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Article by: Rafael Otero info@ebblewhites.com Published: 10/05/2008

Always use a good lawyer. Always use a reputable Agent. Always get the correct up to date information. Always check that the agent complies with the degree218/2005.

Once you have found your ideal property, it is then necessary for you to sign a preliminary sales contract with the seller, and to pay a reservation deposit of usually 6.000 Euros. The property is then officially ‘off the market’.

Thereafter, it usually takes anything between 15- 30 days for your lawyers to gather information on the property regarding land register and legal issues. This is essential to check that the title deeds for the property are correct, i.e. if the person selling the property is authorised to do so etc.

The lawyer is then responsible to check that the property is also free from any pending charges, mortgages or debts. If there are, they will take the appropriate action to ensure it is completely settled before the legal ownership of the property is transferred to the buyer.

The Private Contract is a document containing information on the description of the property on the land register, the price of the sale, the method of payment, the date the contract is formalised, the date you take possession of the property, and so forth.

Upon signature of the Private Contract, and the deposit has been paid – which is usually 10% of the purchase price, minus the reservation deposit, at this point the contract becomes a legally binding document.

Unless you have given your lawyer a power of attorney, you will have to be present for signing over before a Notary, a public official, whos duty consists of identifying the buyer and the seller, and ensuring that all the legal requirements have been met, and that the amount due to be paid has been settled.

Immediately after the deeds have been signed, the buyer is handed the property keys, and can take possession of the property.

N.I.E. (SPANISH IDENTIFICATION NUMBER)

The N.I.E. is the ID number that foreigners use in Spain, and is issued by police authorities. This is essential to buy property in Spain and to obtain service contracts for utilities.

Applications to obtain a N.I.E. number can take up to 2 months to process, so it is very important to present your application for a number at the beginning of the buying process.

SPANISH BANK ACCOUNT

It is essential to have an account in a Spanish bank in order to contract utility services and to pay them by direct debit.

TAXES ON CONVEYANCE OF ASSETS AND DOCUMENTED LEGAL PROCEDURES (ITP-AJD in its Spanish acronym) AND/OR IVA (Spanish equivalent to VAT):

The IVA tax (equivalent to British VAT) is applicable to the purchase of newly built properties and urban plots which are immediately available for building. It amounts to 7% of the purchase price to the purchase of newly built properties. This tax must be paid on each instalment. In addition, the acquisition of the title deed is also subject to Taxes on Conveyance of Assets and Documented Legal Procedures, 1%. It is necessary to pay the ITP-AJD taxes (taxes on Conveyance of Assets and Documented Legal Procedures), when IVA (Spanish VAT) is not applicable. The rate of ITP is 7% of the property purchase price.

Remember the costs associated to a property sale transaction are normally 10% of the purchase price, and one of the mentioned taxes is included in this 10%.

WEALTH TAX

If you are not resident in Spain, you must pay Wealth Tax (which is applicable to all the assets you have in Spain. Among these assets are real estate, bank accounts and other goods of a certain value. The rate of this tax is very low, usually around 0.20% of the total value of your assets.

CAPITAL GAINS TAX

Capital gains tax is payable based upon the increase between the original purchase price of a property, and the selling price. This tax applies to the seller and is levied at 18% or for companies 25% to both residents and non-residents. Anyone purchasing a property from a non-resident must withhold 2% of the purchase price which is then paid to the tax authorities on account of any liability by the vendors.

The vendor then has around 30 days in which to pay the Agencia Tributaria (Spanish tax authorities) the rest of this tax. However, there are factors that can be taken into consideration to reduce the amount paid such as the costs incurred with the original purchase, and time elapsed between the initial purchase and the new sale etc. This is where choosing a good professional Spanish lawyer becomes vitally important

 

External Article Link: http://www.property-partnership.com/overseas-property-guides/overseas-property-guide.cfm?id=134

Article Link: http://www.property-partnership.com/overseas-property-guides/overseas-property-guide.cfm?id=134

Please contact the author at info@ebblewhites.com for more information.