Legal and tax advice for investors in Costa del Sol.

– There are few legal practices in Marbella with so many professionals specializing in so many disciplines, and who are multilingual as well, as in Lexland. This is a great advantage for the client base since they can obtain both legal and tax advice in one place, but there must be difficulties managing a practice at such a high level?

The main skills that you need to manage a successful legal practice are a combination of technical, personal and conceptual skills. Lexland’s roots date back from 1978 and since then we have been updating ourselves at the same time as the market has, thus increasing these skills day by day. Furthermore, our main focus has always been our clients, listening to them, understanding them and offering exactly what they need when they need it; this is what has made us leaders in our field.

– One of the areas which worries the investor at the moment is the cancellation of Marbella’s Urban Development Plan. We would like to know what the consequences may be.

After the Supreme Tribunal cancelled the Urban Development Plan (PGOU) of 2010 we have to go back to the PGOU of 1986 which in turn has to be adapted to the Junta de Andalucía’s new planning rules (LOUA). This process of adaption is scheduled to be finalized in a year and a half, thus resolving a great proportion of the present problems, however, we must wait for the new PGOU of Marbella to appear in about four years’ time before achieving full normalization. In the meantime we must look at each issue on a case by case basis, to find out if a building was constructed under the 2010 plan, if the building license or the license of first occupation were annulled or not by the courts. Anyway, it is true that, apart from a few exceptions, regarding the majority of cases we must be optimistic, given the good will of all parties concerned, above all the Town Hall and the Junta de Andalucía, in order to succeed in normalizing the urban planning situation in Marbella.

– Every day there are more and more people wishing to work in the Costa, and on the other hand, there is a large number of businesses who only want to employ self-employed workers (autónomos); what advice would you give to both parties?.

It is vital to understand clearly that a self-employed person (autónomo) is different from a normal salaried worker, particularly due to the fact that he works independently. Therefore it is important that the parties, from the very beginning of their collaboration, study carefully the contents of the contract and its execution in order to avoid the business relationship becoming a working relationship, which ends up as what has become a well-known category of “false autónomo”, which can create multiple problems for both parties.

My advice in this case is to be very careful with the contract both as worker and businessman. There is an enormous range of options, each one with its own characteristics, and it is absolutely vital to choose the one which best adapts itself to each situation.

– What steps must an investor take when buying a property in the Costa del Sol, and on the other hand, are there any differences between Malaga and Estepona as regards taxes, etc., for example?

The Costa del Sol is a focal point when referring to real estate investment. Each destiny is mainly chosen for its incredible climate or its excellent reputation in comparison with other destinies, since the Costa del Sol offers a sold communication network, high technology medical centres, great sympathy towards foreign residents and a very wide range of services which clearly differentiates it from other “Sun and Beach” alternatives.

When a client wants to invest in the Costa del Sol, the first thing he must do is to find a property which can adapt to his requirements. Because of this, and in order to save time and money for the client, we recommend that he gets advice from a real estate professional. The other day I read in the newspapers that a buyer can waste more than 100 hours visiting properties that do not come up to his expectations, therefore it is important to surround oneself with professionals with suitable experience who know how to identify the requirements of the client, thus saving botsh time and money.

However, given the experience that we have in this field, we can confirm that the most important step at the time of acquiring a property, even before choosing the property, it to employ the service of a lawyer in order to learn the procedure and to commence a legal study in order to ascertain if the property is free of charges and taxes. The lawyer will help the investor from the moment he reserves the property right up to the execution of the notarized title deed, thus ensuring that all is correct and that the client is constantly kept informed of the progress of his operation.

As for the last part of the question, Malaga and Estepona are two cities that are in great demand with investors and it is up to the investor to choose one or other of the two depending upon his requirements, his profile, if you like. With regard to taxes, the most obvious differences relate to local taxation. Local taxes depend upon each Town Hall, for example, the IBI (Property Tax) or the municipal capital gains tax. Therefore differences can arise with regard to local taxation. However, these are not normally of great importance.

– What are the rates for a “non-resident” regarding Andalusian Inheritance & Gift Tax?

The rates applicable to a Non-Resident will depend on various factors such as the residence of the deceased, the residence of the beneficiary and the location of the assets that form the estate, amongst others. Recently a modification of the law regarding this tax was approved, which allows “Non-Resident” heirs, who up until now were assessed by the State law without the possibility of applying for reductions accorded by the rates imposed by the Autonomous Regions, to take advantage of the regulations of the Autonomous Region which has jurisdiction over the estate. In order to determine the jurisdiction of the autonomous community over the estate, the law takes into account the above mentioned factors.

Inheritance taxi is quite complex. However, if we assume that the rates imposed by Andalusia are applied as mentioned above, a non-resident can calculate that he will only have to pay taxes for those assets situated in Spain according to the rates applicable in Andalusia, which range from 7.65% to 36.5%.

In these cases, given the complexity of this tax, we recommend that clients contract the services of a professional who will ensure that all possible benefits, reductions and deductions can be applied in order to reduce the tax burden of the heirs.

– And to finish off, after the crisis experienced by the world in general and Spain in particular, have you observed an increase in the real estate market, or at least an improvement in the real estate market in these last few years?

The Spanish economy was greatly affected by the crisis in many ways. Luckily, statistics show that the Spanish real estate market is consolidating its recovery. During covid We noted a boom in the demand for property with a very positive improvement. Thanks to this we note that the market is approaching normalization with a firm step, reaching the required levels for us to be able to confirm a clear recovery.

The Cost of Buying a property in Spain.

It is important to be clear from the outset about the real costs you will be facing when buying your dream property in Spain.

As a property buyer in Spain there are a number of costs and taxes over and above the property price that you 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 Transfer Tax. 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

These taxes apply for residential properties being sold for the first time or for commercial properties and plots of land.

Purchase Tax on New Properties: At present the buyers of brand new houses in Spain are liable to pay 10% VAT on the purchase price of residential properties (villa, apartment, etc), if the house is finished or is being built at the time of the purchase, plus an extra 1.5% for Stamp Duty (Actos Juridicos Documentados – AJD), however if you purchase land, commercial premises or parking spaces, then the VAT (IVA) rises to 21%.

Resale Property Purchase:

TRANSFER TAX

Buyers of re-sale property are required to pay the Impuesto de Transferencia de Propiedad – Transfer Tax which is currently between 8% – 10%. This tax applies if the property is considered to be a second or subsequent 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 pro rata payment of this tax. However the full amount of ITP still has to be paid upon completion. In this scenario there is no VAT to be paid.

Transfer Tax for resale property purchases is calculated according to the following rate:

Any amount up to 400,000 EUR                                     = 8% Transfer Tax

Any amount between 400,000 EUR & 700,000 EUR     = 9% Transfer Tax

Any amount in excess of 700,000 EUR                          = 10% Transfer Tax

Tax on increased gain payable to spanish treasury.

When a property sale in Spain takes place, a capital gains tax must be paid by the seller. According to Spanish tax legislation law, the buyer withholds 3% of the total purchase price to make sure that the seller does not take the money and run.

Capital gains tax for non-residents.

The capital gains tax is payable to the Spanish Treasury (Tesoro Publico). The “Impuesto sobre la ganancia patrimonial” (Capital Gains Tax) is a tax on the profits obtained from the sale of assets purchased at a lower price.

For sellers who are non-resident for tax purposes in Spain, the Capital Gains Tax goes up to a flat rate of 21%, from the previous 19%. Capital gain is calculated as the difference between the selling price and the inflation adjusted purchase value of the property (the adjustment is done by using the official coefficient tables from the Spanish Government). The seller can deduct from this value the adjusted cost of the purchase and the expenses on the property, like renovations and building work.

When a non-resident sells a property in Spain, the tax authorities make an advance withholding equivalent to 3% of the selling price; as this amount is in general higher than the Capital Gains Tax to be paid, the seller can expect a refund from the Spanish tax authorities during the following fiscal year. There have been talks of increasing the withholding percentage but for the time being the tax authorities have set it at 3%.

Capital gains tax for tax-residents in Spain.

21% for the portion between 0 EUR & 6,000 EUR (increased from 19%)

25% for the portion between 6,000 EUR & 24,000 EUR (increased from 21%)

27% for the portion above 24,000 EUR (increased from 21%)

Any seller who is over 65 and has been a legal resident in Spain for the last three years does not have to pay this tax. Residents and non-residents who purchased the property they are now selling before December 1986 are also exempt from Capital Gains Tax.

Plusvalia.

A special reference should be made to the local capital gains tax – known as Plusvalia. This is a local / municipal tax that only applies to the increase in value of the land upon which development properties are built, and it is levied at the time of transfer of such properties. It is calculated on the basis of the “valor catastral” (an administrative equivalent to the UK rateable value) of the property. The amount to be paid will depend on how long the seller has owned the property: the longer the period of time during which the seller has owned the property, the higher the amount of tax.

This tax should be paid by seller, though it is possible for sellers of resale property to try to shift the burden of this tax to the buyer. This practice is unheard of in regions such as the Costa Brava and the Costa Dorada, though quite common on the Costa del Sol.

Spain is introducing Energy Certification for all properties and this will need to be shown when selling. The system is similar to energy classification for white goods and an expert will be required to come and survey the property, at a cost of between 350 EUR – 550 EUR.

Common Costs.

In addition to these taxes there are also other fees that you must take into consideration such as estate agent fees, legal fees, solicitor fees, notary fees, property registration fees and the mortgage arrangement fee.

In summary, allow for up to 11% of the purchase price to be set aside for taxes and other costs.

If the buyer takes out a mortgage these costs can be somewhat higher due to an additional public deed for the mortgage and the inevitable bank charges involved. In this case, the transaction costs might reach between 12% and 13% of the value of the property purchased.

For More Informacion, Please Contact LuxuryForSale.Properties.