Buying Selling Mortgaging In Spain Simplified
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Transcript of Buying Selling Mortgaging In Spain Simplified
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Buying Selling Mortgaging your property in Spain simplified
Explanation of legal issues and taxes without taxing your mind
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Presentation program
– Introduction – Buying and selling process – Organising finances – Taxes and legal issues – Question and answer session
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VELASCO LAWYERS TEAM
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BUYING AND SELLING PROCESS
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Buying and Selling Process
Buyer • Choose a lawyer • Sign a POA • Obtain a NIE number • Sign a will in Spain • Think about finances
(Cash or mortgage?)
Seller • Choose a lawyer • Sign a POA • Obtain a NIE number • Are you a fiscal resident
in Spain? • Sell Through real estate
or privately?
The process for buying and selling is similar but with key differences
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Buying Process NIE
number Organise finances
Choose a Lawyer Builder’s
contract
Taxes
P.O.A. New property?
ExisDng property?
Private contract
Bank guarantees
Title of deeds
InscripDon in the land registry
Transfer uDliDes in your name
LocaDon
Sign a will in Spain
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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)
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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?
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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.
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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
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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
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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.
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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.
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Selling Process NIE
number You should
already have it
Direct sale? Estate Agent?
Choose a Lawyer
Taxes
P.O.A. Sale of
Rights of a purchase contract?
ExisDng property?
CerDficate and documents to provide at the
signing of the deeds
Title of deeds
start
End
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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
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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.
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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.
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ORGANISING FINANCES
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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)
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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
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TAXES AND LEGAL ISSUES
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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.
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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
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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.
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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).
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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
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APPENDIX
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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?
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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.
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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