You may think that buying a home in Spain is similar to buying in your home country however it is not. The laws, the standards and the procedures as to the purchase of a property in Spain are very different. Not to mention the potential scams!
Our purpose is to clarify and help you with the most complete list of what you will face before, during and after buying a home in Spain. Our main recommendation is that a competent Real Estate Advisor accompanies you as you go through the purchase process. They are responsible for visiting and selecting real estate that corresponds to your wishes, they are responsible for the negotiation of the price of the sale, the control of the legal and contractual aspects, they are also the facilitator of the financing and, could assist in overseeing improvements or needed updates, once the purchase is made. We are at your available at your convince with these services which will save you time and money. Do not hesitate to contact us. Send us an email firstname.lastname@example.org.
In this article, we present what to be thinking about after the purchase. In an earlier article we discussed the pitfalls to avoid before the purchase and, in a third, pitfalls to avoid during the purchase. Good reading!
What to think about after the purchase:
We will share best practices, mistakes to avoid and information on scams to be aware of, from the selection of your property to signing and closing.
That’s it, you bought your apartment or your villa, we only need to install you, you think that all the challenges and problems are behind you … Almost!
1. UNCONTROLLED WORKS THAT DO NOT END
If you followed our advice, you already knew, at the time of signing at the notary, what work needs to be done and their potential cost. After the purchase, it remains to control their completion and their progress and that, at a distance it is always difficult, if not impossible to manage. If you do not follow the progress and standards there will always be “poor workmanship” and delays that will go on for many “good reasons”.
So, three solutions are available to you:
• you stay on the spot with all the inconveniences that it generates (noise and dust if you live in the accommodation, or renting a place while the renovation is being done and if you do not live in the city, your availability if you work)
• or you hire an independent site manager or architect, who will oversee your work,
• or you ask your real estate advisor to get involved in the follow-up of the works and to give you progress reports regularly.
2. SUBSCRIBING TOO HIGH INSURANCE
It should be noted that in an apartment building, the Community of Owners is required to insure the building at its reconstruction value. The individual insurance policy of the apartment must therefore not insure the entire value of the apartment, only the damage caused inside the apartment, its contents and liability to third parties.
3. DO NOT ATTEND COOPROPRIATE MEETINGS
In the case of a co-ownership formed by the owners of the apartments of a building or villas of a subdivision, you will also have to pay monthly community charges which generally include the janitor’s salary, the maintenance of the community garden, maintenance of the elevator, repairs of community elements, garbage collection, water for watering community gardens, electricity for lighting common areas, insurance, security and management fees.
You will also have to participate or be represented at the co-owners’ meetings, the annual general meeting and 2 or 3 others in the year on different topics, the most important being facade remodeling whose work may be several thousand Euros for you.
Normally, the trustee chosen by the co-ownership sends by email and by mail to your Spanish addresses the minutes of the meetings of co-owners.
It is important that you attend or be represented at these meetings, as some decisions may be important, especially in terms of financial burden for you.
MANAGING YOUR LAND TAXES FROM ABROAD, DIFFICULT BUT POSSIBLE
Of course, it is entirely possible to manage all the expenses related to your accommodation in Spain from your home country, bank transfers by internet easily make it possible to do it or automated bank transfer or even giving authority for the IBI Tax Department (“Impuesto sobre Bienes Inmuebles”, the Spanish equivalent of the property tax) to pull the money out of your account. But you have to be well organized and do not forget to look from time to time in your Spanish mailbox: for example the payment receipt of the IBI will be filed in the last days of winter, and you will not be notified by mail to your home abroad, or by email.
We offer you this tip to manage your IBI from abroad: after buying your home, ask the Spanish administration for an electronic key that allows you to access your complete online administrative file (history and update various taxes including IBI, but also fines!) and make your payment electronically. For those unfamiliar with this type of procedure, we recommend that you consult your real estate advisor.
5. AFTER PURCHASE, “FORGET” TO PAY TAX ON INCOME IN SPAIN
All non-resident aliens in Spain must declare to the tax center (Hacienda) the income (financial, professional, wages, rents) that they have earned in Spain during the year and / or the real estate they purchased. As the owner, this declaration must be completed whether or not you derive rental income.
You will have to pay annual income tax in Spain, whether you are a resident or a non-resident of Spain. “Non-residents who own property in Spain must submit Non-Resident Income Tax (IRNR) as they must declare the annuities obtained from their property”. There are two types of taxation with respect to annuities of immovable property:
• Annuities obtained from the rental of real estate: 19% on the profit obtained from the rental of the said property (the receipts minus the expenses).
• Tax on real estate rent derived from the own use of real estate: 19% on 1.1% of the Cadastral Value of the Real Estate Property.
Unlike the Property Tax (IBI), which is claimed by the town hall where the property is located, it is up to you to calculate, complete and submit each year or quarter the tax return form. IRNR at the Tax Center. You can, however, appoint a tax representative to undertake this process.
If you are a Spanish resident, you will need to submit your Personal Income Tax Return (IRPF) and report your income, regardless of their source. Fiscally speaking, if a person resides in Spain for more than 183 days in a natural year, he is considered a resident.
6. HERITAGE TAX?
It applies to the patrimony established on the Spanish territory, all the assets of the taxpayer, whether of financial, movable or real estate origin: cash on the bank account, real estate, savings, securities, life insurance, vehicles, works of art, etc. The value of the whole is stopped on December 31 of the current year and must be declared the following year. There is a whole range of exempted goods, including the main residence (up to 300.000 €).
Good news: this tax only applies to households with a very high wealth in Spain (over € 1 million). Second good news: some regions, including Madrid, practice a tax reduction of … 100%. Third good news: this tax should disappear in 2018!
7. “FORGET” TAXES FROM SPANISH RENTAL INCOME IN ITS COUNTRY OF ORIGIN!
If you live outside Spain, and if you rent your property in Spain, you will have to report your rental income-to-income tax in your country of residence.
8. BELIEVE THAT IT IS EASY TO DO TOURIST RENTALS
You want to rent your second home to recover a portion of your investment.
Depending on where your property is located, on average, the properties are rented from 8 to 12 weeks a year, during the holidays, and a little out of season. In some areas of Spain (costal communities especially) it is easy to rent your property in for most of May, June July and August. Getting close to 20 weeks of good income that can cover most of your expenses. For a villa, the demand will be a little more important, especially if it is located by the sea.
Remember that you will have to be present or represented by an agency when the tenants arrive and leave. And pay attention to management fees and time of cleaning and housing preparation before the arrival of new tenants. We can help with this process.
Renting or leasing the property for the year will be less profitable in the summer, but it also provides you with steady income the rest of the year, and less worries than with multiple tenants.
A tip if you want to have a higher profit by renting the year and if your accommodation is in a big tourist city: rent for tourist stays in summer, and for foreign students from September to June. We can help with obtaining a Tourist License for your rental property in Spain.
9. RESALE CAN BE VERY EXPENSIVE!
If you want to sell your property, you will have to pay a commission for the agency, often do work for a “refreshment”, possibly pay the costs of cancellation of the mortgage and pay national and municipal taxes on the capital gains received. End-to-end, these charges can represent from 10% to 20% of the value of the good! Similar to what it cost to acquire the property.
The most important expense, the national capital gains tax for non-residents is fixed at 19%, payable on the profits made on the difference in the value of the property between the year of its acquisition (price of acquisition plus costs) and the year of sale (selling price less costs). All non-resident sellers, regardless of the date on which they acquired the real estate, are subject to retention of 3% of the sale price, which is paid by the buyer on behalf of the seller to the tax authorities and which applies against the capital gains tax of the seller.
The capital gains tax for residents is 19% on a first installment of € 6,000 in profit, 21% on amounts between € 6,000 and € 50,000 of profit, and 23% on amounts from 50,000 € profit. If the funds received from the sale are for the purchase of another habitual residence during the two years before and after the sale and if the total amount of the sale is reinvested in the new dwelling, the tax obtained for the sale of the previous accommodation will be totally exempt. However, if only part of the amount obtained for the previous sale is reinvested, the tax payable will be reduced proportionately to the amount actually reinvested.
DO NOT HAVE LOCAL LINKS
You live outside Spain, and it is not always easy to maintain or manage your property from a distance. After the purchase, what will you do if there is a water leak? And in case of a storm, who will intervene and who will make the findings in your villa of seaside? Not to mention the cleanings and the inventory of fixtures after a tourist rental, and the preparation of the accommodation before your arrival for the holidays, for example the good functioning of the air conditioning. And how will you pay for and control the gardener’s work and pay for it? There are also plenty of small jobs that you want to do during your absence, who to trust and who to entrust the keys? Finally, we have already discussed here, there is the management of the payment of local charges (co-ownership), local taxes (IBI) and national taxes (IRNR), and participations in general meetings and extraordinary meetings of co-owners.
The simplest is to entrust, after the purchase, the management of your property to a specialized agency or even better to your real estate advisor who has accompanied you throughout the process of acquiring your property, it is he who knows the accommodation as well as you! He will represent you for the meetings of co-ownership, he will come to control your lodging once a fortnight (or more often if you wish it) and will gather the mail, it will be available locally if there is a problem (flight, storm or other), he can welcome or be present when your tenants leave, he can contract the cleaning or gardening staff, he will check the progress or the completion of the work done in your absence, he can also manage and control the bills needing to be paid or that have been paid, (co-ownership, water, gas, electricity) and ensure the management and settlement of taxes (IBI and IRNR), etc. as needed.
For your peace of mind, the Real Estate Advisor is required before the purchase, during the purchase and after the purchase.
Real Estate Advisor, this is our business please contact us by sending an email to email@example.com.
With more than 20 years of experience in real estate acquisition procedures in Spain, we are at your disposal to assist you with all the necessary steps from the search for a property to services offered after the acquisition. When you are buying a home in Spain we help with organizing the visits of properties, the legal verification of the properties, the obtaining of a mortgage, the administrative procedures and the signature of the different notarized documents.
Do not hesitate to contact us!
Send an email to firstname.lastname@example.org.