebody who will eventually inherit the property from you, in the name of a limited company, whether English, Spanish or "off-shore". Each method has its own advantages and disadvantages. Everything depends on your own personal circumstances. We shall be pleased to discuss the various ways of buying and to advise as to the most advantageous method for you. It is worth paying careful attention to this point because of the potential tax and other savings that can be made at a later stage. These tax savings arise because of the Spanish system of inheritance tax under which gifts on death can still attract very high rates of taxation. It is still possible to pay over 80% tax on an inheritance. Careful planning can dramatically reduce the tax payable. The tax savings also arise because of the way that each time a property changes hands, certain taxes and fees become payable. If you can minimise the number of times it changes hands, you can greatly reduce your tax liabilities. As always with tax savings schemes there is a danger that the Government can close the loopholes that allow the schemes to operate and, as always, there are disadvantages to them as well as advantages. In each individual case, you will have to weigh up the advantages and the disadvantages and decide how you wish to deal with the transaction.
Q : What about raising the money?
A : It is possible to raise finance to assist with the purchase of a property in Spain either by mortgaging the property itself or by mortgaging or adding to the mortgage on any property which you may have in England. We will be pleased to advise you about the possibilities of obtaining mortgages and finance both in Spain and in England and to assist in the obtaining of any finance that you require.
Q : What does all this cost?
A : The TOTAL costs (standard service, land registry fees, notary's fees, taxes, associates fees, bank charges etc) normally come to about 10% - 11% of the price of the property. In the case of properties less than £40,000 it will be more. We will give you a detailed estimate of the likely overall cost once we know more about your particular purchase. If a transaction does not proceed to completion, Administration Fees are still in effect.
Q : What fees might I need to be aware of?
A : A fee is paid to the Notary for the preparation of the Escritura. This fee varies but is typically in the region of €500. A fee is payable to the Land Registry. This depends on the value of the property but is usually in the region of €300. Plus valia - a sort of municipal capital gains tax - has to be paid on the transfer of a property. The tax should be paid by the Seller but many contracts transfer the liability to the Buyer. This tax is usually small - say £150 - but, as it can be several thousands of pounds, it is vital that you are aware of the implications of this. A transfer tax or VAT and Stamp Duty has also to be paid. Again this depends on the value of the property, the type of property in question and where it is located. It is typically 6% - 8% of the price of the property. In many cases you may not wish to be in Spain at the time when the public title deed needs to be signed. In these circumstances you will need to prepare a Power of Attorney authorising either someone nominated by you or our overseas associate to sign on your behalf. The cost of doing this is typically £150. You will also then have to pay the charges of the person who attends to sign and pay the taxes on your behalf. In order to buy property in Spain , you need to be registered with the Spanish tax authorities and to have a foreigners' identification number (NIE) or tax identification number (NIF). Also passed on to you will be the cost of any surveyors fees, bank charges and the like levied in respect of your particular transaction. We will give you an estimate of all these charges once we know more about your case. Finally, all or part of these charges may attract Spanish or English VAT at the current rate.
Q : What about the Sellers' taxes?
A : The Buyer is usually obliged by Spanish law to pay 5% of the purchase price to the tax office on account of the Seller's potential tax liabilities in Spain. There are certain exceptions to this rule. This does not increase the amount the buyer has to pay - he or she simply pays 5% of the agreed price to the tax office and 95% to the seller. Having done this he or she has no further exposure to liability in respect of the Seller's taxes. This responsibility is the same wherever the money is paid and whether it is paid in Sterling or in Euros.
Q : How do I get the money to Spain ?
A : You will normally simply pay the money by transfer to Spain.
Q : Are there any other things I should do at the same time as I buy a property?
A : We believe that it saves a great deal of time, effort and money later on if you now review your English Will and make a separate Spanish Will. For most people the cost of this is fairly small. It is highly advisable for any person who has a property in Spain but does not live there all the time to nominate a "fiscal representative". This is a person to whom the tax authorities can send all correspondence relating to your affairs in Spain, secure in the knowledge that it will arrive. The fiscal representative must be resident in Spain, but it is for you to choose whom to appoint. It can either be a friend, a neighbour, a lawyer, or your tax adviser. Many of our associate lawyers offer this service. If you wish to know more about this, please ask. You will wish to insure your property and its contents. In the case of classic property, you will wish to have the electricity, water and rubbish collection charges transferred to your name. You will need to notify the Town Hall that you own the property and register for local rates, open bank accounts and register with the Spanish authorities for tax and other purposes. If you do not speak Spanish we would recommend that you use the services of a local "gestor" to do these things for you. He or she is a sort of official form filler who does this sort of work at quite reasonable charges. In the case of classic property, you should register as the owner with the Community of Owners if you live in an apartment block or an estate with shared facilities.
Q : What happens after I settle into Spain ?
A : If you spend less than 184 days a year in Spain then you are, generally speaking, classed as a "non-resident" and you must : pay your local rates (Contribucion Urbana/IBI), make a declaration of all your capital assets in Spain and, where appropriate, pay wealth tax on them, make a Spanish income tax declaration and pay income tax on any income deriving from your activities in Spain, if you have a car, pay car tax and arrange suitable insurance cover, pay your electricity, water and other bills. It is usual to do this by arranging for your bank to pay the accounts directly to the suppliers.
Q : What happens if either I or my co-owner should die?
A : Jointly owned property does not automatically pass to the survivor. It will be dealt with according to any instructions which you leave in your Will (either English or Spanish) or, if you do not leave a Will, under the rules relating to intestacy. It is generally much cheaper and simpler to deal with your affairs if you have made a Spanish Will.
Q : Anything else?
A : We would also recommend that you join the Institute of Foreign Property Owners , which provides a regular Newsletter about matters affecting the foreign property owner in Spain . Membership cost about £40 per year. The Institute can be contacted at:
The Institute of Foreign Property Owners
Avenida de L'Alt Rei En Jaume I, 15 2 E -9
03590, Altea, ( Alicante ), Spain
Telephone: 00 34 965 842312
Fax: 00 34 965 841589
OFFSHORE INCORPORATION SERVICES
COMPANY FORMATION & MANAGEMENT SERVICES
TAX PLANNING AND ASSET PROTECTION SOLUTIONS
INTERNATIONAL BUSINESS COMPANIES
PRIVATE LIMITED COMPANIES
LIMITED LIABILITY COMPANIES
LIMITED LIABILITY PARTNERSHIPS
PRIVATE & FAMILY FOUNDATIONS
PANAMANIAN LICENSED FINANCIAL CORPORATIONS
NEW ZEALAND OFFSHORE FINANCIAL INSTITUTIONS
SECURE & CONFIDENTIAL NOMINEE STRUCTURES
INCORPORATION IN EUROPE AND
MAJOR INTERNATIONAL OFFSHORE CENTRES
WORLDWIDE FULL SERVICED VIRTUAL OFFICES