The costs associated with the transfer of ownership may affect the decision finally taken by the buyer and the seller, as the net price that the seller receives after deducting expenses and taxes may be much less than imagined, and the final price to be paid by the buyer, adding costs and taxes, may be much higher than previously thought.
The parties in a contract for the transfer of property (usually a contract of sale) have freedom to decide about these aspects. What we analyse now is what law prescribes, unless the parties agree among themselves on their own.
The council tax for the increase of the value of the property sold is one of the costs to be borne by the sellers. This tax is a percentage of the difference between the value of the land at the time of its acquisition by the seller and the estimated value of the property at the time of sale to the buyer.
The seller must also pay the income tax on the increase in value as well. But if the seller is non-resident, the buyer must submit a deposit (3% of the buy price) as a down payment directly to the tax office. This amount is usually subtracted from the purchase price.
The tax on the transfer of property is the buyer’s responsibility. The tax in Catalonia is a 10 % of the selling price.
The invoice for the authorising notary is paid by the buyer, unless the parties agree otherwise. The role of the notary in Spain (unlike other countries) is only the formalization of the final contract as a public document. This contract has been issued in advance by the parties with the assistance of a lawyer. Notarization of the contract of sale is necessary as a purchase contract that is not contained in a public document, can not be registered in the registry of property. And such registration of the document the ownership is changed with is not only a guarantee for the buyer, but also a prerequisite when the buyer has to finance the purchase with a mortgage.
The costs of preparing the documents to be submitted along with the case, is to be paid by the seller (these documents are normally processed or checked by lawyers). The cost of a lawyer could be also common to both parties, if the lawyer provides the following services:
To provide consulting and legal assistance during the whole process of transfer of ownership.
To translate the will of the parties to the legal and technical language.
To make a final agreement of sale and prepare it to be notarized by a notary.
To foresee the tax consequences of the transaction for both parties, and to prepare and submit formally and in time the tax returns in the most convenient manner.
But it is always better for the parties to agree in advance (even in an oral form) the main terms and conditions of the contract, so that the lawyer is able to represent the interests of both parties without any kind of conflict, simply because he develops the sales agreement already adopted by the parties.
Carlos Prieto Cid – Lawyer
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