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Payments,
Costs And Schedules | Mortgages | The Legal Process | Tax
A
Guide To The Payments, Costs And Schedules
 Different
promoters or builders can have varying requirements surrounding the
amount of deposits and the schedules of payments. However in general
most payment schedules follow the same payment process as well as
associated fees.
Using the example of a property based on a purchase price of 200,000
euros, the below model outlines payment schedules that can be expected
when buying a new property.
We are also assuming that based on current capital growth and regional
valuations, for mortgage requirements, a bank valuation could be assumed
to reach approximately 240.000 euros.
| PRICE
OF PURCHASED PROPERTY |
|
|
|
| Market
Price (Euro) |
|
|
240.000
€ |
| Market
Price (GBP) |
|
|
165.517
£ |
| Purchase
Price (Euro) |
|
|
200.000
£ |
| Purchase
Price (GBP) |
|
|
137.931
€ |
| |
|
|
|
| PAYMENT |
AMOUNT |
|
TIMING |
| 1)
Reservation Deposit |
3,000
€ |
|
Immediately |
| 2)
20% Deposit |
40,000
€ |
|
One
Month After Reservation |
| 3)
VAT |
2,800
€ |
|
One
Month After Reservation |
| 4)
Solicitors Fees |
1,044
€ |
|
One
Month After Reservation |
| 5)
Notory Fees |
500
€ |
|
(approx)
On Completion |
| 6)
Registration Fees |
500
€ |
|
(approx)
On Completion |
| 7)
Stamp Duty |
2,000
€ |
|
(approx)
On Completion |
| 8)
Mortgage Administration Fee |
800
€ |
|
(approx)
On Completion |
| 9)
Solicitors Fees |
1,044
€ |
|
(approx)
On Completion |
| 10)
VAT |
11,200
€ |
|
(approx)
On Completion |
| |
|
|
|
| TOTAL |
62,888
€ |
|
|
| TOTAL
LESS DEPOSIT |
22,888
€ |
|
|
Explanation
Of Payments
- 3,000 € (£ 2,068)
is a non-refundable deposit to secure your property
- 20% of the purchase
price will be put in escrow
- 7% IVA (VAT) for deposit
- This is the first
instalment of the solicitor´s fee (half of a set lawyers fee)
- Notary fees are fixed
by law and are applied on both the title deed and the mortgage
deed. For properties priced at 200,000€ you should budget at least
500€
- Registration
fees are fixed by law and are applied on both the title deed and
the mortgage deed. Buyers should budget at least 500€
- Stamp duty is 1% of
the purchase price
- Mortgage Administration
Fees are 0.5% subject to a minimum of £500 (€725). 160,000€ (80%)
x 0.5% = 800€
- This is the second
instalment of the solicitor´s fee (second half of set lawyer fee)
- 7% of IVA (VAT) of
the remaining 80%
Notes
 All
payments are expressed in Euros €. The assumed exchange rates are
£1 = €1.45
Mortgages
 The term
offered on most mortgages is from 5 to 30 years for adults up to the
age of 70.
The currency can be in euros or in any of the other major currencies,
depending on which lender you choose.
We can talk you through any questions you may have and can recommend
the most appropriate mortgage products for you. You can also be assured
that as we are not mortgage brokers and do not benefit financially
from arranged mortgages our advice is totally impartial.
Although on most occasions mortgages work on a 70% to 80% loan to
value basis, selected developments can provide 90% to 100% mortgages.
The mortgage market in Spain splits between those lenders that lend
against the purchase price of the property and those that are prepared
to lend against the market value. If you need to put down 20% of the
purchase price of 200,000€. This means you need a mortgage of 160,000€.
At a market value of 240,000€ with a mortgage of 80% this means you
can borrow 198,000€ which comfortably covers your needs.
One word of caution though, lenders generally look for status-based
mortgages - salaries, tax returns etc. Non-status mortgages are available
but they may not lend against the market value. So it is important
to ensure that you can get the mortgage that you need. By talking
to ourselves we will ensure that you get the correct mortgage to suite
you.
| Price
of Property |
200,000
€ |
|
|
With
a 20% deposit you will need a mortgage of 160,000 € |
| Deposit |
20% |
|
|
|
| Mortgage
Requirement |
160,000
€ |
|
|
|
| Market
Value |
240,000
€ |
|
|
|
| Loan
to Value |
80% |
|
|
At
a market value of 240,000 € with a 80% mortgage you can
borrow more than the 160,000 € you need. |
| Mortgage
Available |
192,000
€ |
The
Legal Process
 Spirit
Of Spain properties have developed a relationship with an independent
firm of lawyers and accountants who have their own qualified lawyers,
economists and tax accountants who are in a position to communicate
in English. A link to Quarum Abogados can be found on the Links
page. Their solicitors are independent graduated professionals whose
legal training and experience enables them to give clients the utmost
professional advise. Due to the complexity of Spanish Law, it is necessary
that a highly qualified professional deals with the legal matters.
However it must be stated that you are free to choose any legal representation
that you choose and that you feel entirely comfortable and confident
with.
Any lawyers office aim should be to guarantee to all their clients
security when they buy or sell a property in Spain using expertise
and knowledge with general bank guarantees, building insurances, fiscal
and registry information, etc, and ensuring that all documentation
is completed in a friendly and relaxed situation.
Once you have made contact with Lawyers here's what you can expect
from them:
- A letter of introduction
- Payment schedule and
schedule of costs, with indication of the payments, fees and taxes
attracted and due dates
- Letter with indication
of the main parameters of the transaction, details of the developer,
available insurance and guarantees, completion date, description
of the property and mortgage options
- Companies House excerpt
with the details of the developer trading company, namely start
up date, share capital, directors and confirmation of due diligence
in bookkeeping
- Sample
of the bank guarantee or insurance policy to cover the guarantee
repayment of the deposit paid.
- Copy of the planning
permission issued by the relevant municipal authority
- If required, bank
forms and power of attorney draft, with instructions on how to
formalise (through a UK Notary Lawyer) and legalise (via the Foreign
Office -www.fco.gov.uk) the document
Lawyers also optional services, which
include the following:
- Advice, preparation
and translation of Spanish wills and attendance for granting of
the wills before a local Notary Public
- Signing of utility
contracts with water and electricity companies and arranging payment
of bills and annual payments on the property through a bank standing
order
Fiscal
representation
In
the event that you may not wish to visit Spain, or are unable to visit,
Power of Attorney can be signed in the UK.
All contracts, apart from the title deed are drawn up in Spanish &
English.
If you come to Spain to sign the deeds, your solicitor will provide
you with a verbal translation at the Notary Office but they do not
offer a written translation of the title deed.
Lawyers will deal with the developer, banks, Town Hall, Police Station,
Notary and Land registry office and any other person, physical or
juridical, involved in the process, to successfully complete the transaction
and obtain full registration of the title in the district Land Registry.
They will also arrange your mandatory tax identification number in
Spain - the NIE (Numero de Identificacion de Extranjeros), an NIE
is required by Spanish
law in the purchase of properties within the country.
Tax
As a property owner in Spain, regardless of whether you are a non-resident
or a resident you will pay tax there. The Spanish fiscal system appears
at first glance to be very tax heavy, but a few words with a good
economical adviser could help you search out a few useful loopholes.
As with all tax systems, the rules are complex, but here is a guide
to what you could expect.
- INCOME
TAX (RENTA) stands at 25% on any Spanish income, before
allowances, based on the rateable value. The Double Taxation Treaty
between the UK and Spain means that any income earned in Spain
will not be liable for income tax in the UK. But you will still
need to declare it.
- WEALTH
TAX (PATRIMONIO) is based on the price of the property
identified in the title deed (Escritura), and varies from 0.2%
- 2.5%. A resident is required to declare his worldwide assets,
while a non-resident declares only his property and assets in
Spain. On an asset worth 200,000 based on last year's Wealth Tax
rate, you would pay approximately 390€.
- CAPITAL
GAINS TAX (PLUS VALIA) is subject to a 35% tax rate after
various allowances. Gains from assets held for less than one year
are treated as income tax and taxed accordingly. Spanish law does
not specify who is liable for this tax so it's important to include
this in your negotiations and have it documented by your solicitor.
Double Taxation Relief means you do not pay CGT a second time
in the UK, but you must declare any gain.
It is worth noting that if you do decide to become tax resident
in Spain, Capital Gains Tax works out more preferably. CGT is
charged at a rate of 15% of net profit. And for property, there
is up to 100% roll-over relief on your main residence if the gain
is re-invested in the new main residence within two years of the
sale. If only half the gain is reinvested, then half is taxable.
If you are 65 years or over and have lived in your main residence
for over three years and are Spanish tax resident, the gain is
tax-free and there is no need to buy a new property to claim roll-over.
This is a very attractive option for people retiring to Spain
NO CAPITAL GAINS TAX is due if the property is sold through a
company that is resident in a double taxation treaty country,
such as the UK. Gibraltarean companies that own Spanish property
would be liable for tax however, if these companies are sold.
- INHERITANCE
TAX
is paid on the value of any assets in Spain on the date of death.
It is a complex calculation based on an individual's inheritance
and not based on the estate as a whole. This means that if two
people are inheriting the property, they will be taxed separately,
based on their personal circumstances. Rates of tax vary from
7% to 35%, depending on one's relationship with the deceased and
the inheritor's pre-existing wealth in Spain. To avoid any unnecessary,
and potentially very expensive, complications later, it is strongly
advised that you set up a Spanish will at the same time as buying
your property in Spain.
- CORPORATION
TAX is levied at a standard rate of 35%, and at 30% on
the first 790,151 € for companies with a turnover of less than
75m €. Corporation tax credits are allowed for job creation, investment
in research and development, environmental investment, and investment
abroad. Buying through a company is only tax-effective if you
are a Spanish tax resident.
- V.A.T.
(I.V.A.) This varies from a rate of 7% to 16%.
- IBI
- (IMPUESTO SOBRE BIENES IMMUEBLES) The IBI is paid if
you own a residential property and use it for yourself (or have
it available for your own use). IBI is calculated at approximately
0.2% on a 'notional rental value' (valor catastral) of your property
by the local town hall. It varies from region to region, but is
usually very low. There will also be local property taxes, which
work like council tax and vary from 200 € to 500 € per annum.
Payments,
Costs And Schedules
| Mortgages | The Legal
Process | Tax
|
|
|
