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BUYER’S GUIDE FOR BUYING AND SELLING PROPERTY IN SPAIN

TABLE OF CONTENT

1. PURCHASING A RESALE  PROPERTY IN SPAIN
• Costs of purchasing
• Appointing a legal representative
• Power of attorney
• Deciding on a property
• The private purchase contract
• Mortgage
• Due diligence / Legal searches
• The title deed and registration

2. PURCHASING A NEW  PROPERTY – OR BUYING “OFF-PLAN”
• Costs of purchasing
• Catastro and Land Registry
• Appointing a legal representative
• Power of attorney
• Reservation Contract
• Private purchase Contract
• Mortgage
• Due diligence / Legal searches
• The title deed and registration
• Protection of the Buyer
• Bank Guarantees
• Responsibilities of the Developer

3. SELLING YOUR PROPERTY
• Capital gains tax
• 3% tax withholding
• Plusvalía tax
• New Andalusian decree of real estate
• Taxes and fees
• Efficiency energy certificate

4. ANNUAL PROPERTY AND INCOME TAXES
• Property taxes
• Property owner’s imputed income tax
• Wealth tax (in private name)
• Annual property tax (IBI)
• Non-resident rental tax
• Resident rental tax
• Your tax & fiscal representative
• Non-resident’s tax identification number (NIE)
• Residents in Spain must declare overseas assets

5. TAX ADVANTAGES FOR RESIDENTS
• Residents over 65 years old
• 100% reduction in inheritance tax in Andalucía

6. REGISTRATION IN YOUR TOWN HALL (“EMPADRONAMIENTO”)
• Who should be registered?
• What are the benefits?
• What documents are necessary to register?

7. SPANISH WILL & INHERITANCE TAX
• Reasons why better to have a Spanish will
• Spanish will explained
• Family trust explained

8. SPANISH BANK ACCOUNTS & CASH PAYMENTS
• Spanish bank account
• Maximum allowed cash payment of 2,500 euros

9. TRANSFERRING MONEY OVERSEAS
• Money transfer by bank
• Money transfer by currency exchange company

10. “SPANISH GOLDEN VISA”
• For people outside Europe. Who is qualified?
• How to get a permanent resident permit to live and to work in Spain?
• Visiting Spain with a Tourist Visa for 90 days and start procedure
• Travel freely with the whole family through 26 European Schengen countries

11. PURCHASING A RESALE  PROPERTY IN THE COUNTRYSIDE IN ANDALUCÍA
• DAFO certificate needed for the purchase of a countryside home in Andalucá.
• Procedure DAFO certificate.
• Basic rules for homes in the countryside in Andalucía.
• Expiring time for illegal built homes in the countryside in Andalucía.
• DAFO Procedure explained.
• Legal investigation work done by a lawyer.




1.
PURCHASING A RESALE  PROPERTY IN SPAIN

COSTS OF PURCHASING
There are various taxes and costs associated with the purchase of a property which will add approximately another 11% – 13% to the purchase price. The various charges are:

 – TRANSFER TAX
The transfer tax, called “Impuesto de Transmisiones Patrimoniales” (ITP) in Spanish, is levied at:
 – 8% of the purchase price when it is lower than 400,000 euros
 – 9% when the purchase price is from 400,000 euros to 700,000 euros
10% when the purchase price is above 700,000 euros.
This tax will depends on the price of the property you are buying.

 – “PLUSVALIA TAX”
The other tax to be paid on a property purchase is the “arbitrio sobre el incremento del valor de los terrenos”, which is the municipal tax charged on the increase in the value of the land since its last sale, using the official value of the land as the taxable base which tends to be always lower than the market value. The land is officially revalued periodically for this purpose. This tax may be paid by either the vendor or the buyer, as agreed between the parties but the norm is that is payable by the seller.

Warning to buyers:
Since January 1, 1999, the “plusvalia” tax can be charged directly against the property itself, meaning that should the vendor be liable, and “forget” to pay it, then liability for payment will pass to the new buyer. For this reason, the lawyer will withhold the tax due off the purchase price for this purpose.

 – NOTARY FEES: The notary fees are fixed by an official scale and the fee varies according to the price and the kind of transaction.
 – LAND REGISTRY FEES: This will be an amount a bit less to the notary fees, and relates to the registration of the property in the Land Registry (“Registro de la Propiedad”).
 – ATTORNEY’S  FEES: 1% of the purchasing price.

APPOINTING A LEGAL REPRESENTATIVE
It is highly recommended to appoint a legal representative as early as possible in the purchase process. Your lawyer will explain to you the legalities involved in the purchase and also carry out due diligence on the property, including advising you of any debts, provide you with an estimate of the annual running costs of the property and prepare all the documentation required to complete the transaction.

POWER OF ATTORNEY
Should you not be able to be present to sign all the necessary documentation related to the purchase, then you may grant power of attorney to your legal representative or to another third party. The power of attorney would list all the duties that can be carried out by the third party, which may include buying and selling property, opening and administering bank accounts, applying for and accepting a mortgage, representing you with respect to utility companies and the tax authorities etc. The power of attorney would be signed before a notary public in Spain, and should cost approximately 200 euros.

Should you not be able to visit a notary public in Spain and need to formalize the power of attorney in your home country, the procedure is different. A lawyer in Spain will prepare the document in Spanish and English, and this will need to be signed before a notary public in your home country.

DECIDING ON A PROPERTY
Once you have decided on a property, you will need to pay over an initial reservation fee to ensure that the property is taken off the market. The fee may be placed normally with your lawyer.
A corresponding “offer and reservation document” should be signed on making the payment, indicating the basic terms of the purchase, i.e. the price, details of the vendor and buyer, details of the property, and the date by which the “private purchase contract” should be signed.

THE PRIVATE PURCHASE CONTRACT
The private purchase contract will then be signed approximately 20-30 days after payment of the initial deposit/reservation fee, and once due diligence has been carried out on the property. Normally a 10% deposit would be paid; however, this may vary according to the vendor’s wishes.

The contract will stipulate all the terms and conditions of the sale, including the final date by which the title deeds must be signed and final payment made, and this will then give the buyer time either to obtain a mortgage or get together the money required to complete the balance.
Should the buyer fail to complete the sale by the final date, the buyer would lose the deposit. On the other hand, should the seller decide to pull out of the sale, or should the seller find another buyer who offers to pay more, then the original buyer has the right to claim back twice (2x) the amount of the deposit.

MORTGAGE
It is important to note that should you consider applying for a mortgage in Spain, this will add approximately another 3% to 4% to the purchase costs. For a non-resident buyer, the mortgage is usually limited to around 60% – 70% of the valuation of the property.
Once the mortgage is approved by the Spanish bank based on your proof of income, the bank will issue a binding offer which can be compared with other bank’s offers.

DUE DILIGENCE / LEGAL SEARCHES
Apart from checking the legalities of the property such as:
– 1) Checking that the property has a license of occupation or responsible declaration certificate which proves that it has been built according to the building license and is duly granted by the Town Hall.
– 2) Land Registry report confirming that the property is free from any charges and duly registered in the name of the vendors, if the property has any extension which does not appear on the title deed of purchase.
– 3) Check that all running costs and local tax payments are up to date. This will also enable us to advise you of the approximate annual running costs.

These checks will include:
Utility Bills
Utility bills usually refer to electricity, water, gas and telephone. If you as a buyer are faced with unpaid utility bills from the previous owner, you should be aware that these are in fact personal bills issued by private companies. They are not attached to the property so that only the person who signed the contract with the utility company is liable for them. If left unpaid, the company will cut off the services. However, upon payment of a reasonable fee, the utility company will conclude a new contract with you for these services. This fee is exactly the same as the charge for changing the electricity contract into your own name, which you would have to do anyway.

Community Fees
These fees are charged by the community of property owners which is the legal body that controls all the elements of the property held in common. This includes the lifts, gardens, swimming pools, roads, etc. Each owner is assigned a quota or percentage of the expenses which must be paid by law.
Due to data protection law, the community office will not be able to provide regulations of the community together with a copy of the minutes of the last AGM but once completion has taken place, please remember to request these documents as they can ascertain the current situation with respect to any community issues.
Decisions are taken by majority vote of the owners at each year’s AGM and these actions are recorded in an official document that you are entitled to inspect when you become the property owner.

IBI (local rates) and BASURA (refuse collection)
The IBI is the municipal property tax and BASURA is the local refuse collection tax.
When purchasing the property IBI receipts and BASURA should be checked for the last 5 years, since you can be liable for five years of back tax. It is recommended to have these local taxes paid automatically from a bank account each year, in order to avoid unnecessary surcharges.

THE TITLE DEED AND REGISTRATION
The “Escritura Publica” or “Title Deed” is the final document of the sale and is signed between the buyer and vendor when the final balance due on the property is paid. The signing takes place in the presence of a notary public, which makes the document legally binding. The notary public is an official of the state, and his duty is to certify that the title deed has been signed, monies paid over, and that the buyer and vendor have been advised of their tax obligations. The notary public keeps the original of the document and the purchaser is issued with a first authorized copy, which is then entered in the Land Registry (against the payment of stamp duty or transfer tax). This means that if the buyer loses the buyer’s copy, then the notary public can always issue another copy.


2. PURCHASING A NEW  PROPERTY – BUYING “OFF-PLAN”
Purchasing a property off-plan in Spain means you pay in advance for a property not yet built. The costs associated with purchasing a new property are slightly different to those for a resale.

COSTS OF PURCHASING
There are various taxes and costs associated with the purchase of a property which will add approximately another 13%-14% to the purchase price.

The various charges are:
 – VAT: 10% on the purchase price.
STAMP DUTY: 1,5% of the purchasing price.
NOTARY FEES: The notary fees are fixed by an official scale and the fee varies according to the price and the kind of transaction.
LAND REGISTRY FEES: This will be an amount a bit less to the notary fees, and relates to the registration of the property in the Land Registry (“Registro de la Propiedad”).
ATTORNEY’S  FEES: 1% of the purchasing price.

CATASTRO AND LAND REGISTRY
The “Catastro” (office in Málaga for the Costa del Sol properties) is the second form of property registration, and deals more with the exact location, physical description and boundaries; while the Land Registry deals more with ownership and title.
The “Catastro” office is also the source of the “valor catastral”, which is the assessed value of the property used in calculation of local rates. The figure is normally considerably lower than the real market value.

If you are purchasing a new property this will not have been assigned a “valor catastral”, it therefore becomes the buyer’s responsibility to register the new property at the “catastro” office for this tax. (an existing property should already have its own “valor catastral”) The annual property tax, or IBI, charged by the municipality, will be calculated based on the “valor catastral”.

APPOINTING A LEGAL REPRESENTATIVE
It is highly recommended to appoint a legal representative as early as possible in the purchase process. Your lawyer will explain to you the legalities involved in the purchase and also carry out due diligence on the property, including advising you of any debts, provide you with an estimate of the annual running costs of the property and prepare all the documentation required to complete the transaction.

POWER OF ATTORNEY
Should you not be able to be present to sign all the necessary documentation related to the purchase, then you may grant power of attorney to your legal representative or to another third party. The power of attorney would list all the duties that can be carried out by the third party,
which may include buying and selling property, opening and administering bank accounts, applying for and accepting a mortgage, representing you with respect to utility companies and the tax authorities etc. The power of attorney would be signed before a notary public in Spain, and should cost approximately 200 euros.

RESERVATION CONTRACT
Once you have decided on a property, you will need to pay over an initial reservation fee to ensure that the property is taken off the market. The fee may be placed normally with your lawyer.
A corresponding “offer and reservation document” should be signed on making the payment, indicating the basic terms of the purchase, i.e. the price, details of the vendor and buyer, details of the property, and the date by which the “private purchase contract” should be signed.

THE PRIVATE PURCHASE CONTRACT
The private purchase contract will then be signed within 30 days after payment of the initial reservation fee, and once due diligence has been carried out on the property.
Normally a 10% to 30% deposit would be paid; however, this varies according to the project and the stage of construction at that moment.

The contract will stipulate all the terms and conditions of the sale, including the final date by which the title deeds must be signed and final payment made, and this will then give the buyer time either to obtain a mortgage or get together the money required to complete the balance.
Should the buyer fail to complete the sale by the final date, the buyer would lose the deposit. On the other hand, should the seller decide to pull out of the sale, or should the seller find another buyer who offers to pay more, then the original buyer has the right to claim back twice the amount of the deposit.

MORTGAGE
It is important to note that should you consider applying for a mortgage in Spain, this will add approximately another 3% to 4% to the purchase costs. For a non-resident buyer, the mortgage is usually limited to around 60% 70% of the valuation of the property.
Once the mortgage is approved by the Spanish bank based on your proof of income, the bank will issue a binding offer which can be compared with other bank’s offers.

PROTECTION OF THE BUYER
The local government of Andalucía (“Junta de Andalucía”) has undertaken some steps to protect better the consumers. Since February 2007, all developers are obliged to supply a complete information package to a prospective buyer.

The documents include papers identifying the builder, the designer, the project manager and the developer and any other intermediary involved in the sale. It also includes the floor plans, building specifications, dimensions, delivery date, terms and conditions of the sale, property registration details, and information on the building insurance.

Spanish law requires that the purchase contract must contain the delivery date with a penalty clause, specifying that the property must be handed over within “x” days after the first occupation licence has being issued.
The developer must also provide bank guarantees for ALL payments made when signing the private purchase contract and all further payments paid during the time of construction.

The lawyer appointed by the client will request and check the following:
• The construction specifications.
• The specifications of the materials used.
• Details of the communal areas.
Bank guarantee details.
• The contract.
• Whether the developer or purchaser will pay the plusvalia tax.
• Whether the developer can offer a mortgage to the buyer.
• If the 10 year insurance policy covers defects in the property.

RESPONSIBILITIES OF THE DEVELOPER
The developer is responsible for attending to defects at the moment the property has been handed over:
• Up to 1 year for any snagging defects
• Up to 3 years for any minor defects
• Up to 5 years for any mayor defects
• Up to 10 years for any structural defects


3. SELLING YOUR SPANISH PROPERTY

When you find a buyer for your property, you will first receive a reservation fee, at which time you must take the property off the market. The private purchase contract is then signed within a specified time frame and you will receive a full 10% deposit on signature of the contract. The private purchase contract will stipulate all the terms and conditions of the sale, including the final date by which the balance of the sales price must be paid and title deeds signed before the notary public.

DOCUMENTS REQUESTED FOR THE SALE OF YOUR PROPERTY:
–  Copy of Title Deed of the purchase
–  Copies of Utililty bills of your property such as IBI (local property tax receipt), rubbish collection tax, electricity bill, water bills and community fees.
–  CEE (Energy Efficiency Certificate) to be issued by an Architect/Engineer.
–  Copy of NIE Certificates and Passports
–  Up-to-date Land Registry history of your Spanish property

CAPITAL GAINS TAX (“Impuesto sobre el beneficio”)
Since January 2010, residents and non-residents (even not EU citizens), pay 19% tax rate of the net profit made when selling a Spanish property. As a vendor, once the sale has been completed, you will therefore need to declare your capital gains and payable within 30 days of the sale taking place. By using tax form 210.

3% TAX WITHHOLDING for a NON-RESIDENT VENDOR. (“retencion de 3% de la adquisición de bienes e inmuebles a No-Residentes”)
Warning to the buyer:
All buyers of Spanish property from NON-RESIDENT owners are obliged to withhold 3% of the total purchase price and pay it to the Spanish tax authorities on account of the non-resident seller’s capital gains tax liability. If they do not do so, the tax authorities can charge it to the property itself. In practice, the lawyer will withhold 3% off the purchase price. Tax form 211. (“retención de 3%”)

Should the amount exceed the 3% withholding, then you will be entitled to a refund of the difference, or alternatively if the capital gains tax is more, you must pay the difference within the 30 days.

PLUSVALÍA TAX (local tax based on the deemed value of the land)
The plusvalía tax is calculated as a percentage of the estimated gain in value of URBAN LAND, payable at the time it is transferred.
The presumed gain in value which constitutes the taxable basis is calculated as a percentage of the current cadastral value of the land, times an estimated annual increase in value over the number of years the land has been owned. Each Town Hall chooses the applicable percentages within the limits sets by the law: not more than 3.7 % per year for land held up to five years, down to a maximum 3% when owned for up to 20 years. The tax base is hence capped at 60% of the current cadastral value.

A tax rate, chosen by each Town Hall with a maximum of 30% is then applied to the base. Taking the current cadastral value of the land makes no sense; if anything, it should be the value when acquired. If you transfer property with a loss, the Constitutional Court has ruled that the plusvalía tax can not be charged.

NEW ANDALUSIAN DECREE ON REAL ESTATE
The Andalusian government enacted Decree 218/05 to protect consumers in buying and selling properties. Briefly, the decree imposes the obligation on real estate agents to have one “data sheet” for each property on their books which must include the following data (Article 10) which you as the vendor must make available to the estate agent and the client:
1. Address of the property.
2. General description of the property and of the building or development.
3. Price of the property.
4. Owner, Land Registry charges or encumbrances, possible rights of way, residential and constructed size, i.e. all of these backed up by a recent (no older than 3 months) land search note, or “nota simple”.
5. Date of construction, if available.
6. Percentage of the communal elements allocated to the property.
7. Note of the presence of electricity, water, telephone or gas supplies.
8. When visiting the property, there is a period of time during which the buyer will be able to process the required paperwork for completion.
9. Declaration as to whether the vendor can or cannot provide the following documentation: copy of by-laws of the community of owners, certificate indicating that there are no debts with the community, available insurances and guarantees, the property book (only provided by developers).
10. Certificate proving that the local Council tax, IBI, is paid up to date.

Article 12 provides for a mandatory document containing the right of the consumer to be given a copy of the property data sheet in Spanish. Articles 14 and 15 relate to enforcement of the obligations and to the fines imposed in the event of non-compliance, ranging from 200 to 5,000 euros (pursuant to articles 71.4 Ley 13/2003,   17th december 2003, “de defensa y protección de los consumidores y usuarios de Andalucía”). Infringements which are considered “serious” may be subject to higher fines (5,000 to 30,000 euros) if the agent has deliberately or negligently ignored the obligations, repeats the offence (which is therefore considered habitual) or if such non-compliance affects a large portion of the market.
With respect to developers, it must be remembered that failure to guarantee down-payments is subject to a fine of 5,001 euros to 30,000 euros, depending on the size and gravity of the offence but fines can be as high as 30,001 to 400,000 euros.

TAXES AND FEES
As the vendor, the only tax that you may be liable for is the local “plusvalia” tax. However, you can negotiate for this tax to be paid by the buyer. All other costs related to the sale, for example the ITP transfer tax, notary fees and Land Registry fees are payable by the buyer. Other costs, however, may include legal fees and estate agent’s fees.

ENERGY EFFICIENCY CERTIFICATE
As port of the documents mentioned, you as a seller should provide to the buyer an Energy Efficiency Certificate. Spain has introduced a new law (Real Decreto 235/2013) obliging property owners to obtain energy efficiency certificates before they can sell or rent their homes, in line with other European countries.

4. ANNUAL PROPERTY TAX AND INCOME TAX
 – PROPERTY TAXES
All property owners in Spain are liable to pay 3 separate taxes every year.

These taxes are:
 – Property owner’s imputed income tax
 – Wealth tax (in private name)
 – Annual property tax (IBI)

PROPERTY OWNER’S IMPUTED INCOME TAX
This is a tax on a fictitious rental income.
 – For a Spanish RESIDENT: Spanish property owner’s imputed income tax is NOT charged on a resident owner’s PRINCIPLE residence; however, a second home will be taxed.
RESIDENTS pay tax on this presumed income (second home) by having it added to their other personal income as if it were more earnings. Lower incomes pay 15% tax and higher incomes 30% or even 40%.

– For a NON-RESIDENT, his Spanish home can not be considered to be the principle residence, as a consequence, the tax must be paid on a yearly basis.
The applicable tax rate is 19% and will be calculated on 1,1% on the cadastral value of the property.  This cadastral value is listed on the yearly IBI tax invoice and is usually much lower than the real purchase price.

WEALTH TAX (in personal name)
Wealth tax will now only affect properties with a property purchase price higher than 700,000 euros. This tax will affect residents on their worldwide assets and NON-RESIDENTS with assets in Spain over 700.000 euros. There is a further exception of 300.000 euros for the main residential home.
Wealth tax is an annual tax, payable on the total value of your taxable assets as of the 31st of December.

If you are a RESIDENT in Spain, you are liable to be taxed on your assets worldwide. Residents in Spain should declare overseas assets. Since February 2013, all residents in Spain must declare their overseas assets worth more than 50,000 euros. Severe fines will be awarded for failure to comply with the new law. Declarations are made by filling out Model 720.

If you are a NON-RESIDENT, then only on your Spanish assets. The progressive tax rates range from 0.2% up to 2.5% on assets over €10.695.996. This tax must be submitted before the end of June of the following year.
Note that the wealth tax excludes properties put under a company name!

ANNUAL PROPERTY TAX (IBI)
This tax is based on the “valor catastral” and can vary widely from town to town for the same type of property because it is a municipal tax. This real estate tax is called the “IBI”, the “Impuesto sobre Bienes Inmuebles”. The tax is increased every year in line with inflation.

For a non-resident, the best solution is to have the tax paid by standing order from a bank account. The bank will provide a form which authorises them to pay the tax, and a copy of the form is deposited with the local Council. This ensures that taxes are paid when they are due, just as with the other utility bills of your property. In addition to the assessed value of your property (“valor catastral”), the “IBI” also indicates the “reference catastral number“, which will identify your property at the “catastro” office together with its officially documented size.

NON-RESIDENT RENTAL TAX
It is legal and acceptable for you, as either a resident or non-resident property owner in Spain, to rent out your property. However you must remember that you must declare your rental income to the tax authorities. You are actually required to declare the income within 30 days of receiving it, but can instead apply to make quarterly tax returns in order to save paperwork. Spanish income tax is due on any profits arising from rental income in Spain.

 – For NONEU-members a rental tax rate of 24% will be applied from the very first euro of rental income.
 – For EU-members (and Norwegians) the tax will be applied at a rate of 19% from the very first euro of rental income.

RESIDENT RENTAL TAX
– If you are a RESIDENT in Spain, you should include your rental income together with your other personal income when you make your annual Spanish income tax return.

If you register your property as a TOURIST LETTING BUSINESS, you can charge the maintenance expenses of your property as a business expense and offset them against income revenues.

YOUR TAX & FISCAL REPRESENTATIVE
The non-resident property owner of only one property is no longer required by Spanish law to appoint a tax representative who is resident in Spain. Owners of two or more properties, however, must do so – under penalty of fines that can go as high as 5,000 euros in the event of noncompliance.
The tax representative guarantees to the Spanish tax authorities that they have a reliable contact inside Spain for the non-resident tax payer. Most non-residents appoint their tax consultant or legal representative as their tax representative.

FOREIGNERS’ TAX IDENTIFICATION NUMBER (NIE)
In order to pay these taxes, foreigners (residents and non-residents) must apply for a NIE number (Número de Identificación de Extranjero), which is your Spanish tax identification number.

You must apply for this number when you purchase a property in Spain. The number identifies you to the Spanish authorities and is required when you pay taxes or have any dealings with “Hacienda”. (The Spanish tax Authority)
To obtain the N.I.E. number, you need to make an application at the nearest police station, or “comisaria”, which has a foreigner’s department and submit a photocopy of the relevant pages of your passport. If you are an EU citizen coming to live in Spain, you will be assigned your NIE number when you obtain your certificate of registration. (which has replaced the residence card). Alternatively, you can appoint a legal representative to apply for it on your behalf by means of a power of attorney.

5. TAX ADVANTAGES FOR RESIDENTS
Foreigners sometimes believe that taking out an official residence permit in Spain will cost more money and expose them to Spanish taxes which non-residents can avoid. However, the resident property owner has some tax advantages over the non-resident.

 EXEMPTION FROM CAPITAL GAINS TAX (Under the following circumstances)
 – Residents over 65.
An official resident of Spain aged 65 or more who has lived in a principle residence for three years is not subject to CGT when selling the residence. If you are 65 or over and hold a Spanish residence permit or the EU certificate of registration, you can buy a principal residence this year, live in it for three years and sell it on with no capital gains tax to pay.

 – Residents reinvesting profits in a new home.
An official resident of Spain who reinvests all the proceeds of a house sale in the purchase of another Spanish residence as a principal residence will have complete relief from CGT.

If a portion of the total amount of the house sale is used, a percentage of relief up to the amount invested will be granted. However, the seller must have lived in the home for three years to qualify.

 – Holders of usufruct
These are people who have the right to live in a property until their death. A person of 65 or older who has a contract with a company to sell a principle residence in exchange for a lifetime right to inhabit the property and a monthly stipend will not be subject to tax. This makes such deals to turn home ownership into lifetime income more attractive for older persons of modest means.
The right to inhabit the property is called “usufructo”.

INHERITANCE TAX
INHERITANCE TAX IN ANDALUCÍA: 0% on total assets up to € 1,000,000
For RESIDENTS, as of January 1, 2017, inheritance tax in Andalucia – in first line – has been abolished (0%) for assets up to € 1,000,000. This makes the autonomous region of Andalucia the region that uses the lowest rate throughout Spain.
Declaration must be made via model 720.

6. REGISTRATION IN YOUR TOWN HALL (“empadronamiento”)
The “Padrón” is the list of all the people who live in a certain town. “Empadronarse” is the act of registering yourself on this list at your local Town Hall. Who should be registered? Officially all residents in Spain are required by law to register on the “pardon”, yet many still have not done so.
Please note that you should not be registered in the “Padrón” if you have decided NOT to become resident in Spain for tax purposes.

Voting rights
In order to register for local or European elections, you must first be registered on the “Padrón”, as this is where the Census Office in Malaga collects the data when preparing the electoral roll. When you register, you should also ask for the form to register for the vote in these elections.

Day-to-day life
Because this document is your official proof of address, you will need your “Padrón” certificate to carry out almost any administrative task such as registering for healthcare, registering your car with Spanish number plates or any procedure carried out at the Traffic Headquarters, enrolling your children in Spanish schools, etc.

What Documents are necessary to register?
1. Original passport and photocopy of NIE card (or Certificate of Registration) with the National Police Foreign Office
2. Proof of ownership of property (your title deeds).
3. If you are renting, photocopy of your rental contract in Spanish.
4. If you do not own a property and you are not renting, you have to come with the owner of the dwelling in order for him to sign the registration form, authorizing you to register at his property.
5. All family members over the age of 18, have to sign the registration form.
This certificate is valid for three months but can be issued again upon request.
Does it need to be renewed? The Town Hall will send you a notification at the address on the “Padrón” if and when renewal becomes necessary.

7. SPANISH WILL AND INHERITANCE TAX
Dying without a will can give rise to very time-consuming and expensive legal procedures for your heirs. So if you really want to look after them and if you have definite ideas about how you want your estate to be apportioned, you should make a Spanish will.
It is a simple procedure and you will feel more secure.

There are 4 points to consider:
– 1. You should make a Spanish will which disposes of your Spanish property in order to avoid time consuming and expensive legal problems for your heirs. Make a separate will to dispose of assets located outside Spain.

– 2. As a foreigner, Spanish law does NOT require you to be subject to the Spanish law. In a will can be written which law will be applicable.
Your Spanish estate will, however, be subject to Spanish inheritance tax, which can be high when property is left by a non-resident to non-relatives. The law also states that any foreigner officially resident in Spain is subject to Spanish inheritance tax on his worldwide estate.
However, in practice the authorities will not ask the testator if he or she is an official resident or not. The only requirement enforced by Spain is the payment of the inheritance tax on the property or assets held in Spain.

– 3. There are a few ways around inheritance tax, but these legal ways require advance planning.

– 4. I f you are an official resident in Spain leaving your property to a spouse or child who is also resident, you may be eligible for reduction in the value of the property for inheritance tax calculation.
Inheritance tax varies from region to region in Spain. For RESIDENTS in the autonomous region of ANDALUCÍA the inheritance tax – in first line – has been abolished (0%) for assets up to € 1,000,000.

FAMILY TRUST
In Spain, family trust documents do not exist under Spanish law, so instead some people set up a Spanish company.

8. SPANISH BANKS AND CASH PAYMENTS
Any bank transaction of more than 1,000 euros requires the payer and the payee of the amount to be identified. Moreover cash payment over the amount of 2,500 euros are NOT allowed. For sums higher than 2,500 euros a payment by bank transfer is the only legal payment allowed in Spain. Note that some banks charge high fees and commissions.

9. TRANSFERRING MONEY OVERSEAS
When you’re sending money overseas, it is important to consider your options.
Currency exchange rates fluctuate by the second and can have a significant effect on the amount you need to send to make your overseas payment – and if you are sending a large amount of money, to purchase property for example, the difference that you need to pay could be significant.
1. – If you use your local bank to make your overseas transfer, you will need to use the exchange rate that the bank set that morning, and will usually pay an (often-high) fee on every transfer you make.
2. – Another option for your international money transfer is to use a currency exchange specialist. Unlike the banks, these companies are specifically focused on navigating the world of fluctuating currency – meaning they can offer you a much more dedicated service than your local bank. This dedicated service includes a number of benefits that will help you ensure you make the most of the money you send internationally. Their exchange rates can save up to 4% on every money transfer compared to your local bank

10. “SPANISH GOLDEN VISA”
In September 2013, the Spanish government passed a law to encourage foreigners to invest in property in Spain. This law, commonly called “Spanish Golden Visa”, allows residency in Spain for anyone – from outside the European Union – who invests a minimum of 500, 000 Euros in properties in Spain. (minimum of € 500.000 , without costs of purchasing)

The “Golden Visa for Spainprogram grants families of non-E.U.-members the right to reside in Spain and travel freely in the 26 E.U. “Shengen countries”.

Main points:
– Minimum investment is €500,000 in real estate in Spain, either as a primary or secondary property.
– The investment can include multiple properties and properties can be rented out.
– The investor and his or her family must have public or private health insurance.
– The investor must be able to show sufficient financial resources to support themselves.
– No criminal record.

Important:
– The investor does not need to reside in Spain. The Golden Visa gives non-EU investors the opportunity to live and work in Spain.
All direct family members: spouse, children – are included in the program (and the visa).
– Visa allows unlimited travel throughout EU Schengen visa zone. (remember that Ireland and U.K. are no part of the E.U.-“Shengen zone”)

How it works:
1. The “Golden Spanish Visa” will be initially valid for 1 year.
Afterwards, the resident permit and the family visa can be renewed every 2 more years.
After 5 years a permanent residency permit in Spain can be applied for.
For the renewals, the amount of the investment has to be sustained.
2. After a 10 year period the investor may apply for Spanish citizenship which allows the issuing of a Spanish passport. (For some South American countries Spanish citizenship is allowed after having obtained the Spanish Golden Visa for a period of only 2 years).

How to start:
1. If you want to visit Spain to search for your property, you should go to the embassy or consulate of Spain in your country, apply for a regular tourist-visa.
A regular tourist visa will allow you a max stay of 90 days in Spain. If you cannot come to Spain in person but know exactly which property you need, you can do everything with a help of a power of attorney from your home country. (but know that this option is not possible for all countries).
2. Once the purchase contract is signed and corresponding funds are deposited, you can apply for the golden visa. If needed, the authorities can grant you a permit for six months so you can complete the process of buying your property. As opposed to other visas, the golden visa application can be presented while you are in Spain.

Good to know!
For more information in detail regarding your personal family situation, our lawyers will check the legal conditions for you, free of charge!


LIST OF SCHENGEN AREA COUNTRIES
:
The 26 countries that are currently members of the Schengen agreement are: Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and Switzerland.

Out of this list, four Schengen countries — Liechtenstein, Switzerland, Iceland, and Norway — are not members of the European Union. So, they are officially known as the countries that are associated with the Schengen activities of the EU. This means that these countries are obliged to accept the decisions made by EU, even though they are not a part of it. Two of these non-European union members, Norway and Iceland, are members of the Nordic Passport Union.

Apart from these countries, the Schengen area also includes the Caribbean islands that belong to France and the three European micro-states — Monaco, San Marino, and the Vatican City. These territories and micronations maintain open or semi-open borders for visitors.

Though Ireland and the United Kingdom negotiated to be opt-outs, they still continue to follow the systematic regulations that of the Schengen area, along with other EU member states.

For more information how to get a Spanish Resident Permit with the “Spanish Golden Visa Program”,
Please, fill in the form below
.

 

11.PURCHASING A RESALE  PROPERTY IN THE COUNTRYSIDE IN ANDALUCÍA.

DAFO-certificate for purchase countryside Andalucia.

In 2012 the Junta de Andalucia approved a new law to regulate the situation of over 200.000 illegally built homes in the countryside. Therefore, since this moment most Andalusian Town Halls have introduced a procedure to apply for a special certificate with the name of DAFO (Declaracion Asimilado Fuera de Ordenación).

It is not a legal requirement to have it or to buy/sell with it, and -important- neither does it make the property legal, but this DAFO (or SAFO) certificate can give owners extra security in writing of the legal / administrative situation of the property.

This is why it is more and more common that nowadays real estate agents and lawyers (that take care of the legal investigation for the property when buying) will recommend their client to have the procedure carried out. However, this depends on the details of each individual property and the circumstances of the buyers.
The costs of the whole process can be severe, between € 5.000 to € 10.000 in total (depending on the town and the square meters). Often the vendor is willing to accept these extra expenses, but this in the end is a matter of negotiating. It´s advisable to already have an agreement about this subject within the initial price negotiation and to have it put in the reservation contract of the real estate agency.

PROCEDURE:
1. Have a project by an architect and pay 2,5% to 4,5% fee.
2. The City Council will visit the property to inspect it.
3. The City Council will issue a resolution.

Basic rules for homes in the countryside of Andalusia.

Over the years many homes in Andalucia have been built either without a building licence from the Town Hall, with an incorrect building licence (for example for a barn or storage) or with an illegal building licence (not according to the rules of the central Andalusian government). Even though the Junta hasn´t acted against most of these houses, these should never have been built.

Not allowed:

According to the Andalusian law it is not allowed to:

  1. Build homes (unless it is for professional agricultural or livestock-farming activities)
  2. Expend or remodel constructions, both outside and inside (you purchase what´s there and you´re not allowed to make any changes)

The only thing that is allowed, is making small repairs like fixing a leaking roof or rebuilding a damaged or collapsed wall. If for example the house would burn down, the Town Hall can´t give you an official license to rebuild the property. This is why it´s extremely important to have a good house insurance from the moment of purchase. Neither it´s allowed to put a tiled terrace or to install a pool, even though it´s above ground. Nowadays the authorities carry out checks and could take legal action against the owner.

Rural accommodation or B&B

It is permitted to construct with the purpose of opening a rural accommodation or B&B, but this project needs to be approved first by the Junta de Andalucia. It´s very difficult to get this permission and the procedure usually takes a long time, so it´s unlikely that a vendor is willing to delay the completion (signing the title deeds at the notary) for it.

Expiring time of acting against illegal building

Normal countryside

Even though a building officially might be illegal, the authorities can´t legally act against it anymore after the expiring time of 6 years. In theory and in worst case scenario ´acting against it´ could mean to have the property demolished. The expiring time is proven either by aerographical photos or an architect´s report (Certificado de Antigüedad) where every part of the property is checked, including pool, terraces, garages, storages, etc.

Special protected land

If the property is in a special protected area and it´s not proven to be old enough, then the responsibility of the Town Hall unfortunately never expires. However, if you can proof that all buildings were already more than 6 years old in the time that the special protected started (until 2012 this used to be 4 years), then there´s no problem and you can even have a DAFO certificate. Just to be clear, it´s not recommendable to buy a home in a special protected area if the buildings aren´t old enough. Nevertheless, it´s not illegal to do so and some buyers are willing to accept the risk of future problems with the authorities in exchange for a (significant) lower purchase price.

DAFO/SAFO Procedure

The DAFO procedure can take several months of time depending on the Town Hall and the amount of applies. This is why in most purchases (where the vendor pays for the DAFO costs), the lawyer of the buyer normally retains an estimated amount for the DAFO during completion at the notary. Based on the real costs, afterward he then will return the rest of the money once the DAFO certificate has been issued and all bills are received.

Architect´s report

If the owner of a house wants to have the DAFO certificate of the house then an architect needs to make a technical project and present it to the Town Hall. In this report he needs to proof the age of all constructions of the property, the official status (like area of special protection) plus the correct infrastructure of the house. The town hall will also check if there are no earlier or current legal cases against the property, because in this case it´s not possible to issue a DAFO certificate.

Infrastructure

Through his report the architect also needs to prove that the infrastructure and service contracts (electricity, water, official water wells, etc.) of the house is according to the environmental regulations of the Town Hall. A special point of interest here is having an approved sceptic tank (including service contract for emptying it). As installing a new tank can cost several thousands of euros, this is an issue the lawyer should check in an early stage. Also, some Town Halls have special requirements like obliged solar panels.

Town Hall tax

Besides de costs of the architect and possible necessary changes in the infrastructure, there´s a tax to be paid to the Town Hall. It´s calculated over the square meters according to an official price index from the year in which it was constructed. Per Town Hall the tax percentage over this indexed price variates from 2.5 to 4.5%.

Inspection by Town Hall architect

During the DAFO-procedure, the Town Hall architect will normally check the property in person, outside and inside, to see if the plans of the architect contracted by the owner are according to the real, physic situation. This is important to keep in mind, because authorities will then have the actual situation registered and officially you´re not allowed to change anything in the exterior or interior. In case you do want to make changes, even though it´s not allowed, it´s better to do so before applying for the DAFO. In other words, in this case it might be better to not have the vendor arrange it for you, but to agree a price reduction instead of a price retention and then later apply for the DAFO yourself.

Legal investigation of the lawyer

If you buy a house in Spain or Andalucia it´s highly recommended to have a specialized lawyer carry out the legal investigation of the property. Especially in the countryside it´s quite normal that registrations in the Land Registry (Registro de la Propiedad) and Cadastre (Catastro) and mostly these can be fixed before signing the purchase deeds. This is not the job or responsibility of either the real estate agent nor the architect that takes care of applying for the DAFO nor the Spanish notary. If you buy without the guarantees of the legal investigation, the legal, administrative and fiscal problems can be huge and will surely cost you more that the fees of the lawyer in the first place.

Besides of this the lawyer will negotiate on your behalf about important conditions of the private purchase contract (where you pay the 10% down payment) and he can give you financial plus fiscal advice, for example arrange the application of a Spanish mortgage. Through the notarial Power of Attorney he can even sign the purchase deeds on behalf of the client and take care of registrations, service contracts, direct debits, tax payment, etc. Also he will advise you in most cases to sign a Spanish wills, especially if you´re becoming resident in Spain.

More information about the DAFO

Read everything you need to know about the DAFO certificate in countryside of Andalusia in the more extended article of law firm C&D Solicitors in Torrox Malaga.

You might also be interested to read more about “Spanish Property Tips”, which includes handy pointers on buying and selling properties in Spain.

Author: Gustavo Calero Monereo, C&D Solicitors, Malaga (Torrox/Nerja)