Tag Archives: real estate

Tax obligations for owners of real estate in Spain

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Owners of real estate in Spain must pay tax on their properties regardless of their place of residence. In practice, resident and non-resident property owners pay the same taxes in Spain, although the names and collection mechanisms of these taxes differ.

A real estate property can generate earnings, either through renting or because of sale. Also, under tax law, just owning a property generates a notional income that is taxable. All these incomes must be declared in Spain. If the property is located in Spain, Spain is the competent state for collecting any tax due. This is according to all the double taxation treaties that follow the general OECD model under which income from real estate property can be collected in the country it is in, regardless of the country of tax residence of the taxpayer.

In addition to paying any income tax due to the national Spanish tax agency, the property owner must also pay all other taxes due to other agencies. This includes, for instance, the municipal property tax collected each year by the local council. And, when you sell your property, the capital gains tax you also should pay to the council.

Lastly, in Catalonia and some other autonomous communities, there is a further tax on an activity widespread among foreign investors in coastal properties: the short-term leasing to tourists. The tax is a small amount due per night for every person staying in the property, which must be registered for tourist use with the local council.

Carlos Prieto Cid

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New Obligations for Tourist Accommodation Owners

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Last year, tourist accommodation owners in Spain were required to obtain a Unique Rental Registration Number (NRUA) if they wanted to advertise their properties online. Now, to maintain this registration, they must comply with a series of reporting requirements.

Owners of properties intended for short-term rentals must submit an information return detailing the activity carried out during the previous year in these properties, specifying each category and type of rental that took place there. This declaration consists of an anonymized list of rentals made by hosts or landlords who provide short-term accommodation rental services through online platforms.

This information declaration for short-term rentals must be submitted during the month of February each year, with information on the rentals established in the previous year. One separate information return must be submitted for each property, ship, vessel, or naval craft intended for short-term rental. For each NRUA (Unique Rental Registration Number), it will be indicated whether the purpose of the rental was on vacation or tourism, work, studies, medical reasons requiring relocation, or any other reason. If there are well-founded doubts about the declared purpose, the property registrar may request additional supporting documentation.

Failure to fulfil these requirements will result in the withdrawal of the rental registration number.

Carlos Prieto Cid

Lawyer

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Who will inherit your property after you death?

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You may think you know the answer to this question. But the law, when applied, can lead to some surprising and unexpected outcomes. Because regardless of whether you make a will, your inheritance will be subject to the law.

I’m sure you know that the law fills the gap when someone doesn’t make a will. But even if you make a will, the law is applied to determine its validity, scope and any limitations.

What happens if the heir you appoint dies before you do? What happens if they die after you but before they formally accept the will, in other words, they die without having been declared your heir? What happens if you appoint a non-family member or a legal person (e.g., a foundation or association) as your heir and leave nothing to your children? What happens if somebody has an interest in invalidating your will?

All these questions are subject to the law. But here is where the doubts just begin. What law? The law where you live, your country of origin or where your property is located?

For instance, the inheritance of a Swiss national resident in Spain is governed by Swiss law. However, Swiss law can end up making Spanish law applicable. Whereas the inheritance of a German national resident in Spain is governed by Spanish law except where otherwise stated in the will.

And then there’s the fact that the applicable Spanish law differs depending on whether you live in Benidorm or Salou. The applicable tax will also differ. Even the formalities that your heirs must observe to take possession of your property won’t be the same.

So care must be taken when setting out your inheritance in a will. You must think about the formalities that the beneficiary you designate will have to go through, the costs that they will have to bear, and any difficulties they might face with other possible beneficiaries, the authorities, your creditors, etc.

So if you have property in your name, we urge you to seek professional advice and make a will as soon as possible. Your heirs will be glad you did.

Carlos Prieto Cid – Lawyer

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Property acquisition tax increases in Catalonia

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On March 25 of this year, the Catalan government adopted a series of new tax regulations, that affect those intending to acquire real estate in this territory.

The background of these measures is the serious political and social problem of housing prices. Purchase or rental prices for flats or houses are once again skyrocketing, as they have been at previous times in our recent history.

In a country where almost 14% of the Gross Domestic Product is driven by tourism, the local population is being displaced in historic city centres, replacing family homes with tourist flats or hotels. Furthermore, investment in real estate in the centres of global cities like Barcelona is attractive to international investment funds, which resell the properties to foreign investors who will not reside there but rather keep them as an asset in the form of a holiday home.

These trends in the dwelling market generate great social tension because most of the Catalan society find it almost impossible to access housing: impossible to buy and increasingly difficult to afford to pay the rent in the centre of major towns or tourist areas.

For this reason, the Catalan socialist government has decided to increase tax revenue from the purchase of luxury homes (priced over €600,000), also applying increased rates of 20% for buyers who already own more than 10 residential properties (or more than 1,500 square meters). This increased rate can also be applied to owners of only five residential buildings if the area in which they are located is considered particularly affected by the rise of prices.

However, there are many exceptions to the rule that are worth knowing, so once again we recommend that investors interested in purchasing homes in Catalonia seek advice from a tax expert.

Carlos Prieto Cid

Lawyer

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Further increase in the final costs of the transfer of ownership in Spain

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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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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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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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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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Spanish residents required to declare foreign assets

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For some time now, residents in Spain have been required by law to declare the assets they hold abroad to the Spanish Treasury. This includes everything from real estate and bank accounts to shares and insurance held or managed outside of Spain.

This declaration must be made online with an electronic signature. You have from 1 January to 31 March to make a declaration for the previous year. In the case of bank accounts, this declaration must include:

  • Full name of the bank or credit entity
  • Full details of your accounts
  • Dates accounts opened or closed, or, if applicable, dates the authorisation that gives rise to your obligation to declare was granted or revoked
  • Account balances as of 31 December and the average balance for the last quarter of the year

You do not have to make a declaration when the total of the account balances does not exceed €50,000 on 31 December. And you only need to make a declaration in following years when the total balance of all your accounts (as of 31 December and the average for the last quarter) goes up by over €20,000 compared to the balance reported in a previous declaration.
Similar rules apply for securities, stock-market shares, investment fund shares, life and disability insurance, and life and term annuities.

What is the purpose of this declaration? It allows the Spanish Treasury to check if the annual income and property tax declarations that you must file as a resident before 30 June take into account foreign assets and income. Because, as a resident in Spain, you must declare your income worldwide.

This obligation to declare foreign assets came about when the tax authorities of EU countries started working more closely together and assisting each other, as we have mentioned in other blog articles.

Carlos Prieto Cid – Your legal adviser in Spain

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