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Register for Property Updates Call Me Back

August 2007

1: THE BUYING PROCESS
 

In this issue we are concentrating on the buying process and a number of points must be checked so that you can be sure you will obtain a clear title with no hidden debts.

 

 

First a PROPERTY REGISTER EXTRACT should be obtained to show whether there are any debts against the property, such as mortgages or loans etc, and to confirm the current owner of the property.

 

Then a check should be made with the relevant authorities – electric, water, rates etc, to make sure there are no invoices outstanding.

 

  

It is important to arrange a NIF number to present to the Notary and pay taxes. For this you will need your passport, one passport photo and a completed application form + two copies which you must take personally to the Comiseria Office in Denia for processing.

 

The NIE numbers usually take about three weeks to be allocated.  We can help you with this, as the forms you need to complete are in Spanish.

 

If you already have an NIF number you need to have your ORIGINAL form to present to the Notary. (Note the current model, not the previous yellow form) A PRIVATE CONTRACT is then drawn up stating the terms of the contract – deposit payable, date of completion, furniture (if any) included etc.

 

After signing the OFFICIAL ESCRITURA at the Notary, you will receive a COPY of the document immediately. The official Escritura will be returned to you once it has been checked and registered at the Property Register, which is usually 3 – 4 months later.

 

THE SERVICES – Electric, Water, etc – must be signed over in the Purchaser´s name and bank authorizations completed and delivered to the relevant offices.

In addition all the relevant TAXES must be paid.

 

Your lawyer will take care of all the above, as part of their service when they represent you for house purchase, so this is for your information and nothing to worry about.

 

The following is a summary of the various taxes payable by the parties concerned on the Sale/Purchase of a property.

 

The SELLER must pay:

 

1                    CAPITAL GAINS TAX

2                    PLUS VALIA

 

The PURCHASER MUST PAY

 

3                    CAPITAL TRANSFER TAX

4                    NOTARY FEES

5                    PROPERTY REGISTER FEES

 

1) CAPITAL GAINS TAX. If the seller is not a Spanish Resident on the date of the sale, they must deposit an advance payment of this tax with the Tax Office within 30 days after the signing of the Escritura for the sale of their property.

  

The amount of deposit payable is 3% of the declared value in the NEW ESCRITURA.  The responsibility for paying this deposit, however, lies with the PURCHASER, and if the amount is not paid to the Tax Office, a debt may be charged against the property at the Property Register. For this reason the 3% deposit is normally withheld from the final PURCHASE PRICE payment by the PURCHASER and the Purchaser then undertakes to make the payment to the Tax Office.

 

AGAIN, THIS IS AUTOMATICALLY TAKEN CARE OF BY YOUR LAWYER and is not as daunting as it sounds.  This is one of the reasons that we strongly recommend that you always employ the services of a lawyer for house purchase.

 

The Seller, or his agent should, however, ensure that they receive a copy of the Tax receipt as this will be necessary to reclaim any amounts which may be refundable. Within 4 months after signing the Escritura, the Seller (or his agent) must then prepare the CAPITAL GAINS TAX DECLARATION and calculate the Actual amount of Tax due. If this amount is more than the 3% deposit already paid, he must pay the additional amount of the tax to the Tax Office. If, however, the tax declaration shows a lower amount than that already paid, he can apply for a refund.

 

Contrary to popular belief, the TAX OFFICE DO REFUND AMOUNTS OVERPAID, usually within 12 – 24 months if they agree with the calculations.

 

The Capital gains Tax is calculated on the PROFIT of the sale of the property.  The PROFIT is determined as the difference between the value declared in the OLD Escritura and the value declared in the NEW Escritura.

 

If the property was originally purchased BEFORE 31.12.94: A discount of 11.11% is allowed for each year the Seller has owned the property as at 31.12.96 (except for the first 2 years).

 

If the property was originally purchased AFTER 31.12.94: NO DISCOUNT WILL BE ALLOWED. Instead a % co-efficient will be applied to the original purchase price before determining the profit made on the sale. This co-efficient will vary according to the number of years that the property has been owned by the seller and will be fixed and published by the Tax Office every year.

 

Other costs may also be deducted from the profit, such as the Transfer Tax, Notary´s fees, Property Register fees paid by the seller when the property was originally purchased and any costs for extensions or other improvements to the property since purchase. The Seller must, however, provide VAT invoices for any such items.

 

The balance remaining, less the discount (if applicable) and above costs is the NET PROFIT. The Capital Gains Tax is 18% of the NET PROFIT.

 

If the Seller is a RESIDENT in Spain and has sold the property to buy another property in Spain, they do not pay the 3% deposit and further more, no Capital Gains Tax is payable providing the SALE PRICE is lower than the Purchase Price of the new property to be purchased. Details of the sale must, however, be declared in the annual INCOME TAX DECLARATION.

 

2) The PLUS VALIA is a tax payable to the Town hall by the Seller and is based on the increase in the value of the LAND since the last sale of the property. The values are based on a number of factors and vary from one area to another. The calculation is somewhat complicated.

 

In general, the amount payable increases with every year the Seller has owned the property and the larger the plot of ground.

 

3) CAPITAL TRANSFER TAX, payable by the PURCHASER within 30 days of the Escritura date, is 7% of the value declared in the NEW ESCRITURA. When determining the amount to be declared in the Escritura, the Purchaser should ensure that they do not under-declare. Otherwise, if the Tax Office deem that the value is too low, they will reassess the property according to their tables of values, and send a demand for the additional tax due which will may be calculated at the higher Gift Tax rate.

 

If the Tax Office over-assess the worth of the property, the onus is then on the Purchaser to prove otherwise, which may be difficult.

 

4/5) NOTARY & PROPERTY REGISTRY FEES are based on their scales of fees and both together normally amount to approximately 1% of the declared Escritura value.

 

As this whole procedure can be fairly complicated and time-consuming, it is always advisable to appoint a Gestor or Solicitor to act on your behalf and ensure that everything is in order.

 

2: BRITISH BAD PRESS???

 
It appears to be a trait limited only to Britain of selling newspapers by printing outrageous headlines designed to sell the paper and not portray the full truth. Luckily we have found that generally the British are able to see past the mentality off “if you do not understand it knock it”

 

There have been many misleading reports about the “LRAU”, which has been replaced by the “LAU” and, although some property owners, Spanish amongst them, have been affected by this law, by purchasing a property on “Urbanised land” and using a qualified Lawyer you will ensure a trouble-free purchase.

 

The property market in the North of the Costa Blanca remains buoyant and we have had a number of successful sales this year. There are a good number of quality properties available from many nationalities and prices are remaining competitive.  As the pound remains strong against the Euro, now is a very good time to buy. Spanish mortgages are also available at very competitive rates and we hope to include further information on Spanish Mortgages in a future issue.

 

3: FIESTAS

 
A number of Coastal towns have been busy celebrating various Fiestas.  Moraira has recently had their Moors’ & Christians’ Fiesta. The International Music Festival, with many well known local bands, dancers and soloists. The most recent celebration was of the Virgin of the Unsheltered and the Virgin of Carmen who is said to protect the sailors and fishermen. There is a beautiful parade and fireworks and a water procession with the statue of the Virgin floating among endless bouquets of flowers. Quite a scene to be seen! This was also held in Calpe, Denia - in fact at any town with a fishing fleet. In general, Fiestas occur throughout the year. Spain has 11 National public holidays & each town has a public holiday for its own patron saint

 

4: WATER & IRRIGATION

 
The Sun has shone every day for weeks, with temperatures up to 30ºc. Evening temperatures are lower but still warm and the towns are busy at night with a great street Café & Restaurant atmosphere. The last real rain was in April, which although not good for outdoor living, is good for the gardens. It is both sensible and economic to water your garden via a well-maintained automatic irrigation system. This both saves water, as the water gets straight to the roots, and saves money as all properties in Spain are on a water meter. For new build properties, grey water systems should also be considered. This is a method of collecting rain water to use for irrigation and for flushing the toilet. In the kitchen, if possible, a dishwasher should be used. It will pay for its self in a relatively short time because it only has a cold water feed and  excess water is not lying in the pipes between the heated source and the tap.  All new appliances purchased in Spain have an energy rating with rating “A” as the best. It is possible to apply for a grant  to change old appliances to a new “A” rated appliance. Other water savings, of course, can be obtained from having a shower in place of a bath, fitting duel flush cisterns to the WC, using the minimum amount of water needed in the kettle/saucepan, etc.

 

 5. FOCUS ON MORAIRA

 
Moraira has, over the last twenty five years or so, developed from a very small fishing port, under the control of the Town hall of the much larger inland town of Teulada, into an attractive, charming resort with an impressive marina, attracting visitors from all over Europe, many of whom now call it home. Although the local government situation still exists and is now known as Teulada – Moraira, each town has its own separate identity. Moraira lies in a bay between Javea to the North & Calpe to the South on Spain's beautiful mountainous Costa Blanca The area is quiet and relaxing, with attractive private properties set amongst beautiful, unspoiled scenery with wonderful Mediterranean views. Moraira has an excellent variety of local shops, weekly markets & many restaurants & bars still retaining their Spanish character, many housed in the picturesque storage buildings once used by the local fisherman who still go to sea in the early hours of the morning & sell their catch later at the traditional fish market – one of the oldest & most important in Spain.

The local sandy & rock beaches have been awarded the EEC Blue Flag for cleanliness and immediately behind the beach is a managed woodland with plenty of seating for shelter from the heat of the midday sun. Close to the beach is the 12th century Castillo - once used to defend the town from sea attacks and is also the focus for many Fiestas. To the north of the marina is El Portet and beach, from where several excellent hill walks start.

 

There is an 9 hole golf course within 3km of the town centre and there are up to thirteen courses within an hour’s drive. Since they are all affiliated to the Spanish Federation they can validate a member’s handicap internationally.

The Town has an excellent Mediterranean climate, with cool sea breezes in summer and is protected from the cold north winds in winter by the “Cumbre del Sol” (Summit of the Sun) mountain.

 

This newsletter is intended as a guide and to be informative and helpful in the process of searching for and purchasing a property in Spain. Total accuracy cannot be guaranteed and in all legal, fiscal and other matters a fully qualified professional should be consulted.

Reproduction of any part of this newsletter is not permitted without written permission.