TO BUY A PROPERTY IN SPAIN
Buying a property in Spain is relatively straightforward and will pose no problem as long as the correct steps are followed. If you do not already have a lawyer, it is recommended that you engage one to safeguard your interests throughout the purchase.
Once you have decided on a property you want to buy, it is normal procedure in Spain to place a reservation deposit. This can be anything from 3.000 – 10.000 euros, depending on the purchase price. This deposit is accompanied by a reservation contract which states the names and identification numbers of the buyer and seller, the agreed sale price and any conditions that have been agreed concerning the purchase. The reservation deposit is normally paid to the estate agent or your lawyer to show good faith. It is recommended to never pay a reservation deposit directly to the owner.
• Property Check
At this point your lawyer will begin carrying out the necessary checks on the property with the local land registry to ensure that all the property’s documents are in correct order, that there are no embargos or debts on the property and that the person selling the property is actually the owner.
• Prívate Contract
Once the lawyer is satisfied that everything is in correct order then the buyer and seller will sign a private purchase contract (a compraventa) and the buyer will pay a 10% deposit (less the original reservation deposit). In this contract, the buyer and seller details and identities are stated, along with the agreed sale price and the date for the final transfer of the property from seller to buyer. At this stage, if the buyer decides to withdraw from the purchase they will forfeit their deposit and if the seller withdraws they will be obliged to repay double the deposit amount to the buyer, unless otherwise agreed.
• Title Deed
The final stage is when you pay the remainder of the monies due and the Title Deed (Escritura) is signed in front of a public Notary. After the deed has been signed your lawyer will register the property in the buyer’s name at the local land registry. Purchase Costs There have been some significant changes to the taxes levied on purchasing property in Spain as from 1st January 2012. The following is a summary of the taxes that a purchaser will pay subsequent to this date.
• Purchase Costs
There have been some significant changes to the taxes levied on purchasing property in Spain as from 1st January 2012. The following is a summary of the taxes that a purchaser will pay subsequent to this date.
When purchasing new property directly from a developer
IVA (VAT) is charged on all new properties (properties that have been newly constructed and purchased by the first owner) at a rate of 10% on the purchase price.
When purchasing a re-sale property from another owner
From 1st January 2012 the transfer tax (ITP) has increased in the following format:
0 – 400.000€
400.000€ – 700.000€
• Other Paperwork required for purchasing a property
Spanish nationals need only their identification (for all persons whose name is going to appear on the title deed).
If you are a non-resident the Spanish Ministry of Interior requires you to obtain a certificate of non-residency, which in turn determines your fiscal number, so that you can sign the title deed. It will also be required later in order to pay taxes. This document is known as an NIE number. As from 1st January 2012 local police stations are not accepting NIE applications through a power of Attorney; clients must now apply for their NIE personally at the police station or at Spanish Consulates / Embassies.
We recommend o open a bank account when commencing a property purchase as this will be needed not only for the purchase, but also to set up direct debits for the utility charges such as electricity and water.
It is also recommended to write a Spanish will. This only has to relate to assets situated within Spain and need not concern assets owned in your country of residence. This will simplify the probate process in the unfortunate event of the death of the property owner and significantly reduce costs and the duration of the process.
LAW ON VISAS FOR ENTREPRENEURS
This Act is aimed at investors, entrepreneurs, highly skilled professionals, researches, and workers performing inter-company business operations, including their spouses and children under 18.
The Act facilitates a swiftness of processing, generally establishing a resolve within 10 days for all visa applications relevant to this law.
The Residence Visa issued under this law is sufficient to reside in Spain for one year without having to obtain a foreign identity card. The renewal of Residency may take place even if absences exist for longer than six months per year in the case of Residency Visas and authorisations for foreign investors and for foreign workers performing inter-company operations abroad or that have established their base of operations in Spain.
- Not to be on Spanish soil irregularly.
- Be older than 18 years.
- No criminal record in Spain or countries lived in during the last 5 years for offenses stipulated under Spanish Law.
- Not listed as objectionable in the territorial space of countries with which Spain has signed an agreement in this regard.
- Have a public insurance or private health insurance with a Health Insurance Institution authorised to operate in Spain.
- Have sufficient financial resources for yourself and for the members of your family during the period of residency in Spain (2.130€ monthly for yourself and 532€ for every family member that is in your care).
- Pay the fee for the processing of visa(s).
It is important to mention that the processing of the Residency Visa is extended to the spouse and children under 18 years of age or to elderly family members, who are not able to provide for themselves due to their state of health, when they unite with or accompany applicants. Consequently they may apply, jointly and simultaneously or successively for a family residence visa, with proof of compliance with the above requirements;
The presence of the applicant of the visa is not required because biometric data is not required. The residency visa may be requested and obtained through a duly accredited representative
This Act of residency visas refers to the following:
• Residency Visas for Capital Investors (RIC).
A significant capital investment is understood as an initial investment with a value equal to or greater than 2 million Euros in Spanish government bonds issued or a value equal to or superior to 1 million Euros in shares or shares in Spanish companies or deposits into Spanish financial institutions.
Besides the general requirements established, the applicant must have proof of the investment of the minimum amount required over a period not exceeding 60 days preceding the filing of the application in the following manner:
- In the case of an investment in unlisted shares or company shares a copy of the statement of investment made in the Registrar of Foreign Investments of the Ministry of Economy and Competitiveness must be presented.
- In the case of an investment in listed shares, a certificate of a financial intermediary, duly registered with the National Commission of the Stock Market or the Bank of Spain, which states that the person has made the investment according to the standard rules.
- In the case of an investment in government bonds, a certificate of the financial institute or the Bank of Spain has to be presented which indicates that the applicant is the sole owner of the investment for a period equal to or greater than 5 years.
- 4. In the case of a bank deposit investment, a certificate from the financial institution must be presented which states that the applicant is the sole owner of the bank deposit.
• Recidency Visas for Acquisition of Real Estate (RIV.
Foreigners who can prove the acquisition of real estate in Spain with an investment value equal to or in excess of 500.000€ may apply for this visa>
In addition to the general requirements established, the applicant must prove the acquisition of the real estate property by means of certification containing information of the dominion and taxes of the Land Registry which corresponds with the property. This certification has to be issued withing 90 days preceding the presentation of the application of the Residency Visa. If, at the time of the visa application, the acquisition of land is pending registration at the Land Registry, it will be sufficient to submit certification attesting the pending submission for registration of the acquisition document, accompanied by the proof of payment of the corresponding taxes.
The applicant must prove availability of an investment in real estate for the amount of 500.000€ free of all charges or encumbrances. The share of investment in excess of the required amount may be subjected to charges or encumbrances.
• Residency Visas for Entrepreneurs and Business Activities (REM)
This section covers all investors presenting a business plan, considered and recognised as being of general interest, to be developed in Spain with the intention of entering and staying in Spain for a period of one year for the sole or primary purpose of carrying out the preparatory work to develop an entrepreneurial activity.
In the first place the applicant must present a favourable report from the Commercial Office in the area of geographical demarcation where the investor presents the visa request, to confirm that the business plan presented is considered as a general interest.
It must be noted that a significant capital investment is admissible when the investment is carried out by a legal person resident in an area not under the consideration of preferential taxation conforming to Spanish legislation and the foreigner possesses, directly or indirectly, the majority of voting rights and has the power to appoint or remove the majority of board members.
In the case of Entrepreneurs, entrepreneurial activity is understood as that which is innovative in nature with a special interest to Spain and can count on a favourable report from the Commercial Office where the investor presents the application for the visa
• Residency Visa for Highly Skilled Professionals (TAC).
Application for this visa requires that the company carries out the processing of the Residency Permit, issued by the Large Enterprise and Strategic Economic Unit in Spain and granted by the General Directorate of Immigration, in advance
• Residency Visa for Training or Research (RIN).
This visa contemplates the mixed case relating to foreigners wishing to perform activities of training, research, development and innovation in public or private institutions. These cases are:
- The Personal Researcher to which Article 13 refers in the additional provision of the Law 14/2011, of 1 June, of Science, Tecnology and Innovation.
- The Personal Scientist and Technician who carries out works of scientific investigation, development and technical innovation, in business institutes or centres of I+D+I established in Spain.
- Researches accommodated in the framework of an agreement by organisations of public or private research, under the conditions laid down by regulation.
- 4. Teachers contracted by universities, organisations or centres of higher education or research, or business schools established in Spain in agreement with the criteria of established regulation.
• Visado de Residencia por Traslado Empresarial (TTI).
This visa may be processed for those foreigners who move to Spain as part of an employment, professional or vocational training on the grounds of a relationship with a company established in Spain or in another country.
This visa requires that the company performs the application beforehand in Spain for the processing of a Residence Permit for Intra-Company Transfers, done by the Large Enterprise and Collective Stragegies Unit and granted by the General Directorate of Immigration.
• Residency Visas for Family Members (RFI).
The new Law establishes that the spouse and children under 18 years of age, or the elderly, unable to provide for their own necessities due to their state of health, that is united with a accompany the applicant may apply for a Residency Visa
In addition to the general requirements they have to prove their family relations
COMPANY-OWNED PROPERTIES IN SPAIN
As a buyer of Spanish residential property, you may often hear the term “company-owned property” and, particularly in the case of older and larger homes, it will be something that may well come up in the course of your home-hunting. This article sets out some basic history, evolution, and present day considerations relative to this issue.
In the ‘70s and ‘80s and even the ‘90s, it was common to hear of Spanish properties that were registered in the names of offshore holding companies and the companies, rather than the properties themselves, were offered for sale. In the early years, many of these companies were domiciled in Panama; later on, Gibraltar based companies became very popular as they were closer to home.
The advantages in the eyes of the owner of the company were clear: when selling the property, he could offer for sale the shares of his holding company, instead of selling the property from the company. This could be accomplished without having to issue any Spanish public documents which recorded the sale, since the public title deeds of the property were already issued in the name of the company. Upon purchasing the company shares, and hence the property held within, the buyer accepted the unrealized Capital Gains Tax liability which would only have to be paid in the case of selling the property outside the company structure, since the original book value of the company asset would remain unaltered. In those days, this type of transaction was very common and it was relatively easy to continue to sell the company on to yet another buyer simply because the seller paid no taxes thanks to the Spanish Tax Office not having any information on the transfer of assets, even though the tax was due.
For the buyers the system appeared easy: it avoided transfer taxes and if at any future point they wanted to sell, they could offer the new buyer the same company package. This worked until the Spanish Tax Authorities “saw the light” and changed the tax laws, making the sale of companies owning properties much more difficult. The most recent of these laws have been several Tax fraud prevention laws passed in 2006, 2010 and 2012 and the abolition in 2007 of the special tax advantages of patrimonial or holding companies.
But changes started coming a lot earlier: in 1991, the Spanish Tax Office introduced a 5% annual “penalty”, based on the cadastral value, in the form of a “special tax” on any property owned in the name of a company domiciled in “tax haven” countries. This was later dropped to 3%. In order to avoid this penalty the company owners, on recommendation from their Spanish lawyers, instructed their company administrators to set up a Spanish company, capitalized by the property, and whose shares were, in turn, owned by the off-shore company. This was a legal way to avoid the special tax. A few company owners made the wise decision to simply liquidate the company, with the title of the property then reverting directly to the company shareholder personally.
Since the ’90’s and especially since the year 2000, the Spanish Tax Office has taken a view that drug and mafia rings and money laundering activities could potentially lie behind off-shore companies (“Why else use a tax haven company?”, they reasoned) when, in reality, most of these companies were formed by reputable lawyers on behalf of their normal, tax paying foreign clients simply as a convenient way to purchase and hold property, and also for inheritance tax planning, in the Anglo-Saxon manner of investing.
The Holding or Patrimonial Company: a new fiscal instrument
With effect in 2003, the Spanish Tax Office gave new fiscal treatment to “Patrimonial or Holding Companies”, that is, Spanish companies holding mainly real estate. This treatment was especially useful for those owners whose companies met certain conditions, one of which was to have “no commercial activity”, amongst others. The Capital Gains Tax, upon the sale of a property owned by patrimonial companies meeting the necessary criteria was only 15%. Spaniards themselves were quick to start to use these companies since a capital gain for individuals at the time was taxed at penal rates. These companies were also ideally suited for foreigners to legally avoid the penal 35% non-resident Capital Gains Tax on the sale of property, and consequently a strong motivation for non-residents to buy properties with Spanish companies owned directly by themselves rather than through a foreign holding company.
As indicated earlier, in 2007 the Holding Company special tax treatment was abolished and anyone selling property out of the company after that had to pay the 35% company tax in force at the time, or had a certain period of time in which to liquidate the company. However, in compensation, a Capital Gains Tax of 18% was finally introduced for non-resident owners who sold properties owned in their own names. This is now up from 19% to 21% in 2013 due to the credit crunch. This long overdue “normalization” of taxes for non-residents hastened the disappearance of the infamous “B money” (cash) in property transactions.
Owners of holding companies have become gradually cornered
As a consequence of the above, those still owning properties within a company structure have gradually become cornered over time. The advice to buyers today from almost all lawyers is not to buy within a company structure, except under certain specific conditions and especially, not to buy someone else’s company where the property has a low book asset value, as you would be taking on this “unrealized Capital Gains Tax” as mentioned before. Most people today prefer to buy a property in their own name or, at least, with their own newly formed company and a present-day, full tax base for the cost of the property.
The result of this evolution is that sellers of properties which are still owned by companies often end up having no option but to sell the property out of the company and pay penal taxes as a result.
Some help might still be available to owners of company held properties
Those who still own their properties through off shore companies, either directly or through a Spanish subsidiary company, or a Spanish company where they own the shares personally, may not be totally out of luck. There are a few lawyers and accountants who are highly specialized in European community tax law who, after analysis of one’s current ownership structure, nationality of the company, place of one’s own fiscal residency etc., might be able to suggest a change in domicile of the Spanish or mother company to another country, ie, a change of nationality of the company, or other company adjustments which could result in a substantial reduction in the Capital Gains Tax, all in a totally transparent and legal manner.
It should be noted that to be safe, these changes must be put in place even before the decision to sell has been taken. Should the Tax Office make a connection between the company changes and a sale taking place shortly afterwards, and conclude that the sole reason for the changes was to avoid taxes, the Tax Office could end up challenging this and trying to nullify the tax advantages claimed.
The long and the short of purchasing a property which is held within a company:
a) Disadvantages in buying a Spanish Company.
1. When the shares of a holding company are bought, the purchaser also takes on an unrealized tax which must be paid once the property is sold from the company, as indicated above. For example: In 2012 the shares of a Spanish company are bought for a price of €1,000,000. The property had originally been bought by the company in 1997 for €400,000, plus title deed costs, which is also the share capital of the company, including any shareholder loans. The property has also been depreciated on the company books in accordance with the Spanish Tax Code to, let us say, €300,000. The property is then re-sold outside the company, in 2016 for €1,400,000. According to today’s corporate tax rates, 30% would be payable (25% on the first €120,000) on the difference between the original, depreciated book value of the property (with indexation) and the price received plus taxes on the dividends if/when the funds are taken out of the company. In the end, tax is being paid on part of a profit which the seller has not made, amounting to nothing less than financial ruin.
2. Company administration costs: These can be between €2,500 and €4,000 a year. It doesn’t sound like much but multiply it by the 15 or so years the property might be owned and it turns into real money. Plus the naming of administrators, book-keeping, annual tax forms to sign and file, etc.
3. It is clear that when we talk about buying a company we refer to a company which has had no commercial activity whatsoever, whose only purpose is to own and perhaps rent out a property, and to pay the running expenses of that property: a holding company. These companies will obviously have a history. This is not normally a problem, but the company must have a professional audit and it must pass all the normal tests and due diligence. Otherwise, if there are any obligations undertaken by the company which have not been disclosed, there will be unpleasant surprises. Fortunately, most company owners leave all control in the hands of a professional company administrator who keeps the books and can give warrants and representations as to the good health of the company. When buying a company owned property, caution should be exercised to make sure it is owned by a visible and solvent seller, and letters of responsibility should be obtained both from the administrators of the company and the real owner, in addition of course to a good audit. The problem arises when there is a seller who has Powers of Attorney himself, and it is difficult to find out who he is and what he does and the use he might have made of the POA. This situation should be avoided.
4. The use of a company home by the company owner has already been declared as a taxable item by the Spanish Tax Office. So, what many the owners do is to rent the property from the company, at a fair market rental value, and from the rent received the company can pay the running expenses of the property, with the intention of reducing the profit gained and hence the corresponding taxes to be paid. From a practical standpoint it does not appear that the Tax Office is making investigations with respect to the rentable value of company owned properties for the moment, but this will probably change at some time in the future, and the rental value you are paying might be challenged.
Advantages in buying a Spanish Company
After reading the above, most people will say: “how can there be any advantages?” Well, there are, but a buyer must fit certain criteria.
1. A large estate, a special property worth a considerable sum of money: a lot of people have assets spread out in different countries all over the world and want to simplify management and their estate situation, as well as not appearing publically as an owner for reasons of discretion. There is nothing illegal about owning a Spanish company with a Trust, or any other foreign company, tax haven or not, provided there is transparency with respect to full identification of the beneficial owner, as well as a declaration made of the legitimate, tax paid source of funds used for the purchase. When several people are beneficial owners of a purchasing company, identification is not required for those who own (directly or indirectly) less than 25% of the company.
So, if the property of interest is in an already existing company structure, if the purchase price is elevated, the buyer may not really care about the issue of unrealized capital gains as he is may be thinking he will never sell it (and under certain, special circumstances he might also save the transfer tax). In the mind of many of this type of investors, even if they do decide to sell in the future, their mind set is that their advisors will solve that problem when the time comes, and who knows, maybe he will meet someone like himself who will buy his company. But here we are talking about the more expensive properties and the wealthiest buyers.
2. If the shares of a Spanish company are bought by two or more individuals with no one person owning more than half of the company, and more than 50% of the company assets are comprised of real estate, or if the company is actively trading, the so-called transfer tax on re-sale properties can be legally avoided. This would work, say, for a married couple with independent assets. The transfer tax in Andalucía was revised in 2012 to: 8% up to €400,000; 9% between €400,000 and €700,000; and 10% above that.
3. Companies are exempt from paying the newly (and provisionally) re-instated wealth tax (but not, however, the shareholders of companies). For those owning properties in their own names, this tax is based on a sliding scale according to the value of the property, from 0.2% (up to €167,129) up to 2.5% (over €10,695,996). Another advantage in owning a property through a company is that all repairs and installation replacements and renewals are fully tax deductible, where this is not the case with properties owned personally.
Needless to say, the exemption of companies from the patrimonial or wealth tax can always be modified by the Tax Office at any time in the future, although most experts do not consider this likely.
4. One person’s problem can often be another’s gain. Property owners today trying to sell along a company structure have a problem: buyers no longer want to take on the company’s tax obligations which would fall due if and when they, in turn, decide to sell the asset outside the company. But if the value of the share capital is not ridiculously low, as in the case mentioned above, we have sometimes witnessed savvy buyers (with their savvy agent to guide them!) who first of all do a deal with the seller to buy a property out of his company, at an agreed price. Then as a second step, with a base price established, he can sit down with the seller, calculate the taxes the seller has to pay (company tax, and dividends tax if the money is taken out of the company) and compare it with the simple Capital Gains Tax of 21% that the seller would have to pay if he were to sell the shares of the company. The buyer might then consider taking on the company (especially if he has no intention of ever selling), and splitting the savings with the seller.
5. Some buyer clients are masters in company transformations, mergers, or outright company acquisitions by other companies he may own. This type of buyer has the experience and mechanisms at his disposal to dilute, in time, a low capital value of a company he purchases.
To summarize: what one could do 20, 30 or 40 years ago with respect to tax issues is no longer possible with the current tax legislation in force. Nowadays, most people will have no interest in purchasing property within a holding company because by owning it in their individual names, all they have to pay when they sell their property is the personal Capital Gains Tax at 21%. Compare that to having to pay the company tax at 25-30% and the dividend tax on top of that when they liquidate the company: in the majority of cases, it will simply not make financial sense. But there are indeed exceptions to this, as outlined above, and a buyer’s particular circumstances can make a company purchase preferable for him.
Inmolux Real Estate always recommends to anyone seriously interested in further advice relative to buying or selling a company which owns property that they consult with a reputable lawyer specialized in this type of transaction.
PROCESS AFTER SELLING – BUYING CONTRACT (ESCRITURA)
The sale contract (escritura).
The notary will confirm that payment has been made and the keys will be handed over. The buyer will be given a copy of the deeds and their lawyer will fax notification to the Land Registry. Later the lawyer will collect the original deeds
a). -Registering ownership:
With the escritura signed and the taxes paid, the final step is the registration at the Land Registry. To register property rights in the Land Registry, the following documents must be presented at the local Registry Office:
• A certified copy of the deed of sale.
• Printed tax self-assessment form, showing payment of taxes at a bank.
• The most recent property ownership tax (IBI), or a cadastral certificate showing the cadastral reference of the property. These documents should be incorporated into the deed and its copies.
• Proof of submission of a copy of the deed to the local tax authority for the purposes of the Municipal Tax on Increase in Value of Land of Urban Nature (plusvalía). The housing authorities from the Autonomy may also require the seller to deliver a certificate of habitability, proving that the property meets all the technical requirements for habitation. Resale properties, as long as they have the supplies contract in place, will not need to show these licences. The presentation of these documents to the Land Registry can be done directly by the buyer, an agency, the notary, the lawyer or a gestor. However you choose to do this, once these documents are at the Registry, registration must be completed within 15 working days. Otherwise there will be a 30% reduction in fees.
The registrar will verify that the agreement has been made with full legal effect and the property rights of the buyer will be recorded at the Land Registry. If the registrar sees that the documents have defects preventing their registration they will notify the filer of the document and the attesting notary. Defects noted by the registrar may be corrected, or if you do not agree with the registrar, you may request a second opinion from another registrar who may replace the first. The corresponding appeal may be submitted to the Directorate General of Registries and Notaries, or you may directly challenge it before the Court of First Instance in the capital of the relevant province. This registration is necessary for the buyer’s newly acquired right to be fully protected:
• You will be considered the only true owner unless judged otherwise.
• You are protected against creditors of the seller.
• You are protected from hidden charges against the property.
• You may obtain judicial protection of your rights.
• Once you have registered your rights, no one can effectively acquire any rights over your home without first obtaining your consent.
• You can obtain a mortgage loan to finance the purchase of housing. Only if the buyer registers his or her right of ownership may the bank register the mortgage that guarantees repayment. The change of ownership will be notified to the cadastre so they will know that the property taxes will now be paid by the buyer. For all these reasons it is essential, as we have already explained, to check if there is any seizure, mortgage or other charge in registration history of the house or the land on which it is to be erected, and to buy only from the person listed as its owner in the Land Registry. It is also essential, once you have signed the deed, to complete the registration of your rights in the Registry.
THE PROCESS OF SELLING A PROPERTY IN SPAIN
Selling a property in Spain is a relatively straightforward process, but as with buying a property, we recommend that sellers engage the services of a professional lawyer to assist and advise them in the process. Sellers need to be aware of several facts before entering into the process.
• The Seller’s Tax Liability
Capital Gains Tax
The seller will be responsible for the payment of his Capital Gains Tax. This is the tax based on the increase in value of the property from the original purchase date to the date that it was sold on. As from 1st January 2012 the Capital Gains Tax has increased from 19% to 21%. Any conveyance costs involved in the buying and selling of the property can be deducted as long as these costs are accompanied by official receipts. Therefore, all purchase taxes, notary fees, legal fees etc can be deducted from the calculations.
To use an approximate example:
Original purchase price: 100.000€
Taxes & fees incurred: 10.000€
Selling price: 160.000€
160.000 – (100.000 + 10.000) = 50.000€
50.000€ x 21% = 10.500€ Capital Gains Tax due.
Residents are exempt from Capital gains tax if they are
• 65 or over and have lived in the property for 3 years or more
• If the property is a main residence and the net sale proceeds are reinvested in the purchase of another new home within two years
• Plus Valia Tax
Sellers are normally also responsible for paying the Plusvalia Tax although this can sometimes be negotiated to be paid by the buyer. This tax is set by the local authorities and is based on the increase in the value of the land (not the property – the selling price has no effect on the plusvalia tax) from the date the owner acquired the property to the time of the present sale. The local authorities will determine the amount and is calculated according to the rateable value of the property and the number of years that it has been in ownership of the vendor.
Sellers must also pay the fees for cancellation for any encumbrances on the property such as mortgages, unless otherwise agreed between buyer and seller. If the buyer is intending on purchasing with a mortgage then they might want to consider simply taking over the seller’s original mortgage (being careful to check the terms and conditions), as this will be cheaper than setting up a new mortgage.
Important factors to know when selling a property in Spain
If the seller is a non-resident and has owned the property for less than 10 years, it is important to be aware that the buyer is obliged to withhold 3% of the purchase price and pay this amount directly to the Spanish Tax authorities. This is a way of ensuring that the capital gains tax (CGT) is paid by the vendor and to prevent them from taking the money and not paying their tax bill. After the CGT is calculated, the seller will either receive a refund or be billed for an additional amount depending on the amount of tax that is due. If the buyer does not withhold this amount they will automatically become responsible for the sellers CGT.
Declared Selling Price
In the not too distant past, tax evasion was common in Spain and property transactions were a prime example of how taxes were avoided. Sellers used to declare the sale price at a much lower value than the actual selling price in order to lower the level of capital gains tax that was due. Buyers were complicit in this process as this also lowered the amount of tax due on the purchase.
In the last 10 years this situation has changed dramatically and the Spanish tax authorities have targeted property transactions in particular. If the tax auditors feel that the declared selling price is too low, they can, and have, imposed significant penalties on the seller. Foreign governments in Europe and Scandinavia have been known to share information with the Spanish tax authorities.
Consequently, under-declared values have practically become a thing of the past and we strongly advise our clients not to get involved in this activity.
Property negotiators at Inmolux Real Estate are experienced and have up-to-date knowledge of the current laws and tax liability. We are happy to advise any owner choosing to list their property with us. If you would like to speak with one of our professionals about listing your property, or have any questions that are not covered here, do not hesitate to contact us. We are happy to call you using our call-back service. Simply fil in your details below.
We provide a comprehensive service which includes the search for land, acquisition of licenses, execution of works, interior design, and selection of furniture for your future home.
HOW TO SELL YOUR PROPERTY FASTER
• Don’t ask for too much.
Everybody seems to value their own property above the market value. If you want a quick sale, you should be realistic. Look at other properties in the area and get the opinion of a reputable real estate professional. Be prepared to lower your expectations if you genuinely want a quick sale. Sometimes, a lower-than-expected price on a house can be a good thing. A low price can spark a bidding war, causing the price of the house to go up. A bidding war isn’t guaranteed, but it’s a lot more likely to happen when the price is lower than it is if the price is higher.
• Hire a professional to stage and photograph your home
A professional home stager sees your home from a buyer’s perspective — a good one understands how to highlight its strengths and soften its flaws. Your buyer’s first impression will be the listing photos, and studies show that homes with more than six listing photos online are twice as likely to be viewed by buyers. But not everyone wants their home staged (or has the money for it). Inmolux Real Estate poses another option: “A friend can stand at the curb and walk through the house with fresh eyes to offer their perspective on decluttering, and then the agent can go through from a marketing standpoint. Either way, staging of some sort is necessary on almost every home, no matter how beautiful it is.”
• Get a storage unit
You might think the easiest way to declutter your home is to shove everything into the closets. Bad idea: Anyone who tours your home is going to check out the storage spaces, and disorganized, overstuffed closets only serve as evidence that your home is lacking. Opt instead for a storage unit to house the things you won’t need while your home is on the market. The general rule? Get rid of a third of your stuff. “If you don’t use it every day, store it,”
Holiday decorations, baby gear, seasonal clothes, that bread maker you’ve never used — they can all go into storage. Bonus: If you choose a portable unit, it can be transported to your new home, making moving day a cinch.
• Use the power of the internet.
The internet changed the way that houses were bought and sold. No longer did prospective home buyers need to physically visit the house to find out what it was like. Today, many potential home buyers weed out listings they don’t want to invest time in online, and then visit the ones in person that look intriguing. Promoting your home’s unique qualities online is a great way to generate more leads.
If you can, borrow a nice DSLR or rent a wide-angle lens on the cheap for a couple of days. It should cost you something like $20 – $50 to rent for a couple days.Take pictures of your house on a bright and sunny day, after all your clutter has been cleared away. Pictures of a bright room on a sunny day will make your house look bigger and more inviting.
• Don’t be afraid to spread the word.
Even if you have a real estate agent, it can’t hurt to tell people you know about putting your house on the market, even though you might feel it’s embarrassing. Update your Facebook, talk to people in your local PTA, ask trusted friends to spread the word. These small blasts can make a big difference when your house is finally sold.