Some important matters to mention about contracts
4.1.). With the private contract, in cases where there is such a document,
or with
the public conveyance deed, it is important to control all the various
points.
Once again, it is convenient to leave this job in the hands of an expert.
4.2.). The following are some
important
matters to consider in order for the foreign investor to be well informed :
In Spain, the seller frequently proposes
the possibility of officially declaring a price which
is lower
than the real one. In this manner, some sellers try to lower their capital
gains tax,
since is based on the difference between the amount
originally paid
by the seller at the time he/she purchased the property and the amount
received
on the current sale. However, it is easy to understand that not only is
there the
normal risk of violating a Tax Law, but also if one eventually decides to
sell such
property, one would find that since the declared purchased price was too
low, the
taxes to be paid for capital gains would be higher. Furthermore, an
additional
concern would be that when the Tax Authorities review the value given to
the
real estate property purchased, if they detect a substantial difference
between
what is declared as the price and the approximated market value of the
property,
one could suffer additional tax claims as well as more severe economic
sanctions.
4.3.). It is important to pay special attention to the section of burdens:
Meaning
the burdens, loans and mortgages affecting the property in question. All
contracts
or deeds must mention that the property is sold free of burdens and
encumbrances
and free of occupants or tenants of any kind. Omitting this section could
bring
most unpleasant consequences to a buyer, if once the purchase transaction is completed,
the buyer
discovers that the property is burdened and the seller is no longer responsible. In cases where the real estate property is
purchased with a
burden (e.g. a mortgage that the buyer will continue
paying,
etc.), this would have to be specifically mentioned expressing the
exclusion of
any other burden.
4.4.). Also one must check that the current expenses
attached to
the property have been paid by the seller, and up to date at the time of
completing
the sale. To do this, one must ask and get from the seller the
corresponding
receipts of at least the last two billing periods.
Those expenses are:
a) Each
year's Land rate taxes (Known as Impuesto de Bienes Inmuebles or I.B.I)
b) Community fees
c) and, where applicable, services such as water, electricity ,
rubbish collection, telephone, etc.
Expenses related to property purchase:
4.5.1.). Local tax on the increase in value of the land (also known as
Plus
Valía). One must not confuse this tax with the capital gains tax. It is
calculated
based on the theoretical increase in value of the land, regardless of whether
or not
there is construction on it. Generally, the longer a person has owned a
property,
the higher this tax would be, since all the annual revaluation scales
would be
applied on the land. Due to its characteristics, this expense corresponds to
the
seller. Nevertheless, it is not unusual for both parties to agree that
the purchaser
would pay all expenses, including this one. Therefore it is advisable to
ask the
Town Hall what is the amount due for this Tax in
the
specific case, before agreeing who would pay.
4.5.2.). Notary's fees. In most cases, are within the range of 40.000 (US $320.00)
to
80.000 Pesetas (US $640.00) It is an expense that
corresponds
to the seller, but as was previously stated, it could frequently be paid by
the buyer,
similar to other expenses.
4.5.3.). Land Registry expenses. The amount is usually similar to that of
the
notary's fees. This is a purchaser's expense.
4.5.4.) Impuesto de transmisiones patrimoniales y actos jurídicos
documentados
(abbreviated ITPAJD) or stamp duty. In purchases between private
individuals it
is 6% of the purchase price, as declared on the public conveyance deed; and
in
purchases where the seller is a company or real estate agent,
this tax is substituted by the IVA (Value Added
Tax)
which is 7%. This is also an expense to be paid by the buyer.
4.5.5.). Attorneys expenses, agents, etc., if they apply. These correspond
to the
party who has contracted the particular service(s).
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Bank accounts and methods of payment
5.1.). Non residents could have open accounts in any Spanish bank.
Generally and additionally, they could have such accounts in any type of
currency they desire. In such accounts they could transfer and deposit any
amount from outside of Spain. It is also allowed to transfer any amounts of
money from the referenced account to any Country other than Spain.
5.2.). One must consider, however, the following control regulations, specifically
designed to prevent laundering of illegal money:
5.2.1.). Each non-resident person who imports cash or banker's drafts
to Spain
--made out to cash-- for an amount higher than 1.000.000 Pesetas must
declare
this at the Spanish frontier when entering the Country. If this is not
done, there
could be problems at the time of depositing the referenced cash or banker's
draft
(made out to cash) in any bank account, or at the time one would decide to
use
these funds for an investment payment.
5.2.2.). Each person (resident or non-resident) who takes an amount in
cash or
banker's draft --made out to cash-- higher than 1.000.000 Pesetas out of
Spanish
territory, must also declare it at the Spanish frontier when leaving Spain.
If this
is not done and it is detected, a file would be opened with sanctions that
could be
substantial.
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