It’s true that there have been some problems in the past. However, by taking simple precautions you can ensure that any risks are reduced to a minimum. Millions of people have bought property safely in Spain and are now enjoying their dream homes. Our advice to you is:
- Make sure you use a reputable and established estate agent
- Engage the services of a trusted conveyancing expert who speaks your language
- Don’t sign anything or pay anything until you have had any contract checked and validated
- Don’t make any hasty decisions
- Be wary of anything that appears too cheap to be true
- Listen to the advice you are given and act on it
There is plenty of Spanish property available at low prices. As a potential purchaser you are very much in the driving seat, take your time, listen to advice, select and enjoy.
We have a friend who purchased a property in Spain four years ago. They’ve just received a tax bill for €3,000 – how could that happen?
What your friend has been charged is complementary tax. This tax can be levied anything up to four years after you originally bought a property. It originated because at one time vendors and purchasers were declaring a lower purchase price in order to reduce the amount to pay on transfer tax and capital gains.
When the tax authority in Spain began to realise that this was happening they introduced complementary tax. They began to check the amount that the property had been sold for on the Title Deed against their own valuation or Minimum Market Value (MMV). A demand of 7% was then applied on any difference between the two.
This doesn’t mean to say that your friend deliberately tried to out smart the tax office. What’s happening now is that people are buying property cheaply. The tax office is continuing to use valuations that don’t take account of the property dip. As a result there are an increasing number of cases where the official property valuation in Spain and the purchase price declared are very different and this leads to tax demands like the one your friend received.
I’ve heard that if I buy a cheap property I might get a big tax bill afterwards. What can I do to avoid this?
The tax you are referring to is complementary tax, a tax that came into existence to stop vendors and purchasors declaring a reduced purchase price. By declaring a lower price on the Title Deed they effectively reduced the amount of tax they would have to pay when the property changed hands.
Now, with so much property being offered so cheaply, purchasers are sometimes receiving complementary tax bills even though they have declared the actual purchase price.
If you feel that you might be susceptable to complementary tax then Ábaco can help. We can provide you with a complementary tax risk calculation that will give you an idea of how likely you are to receive a tax demand after you have purchased your property.
If you do happen to receive a complementary tax demand our appeal service can help provided you appeal within the month’s window that you are given. Our appeal service has been very successful and although you might not be able to avoid the issuing of a complementary tax demand you have a good chance of appealing against it if you act in time.
Our estate agent has put us in touch with a solicitor who he recommends to help us complete the transaction. Should we go along with this or use an independent solicitor?
It can be tempting when the people you are already dealing with make a recommendation. You are out of your home country and the language can be a barrier. It is sometimes easier to go with the first suggestion you are given.
However, be wary. There are benefits to ensuring that you employ someone to look after your affairs who only has your interests at heart. The solicitor may be the best around and good value for money, but the fact that he/ she is being recommended suggests that they do have a link with the estate agent. You want someone who is inspecting all documentation rigorously from your point of view and as such we recommend that you should commission your own solicitor to ensure this.
The property I am buying in Spain is part of an urbanisation and has a community of owners. Do I have to be a member?
Communities of owners are quite common in Spain. They occur where a group of houses or an urbanisation share facilities that need supporting through the community. For example, swimming pools, shared walk ways, stairs and lifts. The community is a legal entity which has statutes and rules and any building work on houses on the urbanisation needs to be agreed by them.
The community has a committee and must appoint a President. They also usually have an adminstrator who is often employed from outside the community and understands the special rules that are linked to them. At least once a year there will be an Ordinary General Meeting with extra meetings called inbetween. Communities usually work well in protecting the interests of their members. However, the down side is that you will have a contribution to make and community fees are payable annually. I’m afraid there is no choice about your membership. You are required to participate but hopefully will see the benefits of doing so in the long run.
I’m buying a resale property that’s about 20 years old. The owner says it doesn’t have a habitation certificate. Is that a problem?
A new property is issued with a cedula de habitabilidad or certificate of habitation. This is the certificate that means everything on a new property is in order and has been passed by the town hall. Resale homes should also have one of these.
However, as in your case, these sometimes are lost, need renewing or may never even have been issued in the first place. It is an important document to have as you will need it for changing contract details with the utilities and when you come to sell the house yourself. It is possible to get a replacement from the town hall, but you will have to pay for this. It can be tricky to replace but a reputable legal firm will be prepared to organise that for you if it’s not a matter you wish to try for yourself.
I’m having difficulties selling my home in Spain and desperately need to move closer to my work. Is swapping my house for another a possibility?
House swaps in Spain are on the increase. Many people are continuing to find the housing market slow to move and where there are compelling reasons they are looking for alternatives. One of these, for example, is renting and lettings agencies are doing good business at the moment.
Another alternative is the house swap. The permanent exchange of your home for another of a similar price is quite feasible. The process is exactly the same as if you were buying and selling a house and you still have to go through all the legal formalities.
However, there are some less obvious advantages. For example, you are a buyer and a seller at the same time. This means that generally the timing of the transaction is easier as there are fewer people involved and no chain. It is likely that you are both as anxious to move swiftly and have great incentive to make sure that everything goes smoothly.
Of course, it won’t necessarily be easy to find someone in the area you want to move to who also wants to move where you currently live. However, house exchange sites are appearing and it is well worth giving it a go.
I’ve seen adverts in the paper promoting the idea of purchasing property in the name of a company. Is this something you recommend?
There are advantages to buying a property in Spain in the name of a company rather than your own name. The main reason for most individuals is to avoid paying inheritance tax. However, there are difficulties in taking this route and as a private individual you should consider carefully the pros and cons.
To begin with, the documentation is complex and does require that you can demontrate that the company is correctly registered in your home country. The documents you will need to prove this will also need to be translated into Spanish by an official translator.
You should also check how much Spanish inheritance tax would be payable on your property anyway. Although inheritance tax does exist in Spain and in some cases can be quite hefty, there are also many occasions when it is not payable at all. Before you commit yourself to spending too much on creating your company check that it will benefit you and your inheritors in the long run.