COSTS OF PROPERTY PURCHASE & OWNERSHIP

As a PURCHASER, you will pay a Transfer Tax, Lawyers Costs, and Notary and Registration Costs.

Transfer Tax 7% (as from 01/01/03 in Andalucia) of the DECLARED PRICE in the new escritura is payable on a resale property, 7% IVA (VAT) and 1% Stamp Duty is payable on a new property and 16% is payable on the purchase of land or garage. If you buy a new property and intend to have a pool or garage built, try and have it included with the sale of the property, as if you build later, you will attract tax at the higher rate of 16%.

Notary Charges These are set on a fixed scale by law and you should expect to pay around €310 as a minimum. This can rise quite dramatically if loans and mortgages are included. Spanish Laws state that unless stipulated in the Contract, Taxes and fees are split between the buyer and seller as follows:

Buyer Pays
:The transfer tax or IVA
:Registration fees
:Notary Costs

Seller Pays
:Plus Valia tax, which is calculated on the increase in value of the land since the last sale
:Notary fees in drawing up the new deeds, often negotiated to be paid by the Purchaser.
:The estate agent´s fees.

By owning a property in Spain, you are obliged to declare the income from its use, or its capital gain, on which you are taxed.

There are annual taxes such as Wealth Tax, Imputed Income Tax and, on the sale of the property, Capital Gains Tax. There is also Inheritance Tax to consider.

Wealth Tax.

Called Impuesto extraordinario sobre el patrimonio, often shortened to Patrimonio. This is a tax on all assets in Spain, and is charged at 0.2% of the Declared value in the deed or the Valor catastral, whichever is the higher by the Autonomous Community in which you live (i.e. Andalucía). There are differing rates that go from 0 to 167.129 € at 0.2%. between 167.230€ and 334.252 € at 0.30%, etc. etc.If you are a Resident, the first 108.182 €  (18 million pesetas) is exempt from tax. If the property is jointly owned, then each Resident owner can claim this figure against any liable tax. That equates to a tax saving of 216.36 €  (36.000 pesetas) per year, for each resident owner.

No relief is granted to non-Resident owners.

Imputed Income Tax.

This is a real tax based on an imaginary income. As a Resident, this tax has not been collected since 1999 for your Principal residence. As a non-Resident, this yearly tax is based on 2% of the assessed value (Valor Catastral) and is charged at 25%. This tax becomes payable after the end of the tax year in question, or by 30th June if more than one property is owned.

Capital Gains Tax.

Capital Gains Tax is NOW (from 01/01/07) paid at the maximum rate of up to 18% for Residents AND non-Residents. This is based on the Declared Value of the property when you sell it. If you are a non-Resident, and have not owned the property since before January 1st ,1987, then the purchaser is obliged by law to withhold 3% of the Declared value against any Capital Gains you have made, and to ensure that at least some tax is paid. The tax is calculated at the same rate as your normal taxable income, but limited to 20% maximum for Residents. Until December 31st 1996 both residents and non-residents could deduct 11.11% per year from their profits after the first two years of ownership, and pay NO tax after 10 years ownership. This has now changed in that all non-residents who bought their property after 31/12/96 will pay the 35% capital gains tax, for which the 5% retention is either whole, part or exceeds the tax that you should pay.

For Residents over the age of 65 years, and where you have lived in the property for at least 3 years, you are completely EXEMPT from Capital Gains Tax. You may also benefit from a scheme whereby you sell your property but retain the right to live in it until your death, and pay a monthly fee for doing so. This is known as "usufructo". If you are a Non-Resident in the position of Capital Gain that is less than the 3% withheld, you can claim this back.If you are Resident and intend to re-invest the whole proceeds of the sale in a new purchase for your Principal Residence, then there is no Capital Gains Tax. You have 3 years to carry this out to obtain the tax relief.

See your Gestor (Financial Advisor) or email me for advice.

gestor@helpline-spain.comGestor

Inheritance Tax.

For Residents that have lived in the property for 3 years you can bequeath the property to your spouse or children and pay no Inheritance Tax on 95% of the valuation. The Inheritor(s) must also be Resident and agree not to sell the property for 10 years.

Special Tax for Offshore Companies.

Where a property in Spain is owned by an Offshore Company, the Tax Authorities consider that any transfer of ownership of the company is a potential tax revenue loss, and therefore, in 1992, and then on January 1st 1996, a Special tax was enforced, firstly at 5%, then at 3% of the Valor Catastral value of the property (See I.B.I. Receipt). This was imposed on properties belonging to companies registered in Tax havens, such as Bahamas, Gibraltar, etc. Where the company resides in a "normal" country, where the assets are declared for tax purposes, the company can apply for Exemption from this tax by presenting a Certificate that tax is paid in another country. After considering your financial situation, residency, etc., you may find it more convenient to create a Spanish company that purchases the assets of the Offshore company, and then the property is subject to normal Spanish taxation. This could be advantageous or disadvantageous according to your worldwide assets, etc.

General Running Costs:

I.B.I. (Rates). based on the Valor Catastral of the property.

Community Charges. for maintenance of gardens, pools, lifts, pavements, etc.

Electricity Standing charges (cuota) and usage.

Pool and gardens if not in Community. Painting/Decorating. Recommended every 2 - 3 years externally, depending on situation and exposure.

Email me at info@helpline-spain.com

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