The process, costs and pitfalls of buying a place in Spain have been well documented. However, what follows the purchase receives less attention, despite being equally important. Being a property owner in Spain attracts the same risks and responsibilities as owning property in any other jurisdiction, but there are some quirks that are unique to Spain. Here we guide you through the steps you ought to take and matters you should be aware of when you become a property owner in Spain.
1.) Spanish Will
If you own property in Spain it makes sense for you to have a Spanish Will. Having a Spanish Will in place will greatly ease the administration of your estate upon your death, a job that the beneficiaries, perhaps your loved ones, will have to deal with. By making a Spanish Will in relation to your Spanish assets, as opposed to any English or other Will governing the succession of everything that you own, you will remove any cross-border uncertainty and unnecessary delays.
IBI is a local charge in Spain that is similar to council tax in the UK. The letters I.B.I. stand for Impuesto sobre Bienes Inmuebles, literally an immovable property tax, or real estate tax. Whereas the tax is payable by the person who owns the property on 1 January each year, the invoice is usually issued during June, July or August.
If you do not make payment of your IBI then the town hall may charge penalties and register a charge against your property in respect of the debt you owe. Hence, it is advisable that you make arrangements for the payments to be debited directly from your Spanish bank account in order to avoid missing payments.
3.) Community fees
If you own a property in Spain that is part of a development, for example an apartment, then you will be obliged to pay community fees, which are service charges by another name. Community fees are paid by all property owners within the development towards the maintenance of the communal areas within the development. This may include swimming pools and gardens, or it may simply relate to an access road to your development.
It is important to note that communities with a large number of debtors or late payers have the right to increase the community fees for the members who do pay regularly. You should ensure that your adviser considers the minutes of the most recent annual general meeting of the community in order to get a clear picture of the community’s finances, as well as a good idea of any other issues that are affecting the development.
If you do not pay your community fees it is possible that the community could take legal action to recover the debt, which could result in a charge being registered against your Spanish property. On a day-to-day level you may be refused access to communal facilities if your contributions are not paid up to date. As with other regular payments, it is wise to arrange for the payments to be made automatically from your bank account to avoid falling behind.
4.) Non-resident’s income tax
As the owner of a property in Spain, but a non-resident of Spain, you will be liable to pay Spanish non-resident income tax.
If you let the property on a holiday let basis, then you will be required to submit quarterly returns declaring the income received and the expenses you have incurred in each quarter. You can expect to pay quarterly tax on the chargeable amount, which will be the net income earned during each quarter. If you let your property on a long term basis, so for a year or more for example, then tax on the net income will be payable annually, not quarterly.
If you do not let your property at all, or if you do not let it during one or more quarters, you will need to submit an annual return and pay an annual tax that is calculated on the basis of the rateable value of the property, either in respect of the whole year, or in respect of the quarters during which the property is not let, on a pro rata basis. That tax payable will usually be relatively low, usually based on a chargeable amount equalling 1.1 percent of the “valor catastral” (similar to a rateable value).
Whether or not you let your property, tax is payable on the chargeable amount at the rate of 19% for those resident in the EU and at 24% for all others.
5.) Rental rules
If you intend to let your property in Spain on the open market, as well as the tax implications, you need to be aware of the local rules. The rules on holiday lets vary in Spain, depending upon the location of the property. In certain locations you will be required to obtain a licence to be able to let your property legally. In other areas you will be required to comply with certain administrative rules. In any event, the consequences for non compliance with the rules could be a hefty fine, so the key if you intend to let your property will be to make sure that you are aware of the rules before you purchase it.
The key when buying property in Spain is to seek good quality independent legal advice to ensure that you know as much about the property you are purchasing as possible.
If you are considering purchasing a property in Spain it is essential that you seek good quality, independent legal advice at an early stage. We here at E&G Solicitors in Spain have been advising clients in their Spanish property purchases since 2004. We can guide you through the legal process to ensure that the transaction goes smoothly.
If, after purchasing a Spanish property, you need assistance in preparing and submitting your tax returns, we will be happy to assist you through the process.
If you would like to make a Spanish Will to cover what will happen to your Spanish property when you die, we can prepare your Will and deal with ensuring it is registered and valid in Spain.
Please do be in contact with us if you would like assistance with any of the issues set out in this article. You can reach us by email at firstname.lastname@example.org, by telephone on 020 3478 1420, or by completing our contact form.