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TAXES
Property Transfer tax or IVA (V.A.T.)
Which of these two taxes is levied will depend
on the type of property you are purchasing. The property transfer tax is
levied on resale properties and is charged at 6% of the new escritura
value (purchase price).
If you purchase a newly built property from a
developer you will pay a different tax called I.V.A. (V.A.T.) is charged
at 7% of the selling price plus 0.5% stamp duty.
Plus Valia (local municipal tax)
This tax is based on an officially assessed
increase in the value of the land since the last time the property was
sold. This can be quite small if purchasing an apartment, but expensive
on a villa with a large plot, which has not changed hands for years.
Find out the exact amount from the town hall. Do not confuse this tax
with the seller's capital gains tax on his profit on the sale.
In practice "who pays what" is negotiated with
the final selling price and this must be stipulated, as well as listing
the contents/fittings to be included in the sale, when the owner accepts
your final offer (in writing).
BUYER PAYS:
In accordance with Spanish law, the buyer is responsible for:
Transfer Tax or
(I.V.A. + stamp duty when buying from a developer)
Property Registration fees
Notary charges
THE SELLER IS RESPONSIBLE FOR:
His own capital gains tax on any increase in escritura value
Plus valia tax
Notary fees
Selling agent fees
The normal custom is for the seller to pay
"Plus-Valia". If, however, the buyer agrees to pay this tax, please
remember that it is registered against the land and you will have to pay
if the vendor fails to do so. This tax is often not demanded until some
time after completion.
New Properties
For new properties, ask the seller to show you
the Declaración de Obra Nueva, the declaration of new construction,
together with a copy of the Declaración de Alteración de bienes de
naturaleza Urbana, the declaration of alteration of property of an urban
nature, which both demonstrate that the property has been registered for
eventual payment of I.B.I..
Withholding Tax
If you buy a property from a non-resident person
or a company, you must withhold 5% of the purchase price; The hacienda
(tax office) make it the buyer's responsibility that this amount is paid
to the tax authority on account of any liability by the vendor to
Capital Gains Tax.
Capital Gains Tax
As the buyer must ensure that 5% of the purchase
price is paid to the Hacienda, it is clearly in the interests of the
seller to have this value as low as possible.
If the seller's original Escritura value shows
he purchased the property at 12,000,000 pesetas, and your Escritura is
drawn up to show that you paid 20,000,000 pesetas - the buyer will show
a profit of 8,000,000 pesetas, which is taxable. So the seller may
suggest that you pay 20,000,000 pesetas, but 6,000,000 pesetas was for
the furniture, giving an Escritura value of only 14,000,000 pesetas.
This has three main effects, the buyer now only
has to retain 700,000 pesetas, and not 1,000,000 pesetas for the
Hacienda retention. The seller's taxable 'profit' is now 2,000,000
pesetas, not 8,000,000 pesetas. It will be the same when the buyer
sells, a low Escritura 'buy' price will become more 'profit' later.
It is obviously in the seller's interest to show
less than the real purchase price. It is in the buyers interest to show
as much as possible of the purchase price on the Escritura. A sensible
compromise is usually reached by mutual agreement.
Escritura values that are clearly below any
reasonable market value may be penalised by the Hacienda at a later
date. It is fairly reasonable to allow 1,000,000 PTAs for the furniture,
thus, the Escritura value will be 1,000,000 PTAs below the actual price
paid, and this is acceptable to the Hacienda.
Outstanding Debt
If there are any debts, outstanding mortgages,
unpaid Community fees etc, then you should make sure that these are paid
directly to the debtors first, and the seller gets the balance of his
money once all other interests in the property have been settled from
the purchasers money. The conveyancer will help you ensure that all of
the various bank certified cheques required for the different parties
are drawn up by the buyers bankers - ready to hand over at the notary
office on the day of completion.
Property Owners Association
If you purchase an apartment in a block,
townhouse or villa in an urbanisation, you will automatically become a
member of the property owners association, with the right to vote at the
AGMs, which administers general maintenance of zones of common
ownership, such as streets, gardens, hallways and swimming pool etc. An
annual budget is calculated to cover these costs, which is divided
between all owners according to the size of their properties. Fees
depend on the services offered and are reflected in the annual amount.
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Check the latest receipt for the payment of
monthly or yearly maintenance charges "cuotas de comunidad" and
discover how much you will have to pay. It is advisable for your legal
representative to obtain a certificate from the association that there
are no charges outstanding.
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Ask the president or the administrator for a
copy of the meeting minutes and the community regulations. The minutes
should highlight problems, such as failing water supply and the
regulations will confirm your rights.
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Please note as some communities have special
rules it is advisable to check up if there is anything special such as
"no dogs" etc. Other items such as domestic services, electricity,
water, & telephone are metered and charged as used.
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If the building belongs to a community it is
important that the property has a public title deed Escritura in which
the plot as well as the house is shown. The community of owners is the
legally registered body that administers the urbanisation or apartment
building.
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