Inheriting in Spain

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The death of a loved one is always traumatic. Even more so if, as well as having to deal with the loss, you are the heir and have to go through a lot of complicated administrative procedures. Such red tape, a challenge everywhere, becomes an even bigger one when you live in a different country to where the estate of the deceased is located, or when their countries of residence and nationality are different.

In Europe, to initiate the transfer of ownership of the deceased’s property to your name, the first thing you need is a death certificate officially certifying the death. You get this certificate from the civil registry. For this certificate to be recognised in another country (e.g., for when a foreign national dies outside of Spain while owning property in Spain), it needs to be valid internationally, which can be attained with an official Apostille stamp.

In Spain, as well as certifying the death, you also have to certify the existence or absence of any wills executed in Spain. To do this, when you have the death certificate, you need to request a certificate from the Ministry of Justice’s General Register of Wills. If a will was executed in Spain before a Spanish notary public, the General Register will inform you before which notary public and on what date the deceased signed the will in Spain. As it is easy to be unaware of the existence of a will, the General Register of Wills is a great help and a way of protecting our rights. It also serves to certify when no wills have been executed in Spain.

Carlos Prieto Cid – Lawyer

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New comprehensive Advisory Service for Property Owners

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Owning a real estate property is a big responsibility. To protect your rights as an owner, your property must meet all current legal and technical requirements. To give you the peace of mind that your real estate property does meet these requirements and is fully protected legally — both now and in the event of any change in the law — Tarraco Iuris law firm would like to offer you its comprehensive advisory service for property owners.

Based in Tarragona, our specialist team of lawyers and technical experts are ready to handle all your properly-related legal and administrative needs, including the handling of any mediation process and other procedures and the drafting and lodging of documents for the Spanish authorities (local councils, provincial and regional governments, the cadastral register, the Land Registry, notaries public, the courts, etc.) or any third parties (adjoining property owners, neighbour associations, the community of owners, entities involved in expropriation processes, etc.).
To legally protect your property in Spain, we offer a complete range of technical and legal services that includes:

1. Helping you obtain a NIE (foreigner ID number required for tax purposes in Spain).
2. Drafting all property-related contracts, including preliminary, option-to-buy, purchase and sale, and lease agreements.
3. Verifying property charges with the Land Registry.
4. Verifying property zoning with the local council.
5. Verifying any debts owed by the seller to the Community of Owners.
6. Verifying that all tax due on a property has been paid (municipal property tax, tax on income from real estate property, etc.) and drafting and presenting any corresponding tax declarations.
7. Providing an estimate of taxes and expenses so you can budget for the cost of transferring a real estate property.
8. Verifying the applicable marital or inheritance law and advising you on the legal conditions for purchasing or transferring a property.
9. Drafting title deeds for executing property transactions.
10. Accompanying you to sign title deeds and any other notarial instruments, acting as advisers and/or translators.
11. Assisting your negotiations with the bank for using the property as loan security.
12. Registering title deeds with the Land Registry.
13. Informing the local council of a change of ownership for the purposes of local taxes and fees.
14. For sales by non-residents, preparing and presenting declarations on tax withheld for Spanish income tax and handling the collection of any refund.
15. Preparing/lodging applications for:
    a. Certificate of occupancy and energy efficiency certificate.
    b. Building technical assessment report.
    c. Certificate of structural soundness and certification of construction age.
16. Plans and topographical surveys.
17. Undertaking boundary demarcation and mediating in conflicts with neighbours.
18. Undertaking historical investigations on properties and updating the cadastral record for divided or joined plots.
19. Advising you on:
    a. Utility connection and the possible use of wells and springs.
    b. New construction, reform or landscaping projects.
    c. Business projects.
    d. Road and path refurbishment.
    e. Land and building assessment.

Are you sure that your property does not run any legal risk?

Do not hesitate to contact us for further information. Please contact us for any service you require that is not listed.

Carlos Prieto Cid – Your legal adviser in Spain

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The impact of real estate transfers on personal income tax

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It’s commonly known that real estate sales are subject to tax. Less widely known is that any property transfer can affect your income tax. To avoid unpleasant surprises months or even years after signing an agreement for conveyance, be sure to get legal advice on the consequences of the transaction.

Any change of ownership of real estate affects your personal income tax. This is clear for selling a house. The difference between what you paid for it and what you get when you sell is normally a gain that, logically, amounts to taxable income. Less obvious is that income tax is due even when there is no capital gain because the change of ownership does not occur via a sale. For example, when the property is transferred as a gift or in the dissolution of a joint ownership arrangement. Yes, that is correct! Even though if there is no capital gain in a transfer of ownership, you still have to pay income tax on it.

It is also not easy to understand why income tax is payable when you sell a house for less than market value or the difference between the purchase and sale price is exclusively owing to inflation. There are even many contradictory court decisions on these questions. Possibly, in the near future, tax rules like these that don’t make much common sense will be found to run against the Spanish Constitution or EU law. As occurred with municipal capital gains taxes. In the meantime, though, we must keep in mind that any change of ownership on our property may be subject to income tax, sometimes for a hefty sum. So we must enter any real estate transaction with our eyes wide open.

Carlos Prieto Cid – Your legal adviser in Spain

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Take advantage of your roof to save on your electricity bill

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Until 31 December 2023, public subsidies are available for installing renewable thermal energy systems in the residential sector and for using renewable energies for own consumption and storage.

As part of the EU funds for repairing the damage caused by the COVID-19 crisis and with the aim of building a more sustainable future via reforms and investment, a range of subsidies are on offer for adopting renewable energy own-consumption and storage systems and renewable thermal energy systems in the home.

Eligible for these subsidies are individuals and companies not selling goods or services and homeowners associations. In other words, the typical clients of our firm — private homeowners, the self-employed, foundations and asset-holding company — are eligible.

These subsidies are available for own-consumption using renewable energy, solar or wind power in the residential sector, with or without storage capacity, and home air-conditioning and hot-water systems using solar thermal, biomass, geothermal, hydrothermal or aerothermal technologies. The subsidies range from €550-€13,500 per dwelling. Subsidy applications are processed strictly on a first come, first served basis and only until the funds are used up. For individuals and companies running businesses, the subsidies can take into account the income of the business activity or the capital gains, depending on the aim of the subsidy. For individuals, the subsidies will not be included in the taxable base for personal income tax calculation.

If you’re interested in installing this type of system with the help of a subsidy, we can assist you. Please get in touch.

Carlos Prieto Cid – Your legal adviser in Spain

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Is it a good time to buy real estate in Spain?

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After a continued drop in prices and sales from 2006, the Spanish real estate market has been on the up and up since 2016. The current international climate might even encourage us to invest in property in Spain.

The energy crisis, inflation and the instability caused by the Russia-Ukraine war are causing a contraction of the economy and an ongoing devaluation of the euro, and all indicators suggest that this trend will continue. But there is an upside to this gloomy news. Whenever currencies devalue, smart investors seek to put their savings in safe assets, and the safest place to invest has always been real estate.

Spanish people have inherited from their parents and grandparents the idea that you should always own you home, no matter your age or stage in life. This conservative mentality has traditionally had a huge impact on the real estate market, creating a higher demand than would be expected given the economic climate. Added to this are the hundreds of thousands of foreign nationals looking to retire or spend their summer holidays in Spain who jump at the chance to buy property here. Spain is also number two in Europe for people owning a second residence, at nearly 15%, this further straining the real estate market.

All this takes us back to where we started: buying property in Spain is a safe investment. The major crises of recent years should not let us forget that, for decades now, property has been the best and safest way to invest in Spain. And the current crisis has put prices back at a reasonable level after they hit rock bottom in 2016.

Carlos Prieto Cid – Your legal adviser in Spain

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European court rules Spain must soften penalties on Spanish residents who fail to declare assets held abroad

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In a recent decision, the Court of Justice of the European Union ruled that the fines imposed on Spanish residents for not declaring assets held abroad were “disproportionate”. As a result, last February, the Spanish parliament approved new, less discriminatory penalties.

Last year on this blog, we wrote about the obligation of Spanish tax residents to declare in Spain the assets they held abroad when the total value of these assets exceeded €50,000. This declaration had to be updated for changes in value of over €20,000.

Not filing this declaration meant facing fines of up to 150% of the undeclared assets, really amounting to a confiscation. And if you filed the declaration but made a mistake on it, you could be fined up to €5,000 for every error or omitted detail.

This regulation was imposed at a time of deep financial crisis when the government feared the freezing of bank accounts and offshore tax evasion. But these penalties have not held up to EU scrutiny for being clearly discriminatory against overseas investors. The new regulation adopted owing to the decision of the Luxembourg court brings the penalties in line with general tax regulations, without any discrimination for these assets being held abroad.

The time limits for these offences have also been brought into line with general tax regulations. Previously, there was no time limit on facing prosecution for offshore tax evasion.

Carlos Prieto Cid – Your legal adviser in Spain

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A legal change improves the position of buyers of inherited real estate

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On this blog, we have commented in the past on the risks of purchasing from a seller who acquired a property by inheritance from a non-immediate family member. Buyers were often not aware of this situation, which entailed legal risks that fortunately have been removed.

The most typical example of this type of inheritance is a single person or widow with no children who, via a will or by law, ends up leaving their estate to a non-immediate family member (under Spanish law: a sibling, nephew/niece, cousin, etc.) or even someone with no family ties. When these heirs accept the inheritance and become the owners of the property of the deceased they, logically, often want to sell it. To sell the property, they first have to register their ownership of it in the real estate register. Until now, this registration recorded with it a charge in the form of a restriction on the owner’s power to sell the property for two years. This restriction existed to protect the rights of any heir with a preferential right to inherit who appears later on (e.g., a child that had not previously been acknowledged).

The buyer, who was unaware of how the seller acquired the property, may have committed to purchasing it via an earnest money agreement, only to later find out that the banks will not finance the purchase owing to the restriction on the property. The legal provision providing for this restriction has recently been repealed with retroactive effect. This means that property buyers can rest a little easier from now on.

However, we still recommend seeking the assistance of a lawyer when purchasing a property to obtain the proper legal advice and avoid the other risks that buying real estate entails.

Carlos Prieto Cid – Your legal adviser in Spain

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Structural soundness certificate for old buildings

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In Catalonia, owners of over 45 year-old buildings must obtain a structural soundness certificate from the Catalan Agency of Housing to show that the building meets all the legal requirements for building safety, health and aesthetics.

This obligation affects both owners of single-family detached houses and units in a commonhold building (in this case, it is the responsibility of the commonhold association). To obtain the certificate, the owners must get a specialist to draft a report on the state of maintenance and conservation of the building, the improvement in its sustainability and eco-efficiency, and the assessment of basic accessibility conditions. The report must state how often these actions are performed.

This certificate is not required in only two cases: 1) detached houses where the main building is at least 1.5 metres from any roadway, public-use area and neighbouring property, 2) detached houses that have a certificate of habitability that was in force when the building reached 45 years of age (until the certificate of habitability expires). The term of 45 years starts from the date of construction or any comprehensive refurbishment of the building.

The owners of the building pay for the technical inspection. However, there is currently no fee for applying for the structural soundness certificate. If you as an owner do not have this certificate when you should, you may be fined.

If the certificate states that the building is structurally unsound, the owners must agree to a refurbishment plan within one year, six months if the defects are serious. This plan must be overseen by qualified specialists. If no serious defects are found, the structural soundness certificate is valid for 10 years. After this period, it must be renewed.

Carlos Prieto Cid – Your legal adviser in Spain

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The banks’ war against non-resident homeowners in Spain

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You always needed a Spanish bank account to holiday in a home you owned in Spain. You needed it to pay the bills and tax associated with the property. But now it’s becoming mission impossible to keep a bank account open for this.

Banks are under constant stress from intense competition, market pressure and, above all, increasingly strict government controls that seek to apply effective anti-money laundering and tax evasion measures. Having a bank account in Spain just to pay the utilities of a holiday home is getting more expensive and difficult because this type of customer is no longer of interest to banks.

Banks must cooperate with the government in identifying their customers. However, until now, they had been far from zealous in meeting this obligation that had been in place for years related to fiscal transparency and the fight against money laundering. But now, in this requirement, they have found the perfect excuse for making life impossible for non-residents with little banking activity, something of little profit to banks at a time they are keen to cut costs by reducing staff and closing branches. What we have, then, is a campaign against non-resident homeowners to try to force them to have their utilities paid through an account in their country of residence (something now technically possible) and close their little used Spanish bank account.

Carlos Prieto Cid – Your legal adviser in Spain

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Tax headaches from receiving a foreign pension

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Many Europeans spend much of their holidays in Spain throughout their working life. Therefore, it’s understandable that once retired they want to have holidays all year round by becoming residents in Spain. What obligations do these retirees have with the Spanish tax authorities?

If you spend more than 183 days in Spain, you are considered a resident for tax purposes. In this case, you must declare all your income to the Spanish tax authorities, both income generated in Spain and any coming from abroad. However, even though the Spanish tax agency must be informed of all your income, this does not mean that you have to pay tax in Spain on all your earnings.

The international agreements between Spain and other countries to avoid double taxation aim to make sure that the tax you pay is legitimate and fair, and you can deduct tax paid abroad previously from tax owed in Spain.

Retirement pensions receive a special treatment that has caused much controversy in recent years because the double taxation rules were not given the same interpretation in different countries. For instance, public pensions can only be taxed in the country in which they are generated. But in recent years, public pensions have come to be interpreted to be only pensions received by retired civil servants.

Another problem is caused by pensions paid as a lump sum without any kind of withholding, typical in Germany. In this case, when the paying country wants to collect the tax it is legally owed, the lump sum may have already been taxed in Spain, without there having been any deduction of the foreign tax due because it had yet to be paid.

Given such complexities, you should always seek the advice of a tax specialist for clearing up any doubt surrounding your situation to avoid unpleasant surprises from the tax authorities in Spain or your home country.

Carlos Prieto Cid – Your legal adviser in Spain

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