Buying property in Spain - contact 020 7324 8281
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Buying property in Spain contact 020 7324 8281
This guide has been prepared by the following companies
Although they have collaborated in the production of this brochure they are legally and financially independent
This guide is, of necessity, both brief and general and is therefore no substitute for proper professional advice,
which we will be happy to provide on request.
John Howell & Co The ONLY firm of English
SOLICITORS & INTERNATIONAL LAWYERS lawyers who do NOTHING
The specialists in Spanish Law BUT work involving continental
The Old Glass works, 22 Endell Street,
Europe
Covent Garden, London WC2H 9AD Our job is to provide cost-effective solutions
to our clients' international legal & tax
Tel: 020 7420 0400 Fax: 020 7836 3626 problems
Regulated by the Law Society
Email: info@europelaw.com
www.europelaw.com
Specialist advice on UK and
Offshore Mortgages and
Overseas Mortgage Division
Barbican House, 26-34 Old Street, Life Assurance with
London EC1V 9QQ Offshore Tax Planning relevant
Tel: 020 7324 0005 Fax: 020 7608 1425 to the location where you intend
Email:overseas@blevinsfranks.com to live
www.blevinsfranks.com Regulated
Blevins Franks byServices
Mortgage the FSAis a trading name of
Mortgage Partner Services LtdThe Legal Side of Buying a Home
Is the conveyancing process in Spain similar We can normally deal with this, Monday to
to that in England? Saturday, "while you wait". This is not a full
investigation. We can only check the contract, not
No. The Spanish legal system is very different the property, but it is better than nothing at all. If
from the English. Generally speaking, however, the contract is unfair or does not protect you we
provided that we make the necessary checks and will say so and try to negotiate improvements.
enquiries, there is hardly any more need to worry
about buying a house in Spain than about When you sign this preliminary contract you are
buying one in England. likely to be asked to pay a preliminary deposit.
This is typically €3,000.
Unfortunately, very often people purchasing
property in Spain take little or no legal advice and Our fee for this service is £200. There is no VAT.
are indeed quite "casual" about the purchase and Once the preliminary contract has been signed
about the signing of legal documents. They may there is usually a period of 2 - 3 weeks for us to
then find there is no title to the property, that it carry out checks on the property before you sign
was built without planning permission. . . or that the main contract.
it does not even exist!
How will you be able to help me buy a home
You will, no doubt, have heard of cases where in Spain?
Buyers have suffered loss. There is no reason why
this should happen to you provided that you take We offer three choices.
independent legal advice.
1. Preliminary Meeting
Most estate agents are, of course, honest, but
however honest and helpful they may be you We strongly suggest that you arrange a meeting
must remember that they are being paid by the with us before you go to look for property. This
person selling the property to sell it and not to way we can discuss all of the key issues - includ-
protect your interests. They are not able to give ing which areas might best suit you, the types of
you independent legal advice. Be very careful property available, who would be the best owner
before using the services of the agents "own" for tax purposes, how it should be paid for, mort-
lawyer. Is he or she or she looking after your gages, inheritance issues and how to minimise
interests or the interests of the agent who is your tax liabilities - calmly before you get into the
providing all his or her work? rush involved in buying the home. The "meeting"
can either be face to face, over the telephone or
Please also note that the Spanish Notary Public
by video conference.
("Notario") - in front of whom all land transfers in
Spain have to be signed - is not there to give
To arrange a meeting just telephone us. The
legal advice to either the Buyer or the Seller. His
meeting will typically take an hour and we will fol-
or her function is to witness the signature of the
low it up with a letter confirming the points dis-
title deeds and to deal with certain administrative
cussed.
matters.
Our fee is a fixed £250 + VAT.
How do I find a property in Spain?
2. Our 'Minimum' service
We offer a property finding service. This can save
you a lot of money. Please see previous page.
As the name suggests, this is a limited service.
We will:
What should I look out for when finding a
property?
Advise you about who should be the owner
of the property to minimise tax and
The most important thing we would stress to you
inheritance problems.
is that you should NEVER SIGN ANYTHING until
Advise you about 'declared values' and
you have had it checked by your lawyer. If you do
'black money'
sign you will be committed to a contract that you
Advise you about your liability to taxes and
may not understand, that may be totally unfair or
other expenses in connection with the
unsafe and which could be structured, financially,
purchase
in a way that is totally unsuited to you and tax
Do a land registry search to establish the
inefficient.
current ownership of the property
Check that the property is free of debts
Sometimes in today's "boom" climate you may
and other charges
have no option but to sign some form of
Advise you about the terms of your
preliminary reservation contract or risk losing the
proposed contract
property. If this situation arises then we strongly
Point out any problems shown by the
recommend that you have the agent fax
documentation - or lack of it
or email the proposed contract for our comments.
2 Guide - Buying in Spain, January 2004 Point out any further enquiries that we all necessary planning permissions and
think you should make licences
Incorporate all of this advice into a written Where appropriate, check the property
report benefits from the necessary guarantees
Write to the Notary who will be dealing Draft a contract of sale or approve a
with the signing of the Deed of Sale contract supplied by the seller of the house
(Escritura) to tell himabout your wishes as Point out any problems shown by the
far as ownership and price are concerned documentation - or lack of it
Point out any further enquiries that we
That is all. We will not deal with any other mat- think you should ask us to make
ters, such as: Prepare a full report setting out the results
of our enquiries and our recommendations
Negotiating the terms of the contract concerning the purchase generally
Further searches or enquiries. Arrange for the completion of the purchase
Dealing with surveys, mortgages etc by the signing of the necessary deed
Preparing Powers of Attorney ("escritura publica de compraventa") in
Obtaining NIEs (foreigners identification front of a Spanish NotaryPublic
numbers) Arrange for the transfer of the necessary
Making arrangements for completion of the funds to Spain or elsewhere as required by
transaction the contract
Transferring funds Arrange for final searches to be carried out
Pre completion checks to ensure that the property remains free of
Paying the taxes due debts and charges up to the point of sale
Registering your title to you
Dealing with the transfer of Water, Arrange for the payment of the fees and
Electricity etc into our name taxes due in respect of your purchase
Arrange for the registration of your title at
This service is designed to appeal to the cost the Spanish Land Registry
conscious or those buying low value properties Receive the registered title back from the
who are prepared to accept a larger amount of Land Registry, check it and forward it to
risk than would be the case if they were buying you. This will be several months after the
something more expensive. It also appeals to the completion of thepurchase
person who speaks some Spanish and who is Establish from you what further assistance
prepared to do some legwork himself or who has you may require in connection with this
decided to use the services of a Spanish lawyer transaction
but who wants the UK tax and ownership advice Liaison throughout with estate agents,
that the Spanish lawyer will not be able to give. developers, Spanish lawyers, the notary
etc
This service is limited. It does not give you the Provide general advice and necessary
full security offered by our standard service. "handholding" during the transaction. This
does not extend to unlimited contact with
Our fee for this service is ½% of the value of the clients.
property, with a minimum of £500. If you have
already had a preliminary meeting with us there Most clients are very reasonable and understand
will be a reduction of £150. that work done at a fixed fee can only cover
necessary contact and not 4 or 5 phone calls or
3. Our Standard Service emails every day!
As part of our standard conveyancing service at In short, everything needed in an ordinary trans-
our standard fixed fee we will: action.
Advise you about who should be the owner Our fixed fee for this standard work is 1% of the
of the property to minimise tax and price of the property. In the case of a property
inheritance problems that has already been built this is subject to a
Advise you about 'declared values' and minimum of £1,000. In the case of a property in
'black money' the course of construction it is subject to a mini-
Advise you about your liability to taxes and mum of £1,500 - because this involves a lot more
other expenses in connection with the work.
purchase
Do a land registry search to establish the Other work may be needed. For example
current ownership of the property
Check that the property is free of debts you may decide to take out a mortgage to
and other charges help buy the property
Where appropriate, check the property had you may want a valuation or survey
3 Guide - Buying in Spain, January 2004 you may want us to obtain a Spanish NIE a survey and will be pleased to advise about the
(foreigners identification number) merits of doing so.
you may want to appoint someone else to
sign the paperwork in Spain on your behalf What is the Escritura?
you may want to set up a limited company
to buy the property This is the title document transferring ownership
you may want us to insure the property of the property.
difficulties may arise in the transaction as
a result of defective title, planning Under Spanish law it is necessary for the escritura
problems, protracted negotiations etc. to be signed before a Spanish Notary Public. We
will arrange this.
If, for any reason, the transaction becomes very
unusual or much more complicated than normal Who is the Notary?
we reserve the right to revise our charges. For
example, we have had situations where one of the The Notary is a public official who is there simply
parties has died part way through the transaction, to put on the public record the fact that the title
or got divorced, or for some reason has refused to deed recording the sale/purchase has been signed
cooperate in the sale. Of course, these situations in his or her presence and understood by the par-
are infrequent. If one occurs in your case we will ties concerned.
tell you and give you an updated estimate of our
fees. Our fees will never exceed the estimate we Where should the money be paid?
have given you.
When the escritura is signed in front of the Notary
Other examples of extra work are explained in our either the purchase price is, in his or her pres-
Questionnaire. ence, handed over to the person selling the house
or the Seller confirms that the money has already
This extra work is charged for over and above our been handed over. Proof of such payment is then
standard charge. If any extra work is needed we incorporated into the title deeds of the property.
will notify you before we undertake it and agree Usually the price may be paid wherever in the
with you either a fixed price for it or another way world the parties agree. We will advise you as to
of charging. the implications of this choice.
Costa del Sol Do I have to be in Spain to complete the
transaction?
Europelaw - Costa del Sol
Special arrangements for our charges The person buying the house may attend in per-
We are delighted to announce that we have son before the Notary, but, if this is inconvenient,
formed a joint venture with BCP Abogados of arrangements can be made for a Power of
Marbella. Together we will be working as Attorney to be granted enabling another person to
Europelaw - Costa del Sol. As a result, our way of attend on their behalf. This must be in the
working and our way of charging for our work on Spanish form and signed in front of a Notary. Our
the Costa del Sol will be slightly different from clients usually appoint our associate in the area to
what we have described in this brochure. sign on their behalf. We can draft a Power for sig-
nature near your home.
Instead of paying our charges and a separate fee
for the lawyers in Spain there will be just one fee, What about paying the taxes due?
payable to us. We will then split that fee with the
lawyers in Spain. Once the purchase formalities with the Notary
have been completed we arrange, on your behalf,
The end result will usually be cheaper for our to pay any taxes due in relation to the transac-
clients. See the separate page on the Costa del tion.
Sol for details.
Is there a Land Registry system in Spain?
What about a survey? Yes. After the Escritura has been signed in front of
the Notary we arrange for it to be presented to
As is the case with the purchase of a property the appropriate Land Registry and for the pay-
anywhere, it is often prudent to have the property ment of the Land Registry fees.
you intend to buy surveyed. We strongly recom-
mend a survey in the case of older (over 10 year Several months can elapse before the process of
old) or unusual properties. Surveys typically take registration is concluded, but as soon as we are
7 - 10 days and cost about £500 - £750. notified that the deeds are ready we will have
them collected, check them and then forward
We can, if you wish, make arrangements for such them to you.
4 Guide - Buying in Spain, January 2004Special points for new properties well as advantages. In each individual case,
you will have to weigh up the advantages and the
By law, where you pay all or part of the price disadvantages and decide how you wish to deal
before the property has been fully built, the with the transaction.
property must have the benefit of a bank
guarantee to ensure that, if the developer goes What about raising the money?
bust before he or she completed the building
work, you do not lose your money. In some parts It is possible to raise finance to assist with the
of Spain developers try to ignore this important purchase of a property in Spain either by
legal requirement. mortgaging the property itself or by mortgaging
or adding to the mortgage on any property which
You must also make sure that the property you may have in England.
specification is agreed in detail with the builder
and that the property will be delivered to you We will be pleased to advise you about the
complete with the necessary licence to occupy it possibilities of obtaining mortgages and finance
as a home. Ideally you should not pay the final both in Spain and in England and to assist in the
instalment of the price until this is produced but, obtaining of any finance that you require.
because of bureaucratic delay it is common for
the deeds transferring ownership to you to be What does all this cost?
signed - and the price paid - several months
before this paperwork is issued by the Town Hall. Our charges are set out in the various sections
above.
In whose name should you purchase the
property? We require a payment on account of costs of
£500.
There are a number of ways to purchase the
property The TOTAL costs (our charges for our standard
service, land registry fees, notary's fees, taxes,
in your own name associates fees, bank charges etc) normally come
in the joint names of you and your wife or to about 10% - 11% of the price of the property.
copurchaser(s) In the case of properties less than £50,000 it will
in your children's names or in the name of be more.
somebody who will eventually inherit the
property from you There will be additional charges, fees and taxes if
in the name of a limited company, whether you are taking out a Spanish mortgage. We will
English, Spanish or "off-shore" give you an estimate of these costs when we
know more about your plans.
Each method has its own advantages and
disadvantages. Everything depends on your own We will give you a detailed estimate of the likely
personal circumstances. We shall be pleased to overall cost once we know more about your
discuss the various ways of buying and to advise particular purchase.
as to the most advantageous method for you.
If a transaction does not proceed to completion
It is worth paying careful attention to this point we charge at our current hourly charging rate for
because of the potential tax and other savings the work actually undertaken.
that can be made at a later stage.
What extras are there on top of your legal
These tax savings arise because of the Spanish fees?
system of inheritance tax under which gifts on
death can still attract very high rates of taxation. A fee is paid to the Notary for the
It is still possible to pay over 80% tax on an preparation of the Escritura. This fee varies
inheritance. Careful planning can dramatically but is typically about 0.4% of the purchase
reduce the tax payable. price.
The tax savings also arise because of the way A fee is payable to the Land Registry. This
that each time a property changes hands, certain depends on the value of the property but is
taxes and fees become payable. If you can usually about 0.25% of the price.
minimise the number of times it changes hands, Plus valia - a sort of municipal capital gains
you can greatly reduce your tax liabilities. tax - has to be paid on the transfer of a
property. The tax should be paid by the
As always with tax savings schemes there is a Seller but many contracts transfer the
danger that the Government can close the liability to the Buyer. This tax is usually
loopholes that allow the schemes to operate and, small - say £150 - but, as it can be several
as always, there are disadvantages to them as thousands of pounds, it is vital that you
5 Guide - Buying in Spain, January 2004are aware of the implications of this. We money is paid and whether it is paid in Sterling or
will advise on this point. in Euros.
A transfer tax or VAT and Stamp Duty has
also to be paid. Again this depends on the How do I get the money to Spain?
value of the property, the type of property
in question and where it is located. It is You will normally simply pay the money into our
typically 6% - 8.5% of the price of the bank account in England in £s Sterling and we will
property. arrange for the conversion into Euros (if
In many cases you may not wish to be in necessary) and the transfer to Spain. This is the
Spain at the time when the public title method we recommend as our bank is dealing
deed needs to be signed. In these with such transfers daily and so we have less
circumstances we can prepare a Power of problems. Just as importantly, because of the
Attorney authorising either someone volume of transfers we make, we will normally get
nominated by you or our overseas a better exchange rate than our client would
associate to sign on your behalf. The cost obtain. This can save you many hundreds of
of doing this is typically £150. You will pounds.
also then have to pay the charges of the
person who attends to sign and pay the Are there any other things I should do at the
taxes on your behalf. We will give you an same time as I buy a property?
estimate of these fees when we know
more about your particular transaction. We believe that it saves a great deal of time,
In order to buy property in Spain, you effort and money later on if you now review your
need to be registered with the Spanish tax English Will and make a separate Spanish Will.
authorities and to have a foreigners' For most people the cost of this is fairly small.
identification number (NIE) or tax
identification number (NIF). If you do not It is highly advisable for any person who has a
already have one our fee for obtaining property in Spain but does not live there all the
these is normally £150. time to nominate a "fiscal representative". This is
a person to whom the tax authorities can send all
We will also have to pass on to you the cost of correspondence relating to your affairs in Spain,
any surveyors fees, bank charges and the like secure in the knowledge that it will arrive. The
levied in respect of your particular transaction, fiscal representative must be resident in Spain,
including the charges of our associates in Spain. but it is for you to choose whom to appoint. It
We will give you an estimate of all these charges can either be a friend, a neighbour, a lawyer, or
once we know more about your case. your tax adviser. Many of our associate lawyers
offer this service. If you wish to know more about
Finally, all or part of these charges may attract this, please ask.
Spanish or English VAT at the current rate.
You will wish to insure your property and its
These "extras" will be the same whichever contents. Once again we can assist you in doing
firm of lawyers you use, whether they are this. You will wish to have the electricity, water
based in England or overseas. If someone and rubbish collection charges transferred to your
gives you a different estimate of these fees name. You willneed to notify the Town Hall that
it is simply because they have based their you own the property and register for local rates,
estimate on different assumptions. open bank accounts and register with the Spanish
authorities for tax and other purposes. If you do
What about the Sellers' taxes? not speak Spanish we would recommend that you
use the services of a local "gestor" to do these
The Buyer is usually obliged by Spanish law to things for you. He or she is a sort of official form
pay 5% of the purchase price to the tax office on filler who does this sort of work at quite
account of the Seller's potential tax liabilities in reasonable charges. If you prefer we can arrange
Spain. There are certain exceptions to this rule. this for you.
This does not increase the amount the buyer has You should register as the owner with the
to pay - he or she simply pays 5% of the agreed Community of Owners if you live in an apartment
price to the tax office and 95% to the seller. block or an estate with shared facilities.
We will arrange for this to be done. What happens if I decide to live
and/or work in Spain?
Having done this he or she has no further
exposure to liability in respect of the Seller's As part of our service we can assist you with
taxes. "residencias", work permits and licences and
permits in connection with the opening of new
This responsibility is the same wherever the businesses. We also advise on the importation of
6 Guide - Buying in Spain, January 2004cars, furniture and pets into Spain, obtaining What do I do next?
payment of your pension in Spain, Healthcare
issues, planning your tax affairs, National If you would like further advice, please telephone.
Insurance and other related matters. Please ask We can then have a brief discussion over the
for details. telephone and, if necessary, make an appointment
so that we can meet to look at the matter in more
After I have settled in, what are my detail.
continuing obligations?
We are used to acting for Clients from all over the
If you spend less than 184 days a year in Spain world and, generally, find that it is not necessary
then you are, generally speaking, classed as a to meet in order to deal with the purchase of a
"non-resident" and you must: property in Spain. Of course, we are delighted to
meet to discuss matters personally if that is
pay your local rates (Contribucion convenient for you.
Urbana/IBI).
make a declaration of all your capital John Howell & Co
assets in Spain and, where appropriate, Solicitors & International Lawyers
pay wealth tax on them. The Old Glassworks
make a Spanish income tax declaration 22 Endell Street
and pay income tax on any income Covent Garden
deriving from your activities in Spain. London WC2H 9AD
if you have a car, pay car tax and arrange
suitable insurance cover. Tel: 020 7420 0400
pay your electricity, water and other bills. Fax: 020 7836 3626
It is usual to do this by arranging for your
bank to pay the accounts directly to the Email: info@europelaw.com
suppliers.
Internet: www.europelaw.com
What happens if either I or my coowner
should die? © John Howell & Co - January 2004
Jointly owned property does not automatically
pass to the survivor. It will be dealt with according
to any instructions which you leave in your Will
(either English or Spanish) or, if you do not leave
a Will, under the rules relating to intestacy.
It is generally much cheaper and simpler to deal
with your affairs if you have made a Spanish Will.
We will be please to help you do this.
Surely there can't be anything else?
We would also recommend that you join the
Institute of Foreign Property Owners, which
provides a regular Newsletter about matters
affecting the foreign property owner in Spain.
Membership cost about £40 per year.
The Institute can be contacted at:
The Institute of Foreign Property Owners
Avenida de L'Alt Rei En Jaume I, 15 2-9
03590, Altea, (Alicante), Spain
Telephone: 00 34 965 842312
Fax: 00 34 965 841589
More Information?
Look at our website: www.europelaw.com
7 Guide - Buying in Spain, January 2004Europelaw - Costa del Sol
We are delighted to announce that on 22nd Advise you about 'declared values' and
January 2004 we formed a joint venture with BCP 'black money'
Abogados of Marbella. Together we will be Advise you about your liability to taxes and
working as Europelaw - Costa del Sol. other expenses in connection with the
purchase
Although we have been working closely with Do a land registry search to establish the
Spanish lawyers for many years, this will allow us current ownership of the property
to provide a much more integrated service. Staff Check that the property is free of debts
from our London office will be working in their and other charges
offices in Spain. Our computer systems will be Advise you about the terms of your
linked together. Clients will be able to telephone proposed contract and suggest any
our London office and be put through to alterations to it
whichever lawyer is dealing with their case, Point out any problems shown by the
whether s/he is based in England or in Spain - documentation - or lack of it
and they will only receive one bill for the work of Point out any further enquiries that we
both firms. think you should make
Incorporate all of this advice into a written
As part of this project we have further refined our report
systems of work to ensure minimum duplication
of effort and maximum control over the quality of That is all.
the service offered to you in both countries.
Our fee for this service is 0.5% of the value of the
This has allowed us to streamline the purchase of property (0.4% on any excess over €500,000,
a property in the Costa del Sol. As a result, we 0.3% on any excess over €1,000,000), subject to
will be able to offer you a choice of FOUR different a minimum of €900 (about £650).
levels of service:
3. Our Standard Service
1. Preliminary Meeting in either London
or Marbella This covers everything needed in an ordinary
transaction, apart from obtaining a tax
We strongly suggest that you arrange a meeting
identification number (NIE) if you don't already
with us before you go to look for property. This
have one, preparing a Power of Attorney (if you
way we can discuss all of the key issues -
did not arrange one whilst in Spain) and dealing
including which areas might best suit you, the
with events after your purchase such as transfer-
types of property available, who would be the
ring the water and electricity accounts into your
best owner for tax purposes, how it should be
name. If you need an NIE or Power we can deal
paid for, mortgages, inheritance issues and how to
with these individually (generally £150 + VAT
minimise your tax liabilities - calmly before you
each) or you can opt for our Full Service (see
get into the rush involved in buying the home.
below).
The "meeting" can either be face to face, over the
telephone or by video conference.
As part of our standard service we will:
To arrange a meeting just telephone us. The
meeting will typically take an hour or so and we Gather all necessary information from the
will follow it up with a letter confirming the points seller and any other parties
discussed. Advise you about who should be the owner
of the property to minimise tax and
Our fee is a fixed £250 + VAT (UK meeting) or inheritance problems
€350 (meeting in Spain). Advise you about 'declared values' and
'black money'
2. Investigation of a Purchase Advise you about your liability to taxes and
other expenses in connection with the
This will appeal mainly to the person who speaks purchase
Spanish and who is happy to do all of the running Do a land registry search to establish the
around involved in obtaining NIE's, arranging to current ownership of the property
sign the escritura, paying the taxes due and Check that the property is free of debts
arranging for the registration of title. Because this and other charges
is time consuming it is costly for us to do it and Where appropriate, check the property had
so we can pass the saving on to you. all necessary planning permissions and
licences.
We will: Where appropriate, check the property
benefits from the necessary guarantees
Advise you about who should be the owner Draft a contract of sale or approve a
of the property to minimise tax and contract supplied by the seller of the house
inheritance problems Point out any problems shown by the
8 Guide - Buying in Spain, January 2004documentation - or lack of it Number)
Point out any further enquiries that we Registration with the local and national tax
think you should ask us to make authorities as a tax payer
Prepare a full report setting out the results Registering a member of our staff as your
of our enquiries and our recommendations Fiscal Representative
concerning the purchase generally Changing the accounts for Electricity,
Make any stage payments required by the Water & Telephone or (in the case of a new
contract property) arranging for connection of these
Arrange for the completion of the purchase services
by the signing of the necessary deed Notifying your comunidad (if any) of your
("escritura publica de compraventa") in ownership of the property
front of a Spanish Notary Public Attending in person to pay the taxes due
Arrange for the transfer of the necessary and to register your title (thus saving you
funds to Spain or elsewhere as required by Gestors fees)
the contract
Arrange for final searches to be carried out Our fee for this service is 1.5% of the value of the
to ensure that the property remains free of property (1.2% on any excess over €500,000,
debts and charges up to the point of sale 0.9% on any excess over €1,000,000), subject to
to you a minimum of €2,000 (about £1,400).
Attend with you at completion of the
purchase by signing the escritura at the If the Case does not proceed to Completion
notary's office
Arrange for the gestor to make payment of If a transaction does not proceed to completion
the fees and taxes due in respect of your we charge at our current hourly charging rate for
purchase the work actually undertaken.
Arrange for the gestor to register your title
at the Spanish Land Registry Detailed Estimate
Receive the registered title back from the
Land Registry, check it and forward it to We will give you a detailed estimate of the likely
you. This will be several months after the overall cost once we know more about your
completion of the purchase particular purchase. Generally, the total of all fees
Establish from you what further assistance and taxes, including our own, will amount to
you may require in connection with this about 10% - 11% of the value of the property. It
transaction will be a more if the property costs less than
Liaison throughout with estate agents, about £50,000 and less if it costs over £350,000.
developers, gestors, the notary etc
Provide general advice and necessary Other Work
"handholding" during the transaction. This
does not extend to unlimited contact with Other work may be needed. For example
clients. Most clients are very reasonable you may decide to take out a mortgage to
and understand that work done at a fixed help buy the property
fee can only cover necessary contact and you may want a valuation or survey
not phone calls or emails every single day! you may want to set up a limited company
to buy the property
Our fee for this service is 1% of the value of the you may want us to insure the property
property(0.8% on any excess over €500,000, difficulties may arise in the transaction as
0.6% on any excess over €1,000,000), subject to a result of defective title, planning
a minimum of €1,500 (about £1,100). If you ask problems, protracted negotiations etc.
our UK office to do this work at least a part of our
fee is likely to be outside the scope of VAT. If you If, for any reason, the transaction becomes very
ask our Spanish office to do the work it will be unusual or much more complicated than normal
subject to Spanish VAT (IVA) at the current rate. we reserve the right to revise our charges. For
example, we have had situations where one of the
4. Our Full Service parties has died part way through the transaction,
or got divorced, or for some reason has refused to
This includes everything in our Standard Service cooperate in the sale. Of course, these situations
plus: are infrequent. If one occurs in your case we will
Advice about the Spanish & UK tax tell you and give you an updated estimate of our
consequences of ownership fees. Our fees will never exceed the estimate we
Preparing a Power of Attorney for use have given you.
when buying the property. Note: There will
be an extra fee if a limited company is to Other examples of extra work are explained in our
be the buyer of the property Questionnaire.
Obtaining your NIE (Tax Identification
9 Guide - Buying in Spain, January 2004This extra work is charged for over and above our What do I do next?
standard charge. If any extra work is needed we
will notify you before we undertake it and agree If you would like further advice, please telephone.
with you either a fixed price for it or another way We can then have a brief discussion over the
of charging. telephone and, if necessary, make an appointment
so that we can meet to look at the matter in more
Payment on Account of costs detail. We are used to acting for Clients from all
over the world and, generally, find that it is not
We require a payment on account of costs of necessary to meet in order to deal with the
£750. purchase of a property in Spain. Of course, we
are delighted to meet to discuss matters
Extras personally if that is convenient for you.
In each case we will also have to pass on to you John Howell & Co
the cost of any taxes, notaries fees, land registry Solicitors & International Lawyers
fees, surveyors fees, gestor's fees, bank charges The Old Glassworks
and the like levied in respect of your particular 22 Endell Street
transaction. We will give you an estimate of all Covent Garden
these charges once we know more about your London WC2H 9AD
case.
Tel: 020 7420 0400
If you ask our UK office to do this work at least a Fax: 020 7836 3626
part of our fee is likely to be outside the scope of
VAT. If you ask our Spanish office to do the work Email: info@europelaw.com
it will be subject to Spanish VAT (IVA) at the Internet: www.europelaw.com
current rate.
© John Howell & Co - January 2004
Typically, these extras include:
A fee is paid to the Notary for the
preparation of the Escritura. This fee varies
but is typically about 0.4% of the purchase
price.
A fee is payable to the Land Registry. This
depends on the value of the property but is
usually about 0.25% of the price.
Plus valia - a sort of municipal capital gains
tax - has to be paid on the transfer of a
property. The tax should be paid by the
Seller but many contracts transfer the
liability to the Buyer. This tax is usually
small - say £150 - but, as it can be several
thousands of pounds, it is vital that you
are aware of the implications of this. We
will advise on this point.
A transfer tax or VAT and Stamp Duty has
also to be paid. Again this depends on the
value of the property, the type of property
in question and where it is located. It is
typically 6% - 8.5% of the price of the
property.
These "extras" will be the same whichever
firm of lawyers you use, whether they are
based in England or overseas. If someone
gives you a different estimate of these fees
it is simply because they have based their
estimate on different assumptions.
More Information?
See the general section on The Legal side of
buying a home (above). Also look at our website:
www.europelaw.com
10 Guide - Buying in Spain, January 2004Mortgages
Why take out a Mortgage? your home overseas. This normally reduces
the overseas inheritance tax payable when
Apart from the obvious reason that you might you die. This is particularly important if
need the money many people have decided that the inheritance tax rate overseas is more
the present low interest rates available in the UK than the tax rate in the UK.
and overseas mean that their own money is
better invested in their business or other assets. 7. If you are going to repay the mortgage
from your UK earnings you will be exposed
Some decide that borrowing part of the price of to a major exchange rate risk. This can
the property can "leverage" their investment. That dwarf the potential savings on interest
is that, provided the property rises in value more payments. The £ Sterling has varied in
than the interest rate, their own investment in value against the Euro, for example, from
the property will grow in value even faster. 1.40 to 1.74. A monthly repayment of 600
Euros would therefore sometimes have
To guard against the risk of increasing mortgage cost you £428 and sometimes £344. The
rates you may want to consider taking a fixed rate capital value of 100,000 Euro mortgage
mortgage over a period of, say, 10 or 15 years. would similarly, in £ Sterling terms, have
Other people will take out a mortgage on their varied from £71,428 to £57,471. This is
overseas property to reduce the net value of their simply as a result of the exchange rate
home overseas and so, in most cases, the fluctuation!
inheritance taxes payable there.
8. There is a potential UK tax trap. You must
Should I take a UK or an Overseas ensure that the overseas mortgage docu
Mortgage? mentation complies not only with local law
but also with UK tax law.
There are advantages and disadvantages both
ways. When should I arrange the Mortgage?
UK Mortgage We think that it is sensible to start the process
before you go looking for property. The eligibility
1. You may already have a UK mortgage. criteria are different from those in the UK. That
There will therefore be no legal or Land way you will know that, at least in principle, a
Registry fees if you add to it. In today's bank is prepared to lend you the money to fund
climate there may not even be a bank your purchase before you waste time and money
arrangement fee. looking at property.
2. You will pay UK interest rates, which are Are there any special rules for overseas
currently higher than many continental mortgages?
rates
Yes. The rules about how much you can borrow
Overseas Mortgage are different from those applied in the UK. They
also differ from country to country. We will guide
1. There will be high set up costs. 3% - 4% you through these. Most mortgages are on a
of the amount borrowed or £1000 - £1500 repayment basis - i.e. you repay both capital and
would not be unusual. interest over the period of the loan. Some interest
only mortgages may be available.
2. You will pay local interest rates, which are
likely to be lower than UK rates. Almost all mortgages require proof of income. If
you are self employed they mostly require 3 years
3. You will not tie up your UK assets. audited accounts.
4. There will be a balance between your How can I arrange a Mortgage?
assets (the house) and your liabilities (the
mortgage debt). Many experts think that We can help.
this is desirable. If you can't keep up the
payments you will only lose your holiday We can discuss whether a UK or overseas
home. mortgage will best suit your needs and then refer
you to a specialist to arrange the mortgage for
5. If you are renting out your property you you.
may be entitled to set off the cost of the
mortgage against income received, so We work with a number of overseas banks and
reducing your tax bill. independent mortgage brokers who can assist you
whether you want a UK or an overseas mortgage.
6. The mortgage will reduce the net value of
11 Guide - Buying in Spain, January 2004What do I do next?
If you would like any further advice, please
contact us.
We are used to acting for Clients from all over the
world and, generally, find that it is not necessary
to meet in order to deal with obtaining a
mortgage. Of course, we are delighted to meet
to discuss matters personally if that is convenient
for you.
Blevins Franks Mortgage Services
Overseas Mortgage Division
Barbican House
26-34 Old Street
London, EC1V 9QQ
Tel: 020 7324 0005
Fax: 020 7608 1425
Email: overseas@blevinsfranks.com
Internet: www.blevinsfranks.com
12 Guide - Buying in Spain, January 2004Foreign Exchange
What is foreign exchange? Will my bank help me transfer money abroad
to purchase my property?
The foreign exchange market is vast. Every day
$1,600 billion is traded through thousands of Over the years, banks have traditionally been the
dealing rooms in dozens of countries throughout mainstay of foreign exchange and money transfer
the world. Amazingly, this figure is greater than services. Consequently, they tend to be the first
the global equity markets (shares) trade in an place people who are intending to buy overseas
entire year. 95% of this amount is traded for property turn to.
speculative gain and is largely accounted for by
banks trading with each other, known as However, private client transactions are often
'interbank' trading. However, this still means that viewed as one off deals and as such are usually
£80 billion is traded daily for commercial reasons subject to uncompetitive exchange rates, which
for both businesses and private investors alike. enables the banks to generate sufficient profit in
their deals.
The UK is by far the world's largest financial
market. In fact the UK trades a greater volume In addition, a transfer within Europe can often
than the financial markets of New York and Hong take 3 or 4 days and information flows are scarce
Kong put together. This is partly due to the and trading hours limited to branch opening
historical significance of London as a times.
world-trading centre and partly because of the
time zone advantage the UK has over other Foreign exchange, foreign language.
countries, which enables it to cover both
European and US hours of trade. With normal conveyancing periods of 2 months or
more and the construction of new build properties
The market opens in the Far East on Sunday taking anything up to 18 months and beyond, a
evening (UK time) and trades continuously simple, information led foreign exchange service
through the Middle East, Europe, London and the can take much of the confusion and worry out of
US. The only break in operations comes between buying overseas.
Friday night close in the US and Sunday night
opening in New Zealand. Unfortunately, the banks will offer you limited
choice. More often than not, they will simply
What relevance does this have with advise you to buy your currency on the day that
my overseas property purchase? you need to transfer money. Not only is the
exchange rate likely to be uncompetitive but you
More than you might think. The timing of when to will also have missed out on any opportunities
buy or sell currency is at the heart of every that the markets may have presented. You may
foreign exchange transaction and with property also suffer added expense if the exchange
deals taking anything up to 18 months and rate has moved against you. Fortunately, more
beyond, control and understanding is the key to timely and readily available information flows, a
success. single dedicated specialist point of contact, 24
hour exchange rate monitoring and simple
Most people identify with foreign exchange solutions to achieve better rates of exchange are
through the buying of holiday money, however, now not only the preserve of 'blue chip' organisa-
this bears little relation to the bulk buying of tions.
currency for a property transaction.
Who are Moneycorp?
The annual buying of holiday money provides
scant opportunity to identify with the speed In the complex, fast moving world of foreign
exchange rates move, nor the ranges within which exchange, you need someone on your side who
they trade. This is often the most surprising knows markets inside and out and is dedicated to
aspect of foreign exchange for those unfamiliar delivering the very best service.
with the markets.
Moneycorp is the commercial foreign exchange
However, when understood and correctly division of TTT Moneycorp Limited. Incorporated in
harnessed, exchange rate volatility and near 24 1962, the Company offers a broad range of
hour, 7 day a week trading, can present excellent foreign exchange services, notably bureaux de
opportunities to save you money. Conversely, change services in Central London and Gatwick
anyone choosing to ignore the market, will either Airport, wholesale currency services and
fail to make the most of these opportunities, or at commercial foreign exchange for both private
worst will find the cost of their property escalate individuals and businesses alike. The Company
beyond their budget. has been ISO 9001:2000 assurance accredited
since 1996.
13 Guide - Buying in Spain, January 2004What are the advantages of trading with Will this be the same in two months time when
Moneycorp? you need to pay for it?
Talking to Moneycorp before you start looking for You have agreed to buy a house overseas. You
an overseas property will make buying abroad so need to transfer your deposit over immediately.
much easier. You will want the best exchange rate!
Moneycorp's foreign exchange experts will help You need to make 3 additional staged payments
you at every stage of the purchase transaction, over the next 12 months. How much will these
from working with you to identify what you can cost you in sterling?
afford to spend, to protecting your investment
from currency fluctuations and even enabling you You have retired overseas. You know that your
to benefit from favourable currency moves. pension, paid in £'s sterling, will be £15,000 per
year. What will this be worth in the country where
Your dedicated dealer will always be on hand to you are now living?
make the process as simple and enjoyable as
possible. Be it explaining market terminology or You have agreed on a local currency mortgage to
proposing a bespoke foreign exchange solution to buy your overseas property and will be paying for
best suit your individual needs, you will be in a it out of your £ Sterling income. How much will
more informed position to best take control of your mortgage payments cost over the next year?
your finances.
Budgeting your expenditure accurately is impossi-
In addition, Moneycorp have negotiated with ble without knowing what exchange rate you will
partner banks a far more cost effective means of get to convert your sterling into foreign currency.
transferring monies to Europe. In most cases,
typical 'handling' charges which European banks What are the solutions?
levy for receiving inbound funds will be greatly
reduced or even eliminated. There are several possible actions you could take:
How can I secure an exchange rate? Do nothing!
When you buy foreign currency there are two The most common action from overseas property
contract types - spot and forward buyers sadly often costs them money. If the
exchange rate for £ Sterling against the local
A 'spot' contract enables you to buy foreign currency improves, people are happy. If it
currency immediately for settlement within 2 worsens, then they overstretch their budget, often
working days. This is the simplest way to buy by £000's.
currency. If you need to make a fast payment,
then this contract may suit you. The value of the Euro can and does fluctuate on a
daily basis. This volatility will ultimately affect the
A 'forward' contract enables you to fix an final price that you pay for your overseas
exchange rate for settlement anything up to 2 property.
years in the future. This fixed exchange rate
enables you to calculate the sterling cost of your Buy the currency now
property and, as it does not need to be paid for
until the maturity date, it enables you to budget This will tie up large quantities of your money for
and resolve any immediate cashflow concerns. long periods. The overseas funds will earn very
This is often the case if, for instance, your house little interest because Continental interest rates
sale has not completed but you want to secure an are usually lower than UK rates.
advantageous exchange rate.
'Forward' buy the currency
As the availability of your funds, the payment plan
of your new property and the best available You can fix an exchange rate for delivery on an
exchange rate rarely coincide, forward contracts agreed date in the future. Money can be drawn
are a popular option. They are a cost effective down whenever you want it during the period of
and simple way of securing an exchange rate and the contract or the contract can be extended
simultaneously eliminating the risk posed by if, for example, the construction of your property
exchange rate volatility. is delayed.
How does this relate to my property You will need to place a deposit of 10% of the
purchase? amount you wish to buy, with the balance payable
prior to the maturity of the contract.
You have signed for a property, priced in Euros,
that you have calculated will cost you £100,000.
14 Guide - Buying in Spain, January 2004Draw comfort from 24 hour market monitoring Moneycorp
Banks' restricted opening hours and limited 2 Sloane Street
knowledge of regional branch staff of the London
intricacies of foreign exchange, may often leave SW1X 9LA
you feeling short changed. Moneycorp will monitor
your transaction from dawn till dusk, enabling you Tel: 020 7808 0500
to take advantage of any opportunities, which you
may otherwise have not been aware of. Email: enquiries@moneycorp.com
Internet: www.moneycorp.com
Utilising automated orders, Moneycorp can target
desirable exchange rates, enabling you to develop © Moneycorp - September 2003
a highly flexible, 24 hour strategy to manage your
exchange rate risk.
How does Moneycorp's streamlined payment
process work and where is my money held?
Moneycorp works closely with John Howell & Co to
ensure that the payment of your transaction is
seamless. Moneycorp receives funds for deposits
from John Howell & Co, although customers
can choose to deal directly with Moneycorp if they
wish.
All Moneycorp client funds are held in designated
client accounts held at HSBC Plc.
John Howell & Co. will release payment to
Moneycorp on written confirmation the funds have
already been forwarded by HSBC Plc to the
designated beneficiary account.
How do I open a trading facility?
Moneycorp's account opening procedure could not
be simpler.
You will need to complete an account opening
form, sign terms and conditions and provide 2
forms of identification.
On receipt of these documents Moneycorp will
open a trading facility for you, from which you can
start to benefit from their market knowledge and
strategies. At this stage there is no cost or
obligation to use their services although we are
sure you will find no better service elsewhere.
What do I do next?
To receive further information please call
Moneycorp's Private Client dealing team who will
be more than happy to assist you and answer any
questions you may have. For a courteous, friendly
and professional foreign exchange
service, contact Moneycorp.
15 Guide - Buying in Spain, January 2004Spanish Taxes
Taxes for Spanish Residents Wealth Tax (2003)
This is an annual tax based on Worldwide assets
You will become resident for tax purposes in Spain
for Spanish residents; only on Spanish assets for
if:
non-Spanish residents. Non Spanish residents are
not entitled to any exemptions, therefore non-
you spend more than 183 days in Spain in
Spanish residents owning a property in Spain will
a calendar year.
always have a Wealth Tax liability each year.
OR you arrive in Spain with an indefinite Single Married
intention to reside there. Exemptions:
OR if your "centre of vital interests" is Own House €150,253 €300,506
Spain even though you may spend less Exemption €108,182 €216,364
than 183 days there. ________ ________
OR you are deemed Spanish resident if €258,435 €516,870
your spouse lives in Spain even though
you may spend less than 183 days in Wealth Taxes (Annual) 2003
Spain.
Euro Tax Total
payable at
A Spanish tax year is the same as a calendar year
top of band
(1st January to 31st December), unlike the UK From To Rate
which is from 6th April to the following 5th April. Nil 167,129 0.2% 334
If you are a resident of Spain you will be liable for 167,129 334,253 0.3% 836
income tax, wealth tax, capital gains tax and
succession tax (inheritance tax) on your 334,253 668,500 0.5% 2,507
world-wide assets.
668,500 1,337,000 0.9% 8,523
Income Tax
1,337,000 2,673,999 1.3% 25,904
Worldwide Income for Spanish residents.
For Individual & Joint Returns (2003) 2,673,999 5,347,998 1.7% 71,362
Euro National Total Tax 5,347,998 10,695,996 2.1% 183,670
From To Income Total Payable at
Over 10,695,996 2.5%
Tax Rate Tax Rate Top of band
Nil 4,000 9.06% 15.00% 600
4,000 13,800 15.84% 24.00% 2,952
Gifts or Inheritance Tax Rates 2003
13,800 25,800 18.68% 28.00% 6,312
25,800 45,000 24.71% 37.00% 13,416 Payable on Spanish assets (even if owned by non-
Over 45,000 29.16% 45.00% - residents) and on non-Spanish assets if recipient
is a Spanish tax resident. There's no exemption
between husband and wife. The highest rate of
From 2003 there is an additional relief in Spain tax is 81.6% and may be payable on assets
for rental income received by Spanish residents. transferring between unmarried couples.
As a result only 50% of the net income is taxable.
There are significant changes expected to the
Capital Gains Tax Spanish inheritance tax legislation which will take
15% if Spanish Resident; 35% on property gains effect from 1 January 2004. At the time of
if non-Spanish resident. Spanish capital gains tax printing, these changes are not yet known in
includes gains from assets disposed of whilst detail. We would recommend you seek specific
Spanish resident, even though the asset was advice once the changes have been announced.
owned long before you came to Spain. There are
ways to avoid this tax.
Personal Allowances
Single person €3,400 (under 65)
Single person €3,907 (over 65)
Married couple €6,800
16 Guide - Buying in Spain, January 2004Euros Assumes heir's estate is under Euro 402,678.11
Total tax
Payable at Euro Less Net Tax Payable Tax Payable
Married Unmarried*
From To Tax Rate top of band Estate Exempt
Nil 7,993.46 7.65% 611.50 50,000 (15,957) 34,043 3,083 9,898
7,993.46 15,980.91 8.50% 1,290.43 100,000 (15,957) 84,043 9,838 24,831
15,980.91 23,968.36 9.35% 2,037.26 200,000 (15,957) 184,043 28,250 63,282
23,968.36 31,955.81 10.20% 2,851.98 400,000 (15,957) 384,043 76,898 162,038
31,955.81 39,943.26 11.05% 3,734.59
750,000 (15,957) 734,043 180,397 370,288
39,943.26 47,930.22 11.90% 4,685.04
1,000,000 (15,957) 984,043 262,697 536,245
47,930.22 55,918.17 12.75% 5,703.50
2,000,000 (15,957) 1,984,043 602,697 1,216,245
55,918.17 63,905.62 13.60% 6,789.80
5,000,000 (15,957) 4,984,043 1,622,697 3,256,245
63,905.62 71,893.07 14.45% 7,943.98
10,000,000 (15,957) 9,984,043 3,322,697 6,656,245
71,893.07 79,880.52 15.30% 9,166.06
79,880.52 119,757.67 16.15% 15,606.22 *No €15,957 exemption
119,757.67 159,634.83 18.70% 23,063.25 Pensions
159,634.83 239,389.13 21.25% 40,011.04 Taxable, but certain types of pensions can benefit
from significant tax reductions.
239,389.13 398,777.54 25.50% 80,655.09
Capital Gains on Property Sale
398,777.54 797,555.10 29.75% 199,291.41
If non-Spanish resident 35%. If Spanish Resident,
15%. If own home and over 65 and Spanish
Over 797,555.08 34.00%
Resident and lived in house for 3 years minimum,
no tax.
Multipliers Otherwise can roll-over gain into new home if
Spanish Resident. The rules are complex; seek
advice.
Euro Assendents 2nd/3rd Others
Net Worth of Descendents Degree Including Taxes for the Non Spanish Resident
Donor
From To Married Relatives Partners As a non-resident, you will be liable to Spanish
Wealth Tax on all property in Spain without any
Nil 402,678 1.0000 1.5882 2.0000 deductions given. The rates are shown above.
402,678 2,007,380 1.0500 1.6676 2.1000 You are also liable to 35% Spanish Capital Gains
2,007,380 4,020,770 1.1000 1.7471 2.2000 tax on the sale of the property.
Over 4,020,770 1.2000 1.9059 2.4000 There are local taxes equivalent to the UK's
Council Tax. Overall, including Wealth Tax, the
taxes payable are usually considered reasonable,
Here are some examples of the Spanish so do not be put off.
inheritance tax payable on an estate left by a
husband to his wife whilstliving in Spain as On death, Spanish succession tax is payable on
residents. Spanish assets and the rates are shown above.
These can be deducted from any UK inheritance
taxes payable on the same asset on death.
Any rental income arising from your Spanish
property is iable to Spanish income tax at a flat
17 Guide - Buying in Spain, January 2004You can also read
