Landsdowne’s European team provides a comprehensive, all inclusive service for our clients. It is our aim to make the entire process seamless - from sourcing the perfect property and obtaining the European residency, to maintenance and management of the property.
• Landsdowne Europe’s Services include:
Our European team of property professionals has over ten years of experience in the European property market and is fluent in ten languages. Landsdowne Europe has access to thousands of properties throughout Europe.
We have a full, bilingual legal and tax team who will control the entire process of the property purchase as well as the European residency application – this gives the client one point of contact for all processes. Our legal and tax experts are always on hand for any queries.
Landsdowne Europe provides full property management solutions and property maintenance. Should the client wish to place a tenant in the property, we will source the perfect tenant and manage the rental.
Our strategic partners supply interior decorating and furniture services at a considerable discount to market value.
Our broad network allows us to supply a full concierge service for clients. This includes transport, restaurant bookings and any other entertainment requests.
Our assistance goes far beyond this list of services as customer satisfaction and outstanding service is Landsdowne’s primary objective.
Spanish Investor´s Visa
On the 27th of September 2013, the Spanish Government approved law 14/2013 which regulates the "investor’s visa" in Spain.
This law aims to improve the Spanish economy, and one of the decisions taken is very appealing for foreign Real Estate investors among others. The rule states that whoever buys a property with a value over 500,000 euros, free of charges or mortgages, will be able to obtain an "investors-visa" which will allow them to live in Spain for one year.
The requirements to be able to apply for this visa are:
• The investor cannot have tax residence in a tax haven. • The investor must be over 18 years old. • The investment must be proved with a Certificate from the Spanish Property Registry or property deed. • Do not have criminal records in Spain or the country you have lived in for the past five years. • The investor must have a public or private insurance. • The Spanish Authorities have ten day to make a decision about this visa application.
Once you have this investor´s visa, it provides the opportunity to live in Spain for a year, after which the investor’s residency may be obtained. This residency gives the investor the possibility to be in Spain for two years, and every two years this residency permit must be renewed. The requirements to obtain residency are:
• The investment must be proved with a Certificate from the Spanish Property Registry or property deeds. • The investor must have the "investor – visa". • The investor must have travelled to Spain at least once during the year of the "investor-visa". • The investor must have paid all taxes and other obligations.
This new rule applies to the investor’s wife or husband, and children under 18 or children over 18 with mental or motor disability. The Spanish authorities have 20 days to provide an answer on the residency authorization.
During the process several forms must be submitted to the Spanish Authorities in Spain, and other documents will have to be submitted to the Spanish Consulate in the investor’s country of origin.
Cost and Taxes
As a buyer of property in Spain there are some costs and taxes, over and above the property price, that the property owner will have to pay. Depending upon whether you are buying a new property from a developer, or a resale property from a private individual, you will either have to pay VAT & Stamp Duty, or a transfer tax (ITP).The different cases are explained below, along with the other costs and taxes that are common to both cases.
• New Build from a Developer:
• VAT & Stamp Duty (IVA & Actos Jurídicos Documentados – AJD) These taxes apply for residential properties being sold for the first time (never previously occupied), or for commercial properties and plots of land. VAT is a national tax, so it is the same wherever the property is located throughout Spain, with the exception of the Canaries Islands. At present the VAT rate is 10% on the purchase price of residential properties (villa, apartment, etc), and 21% for commercial properties and plots of land.
• The Stamp duty (known as AJD) is 1.5% of the price of the purchase.
• VAT and Stamp Duty are paid by the buyer, and if any deposit is paid before completion of the sale, such deposit will be subject to VAT at the moment of payment of this deposit. In this scenario there is no transfer tax (ITP) to pay.
• Resale from a Private Individual:
Transfer Tax (Impuesto sobreTransmisiones Patrimoniales – ITP)
This tax is incompatible with VAT. It applies if the property is deemed to be a second or posterior transfer (i.e. not the first time a newly built home is bought), and is paid by the buyer.
If any deposit is paid before completion of the sale it is not subject to ITP. However the full amount of ITP still has to be paid upon completion and the stamp duty is already included in this tax.
The Transfer Tax rate is ceded to the autonomous regions, which can choose to apply the general rate, or their own rate. In Andalucía, since 01/01/2012, for amounts up to €400,000 a tax rate of 8% applies, the next €300,000 is at a 9% rate, and everything after that is rated at 10%. Therefore, for example, a property of €1 million would attract (€400,000 x 8% = €32,000)+ (€300,000 x 9% €27,000)+(€300,000 x 10% = €30,000) = total of €89,000 in ITP tax.
If the seller is not a Spanish resident, the buyer has to withhold 3% of the purchase price and pay it to the tax authorities. If this is not done the property will be considered by the tax authorities as the asset backing the capital gains tax liability of the seller. This condition is very unlikely to apply when purchasing from a developer.
Costs that affect both new build and resale property purchases:
Estate agency fees or commissions are paid by the seller,unless otherwise agreed.If the buyer uses a search agency then search fees are paid by the buyer.
It is strongly recommended to hire a lawyer and tax advisor to help you during the buying process and thereafter. The lawyer drafts and reviews contracts on your behalf and can explain all the legal and administrative issues you face, carries out any necessary due diligence (checking ownership claim of the seller, charges on the property,permits, etc.) and arranges all the required documents for completion of the process (property registration, tax payments, etc.).
A lawyer will charge you according to the service you require. This will vary according to the complexity of the purchase. The common charge is approximately 1%+VAT of the purchase price in legal fees.
You will also require a tax advisor to submit and advize you about all the taxes to be paid in Spain once the property is purchased .The fees are proportional to the service performed but our approximate charge is 200 euros +VAT.
If you choose to purchase with a mortgage then this will incur several additional costs. Firstly, there will be the property valuation that the mortgage provider will require before granting the mortgage. This is paid for the by the buyer and can cost approximately 500 Euros. Secondly, there are the costs of the mortgage itself. This varies according to the provider. However there is usually some kind of opening fee of around 1% of the value of the mortgage. Finally a mortgage will incur Notary expenses.
Notary expenses are nearly always paid by the buyer and are calculated in relation to the purchase price declared in the deed of sale. Conservatively you should calculate Notary fees between approximately 0.5% and 1% of the price declared in the deed. The Notary will have official tables illustrating this.
Property Registry Inscription Fees:
Expenses related to inscribing the sale with the land registry are also nearly always paid by the buyer, and are approximately the 70% of the amount paid to the notary.
Costs of owning property in Spain:
There are costs associated with owning a property on the Costa del Sol. Some of these will be maintenance costs; cleaning, repairing,reforming,utility bills, rubbish collection,and so on. These will be determined by the size and type of the property purchased.For example, a large villa with a garden and pool will require much more effort and cost to maintain than a small apartment.
Property Ownership Tax (Impuesto Sobre Bienes Inmuebles – IBI):
This is a municipal tax paid annually. The taxable basis is the “cadastral value” multiplied by a rate between 1.08 and 1.3. This value is the one recorded on the Official Property Registry. The IBI receipt can be paid by direct debit.
AnnualWealthTax (Impuesto Sobre Patrimonio):
According to the Law, this tax is payable for those residents and non-residents with assets in Spain with a value of 2.000.000 € or more, calculated according the law, or those whose gross tax due results in positive Personal Income Tax. The first 700.000 € are exempt.
The amount to be paid depends on a table that the Andalusian City Hall approves each year.
Personal IncomeTax (Impuesto sobre la Renta de No Residentes – IRNR):
Depending on the use of the house,this tax can be calculated in different ways:
• If the Property is Rented to a third party:
We will calculate the income minus all the expenses related to the property and apply a 24,75% tax rate.The expenses t h a t the legislation states relating to the rent of the property are:(each case must be studied separately):
• The interest if you have asked for credit to purchase the property. • Local rates or taxes eg. garbage collection. • Lawyer expenses, as resulting from conclusion of the rental contract. • Maintenance expenses. It is not possible to include improvements or expansion of the property. • Insurance of the house,against for example robbery or fire. • Supplies.For example light,water,gas or telephone. • Depreciation of the property.
If the Property is Left Empty:
Spanish law calls it a “Deemed Rental Income”. This legal rent is obtained by applying the percentage of 1.1% on the cadastral value (taxable base of this tax) of the property,on which amount the rate of 24.75 % is applied. The cadastral value is reflected on the IBI and it is normally a lower quantity than the value paid for the property.
There may be other costs, for example Insurance of the house or the Community, depending on the location, area, meters, supplier etc.
For Further enquiries please contact:
South African Office:
• Jonathan Kohler cell: +27 82 904 0739 email: firstname.lastname@example.org
• Alfie Chemaly cell: +34 646 555 971 email: email@example.com
Please visit our website: www.landsdowne.co.za