Fees

When you are considering buying a property you have to be aware of the fees you will be paying for the completion of the process. The five main fees are: • Notary Fees • Land Registry • Plus Valia • Transfer Tax & Stamp Duty • Legal Fees As rule of thumb, many put aside at least 10% of the total property price for associated charges.

Tax Considerations

Do not try to evade tax and, although no longer a legal requirement as a foreigner, the simplest way to ensure that your tax affairs are in order is to appoint a lawyer or accountant. It is hardly surprising that once you have purchased your Spanish property, you will need to contribute to the community, schools, police and local council taxes. Additionally, there is an annual Wealth Tax, Property Owners Imputed Income Tax, Capital Gains Tax, and, if you die, Inheritance Tax.

Finding a Lawyer

You need to find a lawyer familiar with Spanish law who can advise you about all of the following: • The complete process from requirements to completion • How it should be paid for and procedures for transferring payment • Taxes and minimising tax liabilities As in most countries, your lawyer will do most of the work, including offering advice, undertaking land registry search, drafting a contract of sale, arranging the completion of the purchase in front of a Spanish Notary Public and arranging the transfer of funds.

Arranging a Mortgage

Spanish banks are happy to lend up to 70% of the purchase price to non-resident buyers. Many British buyers are more comfortable borrowing in the UK, releasing equity from existing property ownership. So you have found your dream home… You have found your ideal property and are ready to commit to purchase. It is likely that the seller will want you to pay a reservation fee and the advantage of payment is twofold: Firstly, the property is immediately taken off the market and, secondly, the price is fixed.

It is essential that the reservation fee is refundable subject to legal checks, otherwise it may be very difficult to recover the payment in the event that the purchase should not proceed. The best course would always be to have a lawyer already instructed and as soon as a suitable property is located, have him/her undertake the following checks before any payments are made:

• The boundaries and the legal description of the property; • Determination of the current legal owner of the property or land involved; • Planning permission building licences obtained; • Bank guarantees in place; • The land has been properly re-zoned for development purposes; • All utility services installed and available; In Spain, contracts are not “subject to survey” as in the UK for example. You should still commission a survey to check you are happy with the results before you sign.

Tax Identification Number and Residencia NIE

When you are buying a property in Spain you must be aware that there are certain documents you must ascertain before completion. One of which is a Número de Identificatión de Extranjeros (NIE.) This identifies you to the tax authorities and allows them to calculate your tax liability. You can get your NIE number from the local police station. Residency Legally, any foreigner can stay up to 90 days as a tourist. However, if you are an EU citizen and intend to stay for more than 6 months per year in Spain you should consider applying for residencia. This is done in the same way (and after you have applied for) your NIE number.

Private Purchase Sale Contract

Once all of the legal checks have been done, and all the documentation is in order, you will be asked to sign a private purchase contract stating the price and full conditions of the sale. This will contain all the relevant terms and at this juncture, a deposit will be paid to the seller and both parties are then bound by the contract to paying the balance of the purchase price and transferring ownership of the property. In the event that the property is ‘off-plan’, it is likely that the seller will require staged payments throughout the development; your lawyer should keep you informed in advance as and when such monies are due. The signing of this contract must be done in the presence of the Notario. As soon as this document has been signed, your lawyer should arrange to pay any taxes due, as well as sign and witness the Escritura of the land registry and pay the appropriate fees.

Signing of the Public Deed (Escritura)

All property transactions are concluded before a Notary who is a legal official of the state. The Notary will witness the signatures of the parties indicating transfer of title and check the legal documents presented. The Notary will also seek to ensure that any relevant taxes and community charges have been paid. The Escritura is only signed once the property is completed and thereafter, the title deeds are sent to the Land Registry where the transaction is officially registered in Spain.

Spanish Wills

It is absolutely essential that any purchaser of Spanish property makes a Spanish Will to dispose of assets in Spain. Spanish Inheritance Rules are complicated and a Will should avoid unnecessary legal problems for your heirs. It is not expensive and a Spanish Will should be separate from your wishes to dispose of UK property.

Importing and exporting money

Importing money to and exporting money from Spain is a relatively easy task. Exchange controls were abolished in Spain in 1992 and there are currently no restrictions on the import or export of funds.

Spanish residents are permitted to open a bank account in any country and to import (or export) unlimited funds in any currency. However, if a resident opens an overseas bank account, his Spanish bank must routinely inform the Bank of Spain of any account movements over €3,000.

Declaring your money

Any monies (cash, notes, bearer-cheques etc.) up to the value of €6,000, or the equivalent in foreign currency, may be freely imported or exported by both residents and no-residents alike without approval or declaration. However, it is advised that if you choose to re-export funds that you declare them to certify that the currency was imported legally.

Residents receiving funds from non-residents, or making payments to non-residents over €6,000 in cash or bearer cheques, must declare within 30 days and complete a B-3. This form will include details such as name, address and NIE number, (Numero de identification de Extranjero – personal identification number) the name and address of non-resident and the reason for the payment.

All sums of money above €6,000 must be declared. However, the EU ruled that the demand of prior authorisation was illegal under EU laws relating to free transfer of capital between member states and this now applies to non-EU nationals only.

These regulations were put in place to stop criminal activity; drug trafficking in particular. It is important to remember that should you not declare funds, they are subject to confiscation.

Dealing with the Spanish Banks

Spain’s biggest and most popular bank branches include Banco Santander-Central Hispanico (BSCH) and Banco Bilbao Vizcaya-Argentaria (BBVA). Smaller banks also include Banco Popular, Banesto and Sabadell Atlantico.

The Spanish banking system is well established and fairly modern. It is controlled by the Bank of Spain (Banco de Espana), which has its central office in Madrid and branches in all provincial capitals. In regards to electronic banking, Spanish banks compare favourably with other European countries; ATM’s in Spain are among the most advanced in Europe.

Normal banking hours are generally from between 8.15/9.00am until around 1.30/2.00pm Monday to Friday. Opening hours on Saturday (in winter only - most banks close on Saturdays during summer seasons) are between 9.30am and 1.00pm. All Spanish banks close on public, local and national holidays, with many closing during local fiestas (which vary from region to region).

Opening an account You do not have to be a resident to open a bank account in Spain. You must be 18 years or older and be able to provide proof of identity, (passport etc.) proof of address in Spain and your passport number or NIE number.

International Bank Transfers When transferring money to Spain, it is important to shop around for the best exchange rates. Banks are often willing to negotiate.

Bank-to-Bank Transfer Bank to bank transfers can either be made by a normal transfer or by SWIFT electronic transfer. A normal transfer generally takes between three to seven days to clear, but can often take a lot longer, especially if sent by post. SWIFT should be completed within two hours, but can be slightly unreliable. It is generally a lot quicker and cheaper to transfer funds between branches of the same bank or affiliated banks.

Spanish banks, along with Portuguese banks, are renowned for being among the slowest in Europe in regards to processing bank transfers. It is not unusual for funds to get stuck in the pipeline, most commonly somewhere in Madrid.

Mortgages

Spanish mortgages have are often regarded as among the most competitive in Europe. Obtaining a mortgage for a Spanish property is much easier now than it was 10 years ago. Spanish banks and mortgage companies were not geared towards foreign property ownership, yet today it is much easier to find all the information you require to make an informed decision. Mortgages or home loans in Spain are available from most banks for residents and non-residents. The amount you can borrow depends on varying factors, such as your income, your trade, your marital status and your spouse’s employment status, and whether you are employed or self-employed.

Most banks offer mortgages for up to 80%, although non-residents can only borrow a maximum of 60%. To obtain a mortgage from a Spanish bank you must provide proof of identify and proof of your monthly income and major outgoings, including any loans or commitments. There are no self assessment mortgages like those available in the UK: mortgages without proof of income are difficult to find, if not practically non existent.

If you finance your purchase of a Spanish home with a mortgage, you must always take into considerations the possible fluctuations in interest rates. A slight rise can lead to substantial increases in your monthly repayments.

Mortgages are granted on a percentage of the valuation, which itself is usually below the market value. The maximum mortgage in Spain is 80% of the purchase price for the principal home (vivienda habitual) and between 50-60% for a second home (segunda residencia).

The normal term is 10-15 years, although mortgages can be repaid over 10-35 year terms. Spanish banks also insist you take out home insurance with them together with the mortgage; although this is not a legal requirement and their rates are generally higher than other insurers, so it is advisable to shop around to get the best deal.

Talk to us today

If you would like to find out more about buying property abroad through Volcano Estates, simply contact us today on (0034) 928-51.87.52, or by e-mail, for an immediate response.