Paying Your Dues
STEP 8.- ONGOING COSTS:
If you obtained a mortgage in order to buy your dream home, your bank will pay all taxes and fees on your behalf and will also take care of registering the property in your name. If this is not the case however, either you or a representative must carry out a series of tasks in order to do so. From the date in which you take title of the property at the Notary you have 30 days in which to pay taxes and register.
Ongoing costs include the following:
Water and electric bills: If you have bought a resale property you will only have to arrange a name change of the previous contract which can be done with your passport and an abbreviated version of your title deed (Copia Simple; which can be obtained at the Notary the same day you take title) however if you have bought an off plan property you will also need the Cédula de Habitabilidad and the original bolletins for the water and electric board to prepare new contracts in your name.
Annual Rates and Rubbish Collection: Once you own a property in Spain you are required to pay these annual fees. The rates or IBI as it is known here is a property tax charged by your local Town Hall and the other doesn't need much explanation, it's a fee to cover rubbish collection expenses. The Town Hall issue the bills by post usually around mid October and payment can be made in person at their offices but it is possible to arrange these fees to be set up on standing order. It is quite a time consuming process so most people request their solicitor to arrange the paperwork on their behalf.
Community of Owners : This fee is only applicable if your property forms part or an urbanization. All property owners automatically form part of this community but since this concept isn't well known in the UK and Ireland it can be confusing. Basically, the community jointly owns communal elements of the urbanization (for example gardens, pool, roads, lighting, sport areas and similar elements). In the initial meeting you will vote for your President, Vice-President and Secretary and the budget and fees can be agreed. Further meetings will be called to discuss various situations that may arise. These meetings must be called for in writing and must take place at least once a year. The fee will depend on the size of the urbanization and the elements within. Payment of community fees are obligatory and are usually paid monthly and can also be set up by direct debit.
STEP 9.- OTHER TAXES AND RETENTIONS:
These taxes may vary depending on your status in Spain. This falls in two categories: resident and non-resident. For tax purposes, you are considered a resident if you actually reside in Spain for 183 days in the tax year. You can also apply for official residency through local authorities.
- Capital Gains Tax (CGT): For Spanish residents this tax has been set according to current legislation at a maximum of 15% and is calculated as part of their Spanish income tax. There have been recent changes with regards non-residents and as of 1st January 2007 CGT tax has been reduced from 35% to 18%. Upon taking title before a Notary Public a 3% retention will be applied based on the declared value of the property. The remainer is deductible with the following year's tax return where other property expenses such as notary and solicitor fees can be compensated.
Please consult a tax advisor for possible exemptions and reductions on Capital Gains Tax.
-Wealth Tax: Also known as Impuesto sobre el Patrimonio, this tax is payable by both residents and non-residents (if property is owned in Spain). There are differences though; residents pay wealth tax on their worldwide assets but have generous tax-free allowances to compensate (the first 108.182,18€ is exempt) whereas non-residents are only liable for net assets within Spain (car, houses, bank accounts etc) but without the compensation. Wealth tax is an annual tax calculated on your assets as they stand on the 31st December.
The value of the house to be declared is the official catastral value which can be located on your local rates receipt (IBI). The amount you have deposited in a Spanish bank would be the average cleared balance over the previous year. The tax rates range from 0,20 to 0,50% according to the Spanish law applicable.
- Tax Retention on a Resale Property: According to current legislation, 3% of the declared purchase price needs to be retained by the purchaser (or the purchasers´ representative) and paid to the Spanish Inland Revenue (Hacienda) within 30 days of signing for title deeds (Escritura). This is payable whenever the vendor is a non-resident of Spain. If the vendor is a resident of Spain, there is no need to retain the 3% as they would be expected to make their own tax returns regularly.
We cannot stress enough the importance to seek professional counsel with tax related matters as the information here serves as a guide only.
You will come across many terms and phrases in Spanish along the way so please check our Glossary for the main terms that will help you when purchasing a property in Spain.
