Autor: MSG Legal

 

One important aspect to be taken into account when acquiring a property under the Horizontal (or Condominium) Property Regime, is the state of any debts or charges that may exist over the property in relation to the expenses of the Association of Property Owners. In some cases, when acquiring this kind of property, purchasers encounter previous debts that they were unaware of and later face liability for settlement. The Spanish legal system, in particular the Housing Policy Act (LPH) provides measures to audit the non-existence of ordinary and extraordinary arrears (or overspend) corresponding to existing Property Owner Associations previous to purchase. An essential element of the CONVEYENCING legal service provided by MSG LEGAL is to verify that all ordinary and extraordinary expenses are settled previous to purchase, and that our clients have complete peace of mind in that respect.

 

Article 9.1.e of the Housing Policy Act (LPH) provides that the debtor of any expenses corresponding to the Property Owner Association shall be the owner of the property at the time the debt should have been settled. Nonetheless, and this is an extremely important point, the law also provides that the property itself is liable for settlement of existing debts, this is to say that although any existing debts are attributable to the previous owner, it must be taken into account that once the property is acquired, existing debts will then correspond to the property and consequently the property purchaser.

Therefore, the purchaser of a dwelling or premises under the Horizontal (or Condominium) Property Regime, shall be liable, on behalf of the previous owner, for settlement of any amounts due for sustaining the general costs of the Property Owner Association. This is restricted to the year in which the expenditure is attributable plus three previous calendar years.  Compliance with this obligation is therefore bound to the dwelling or premises (a total of four years of expenditure).

Equally, the Housing Policy Act (LPH), Article 9.1.e requires that the Secretary and the President of the Association certify the existence of any debts to the new owner, the vendor should provide this certificate when signing the deeds. Its existence will be a prerequisite in order for the deeds to be officially recognised and recorded at the Land Registry. The only exception to this rule would be in the case that the property purchaser renounces the provision of the certificate when signing the deeds, an option which we evidently discourage in any event, given that there is no legal justification for not providing the certificate.

Another important aspect to be taken into account stipulated by the Housing Policy Act (LPH), in this case our client being the vendor of the property, is to delimit the liability of property for debts that could be generated by the Association of Property Owners via the requirement that the Secretary of the Association of Property Owners shall be notified of the change of ownership of the dwelling or premises by any means that permits acknowledgement of receipt. Taking into account that otherwise the vendor will continue to be liable for the settlement of debts jointly with the new owner following the change of ownership.

Expert Advice

Regarding the debt certificate issued by the Association of Property Owners, it is important to bear in mind that the law only requires that the certificate clarifies the state of debts, for this reason there are occasions when subsequent to acquisition, in this case our client being the property purchaser, faces claims for extraordinary expenses (overspend) already approved but not yet payable and therefore not legally considered as debts at the time the certificate is issued. At MSG LEGAL we have the knowledge to confront these situations, to detect if there are any ‘hidden’ extraordinary expenses and to demand that the Association of Property Owners certifies their existence previous to purchase. With our comprehensive Conveyencing service we also provide legal security and peace of mind to our clients.

 

This post will provide you with further details on the fiscal/tax obligations that should be taken into account when initiating the process to acquire a property in Spain, and more specifically the obligations that arise from owning a property in Spain, and what a correct CONVEYANCING service should anticipate in the interest of the client.

These fiscal/tax obligations should be taken into account not only by future property acquirers, but also by current owners, in order to comply with the fiscal/tax obligations ownership is subject to, and to avoid any surcharges or sanctions that may arise from it.

 

• PROPERTY TAX (IBI). This is a Council Tax managed by the District Council corresponding to the property location, and is annual. It is calculated based on the cadastral value (not the sale value of the property), and the District Council will inform you of the payable rate and the corresponding settlement period, within the yearly voluntary settlement period

 

Expert advice.

During the property acquisition period, one of the most important aspects in the task of CONVEYANCING is to investigate and certify the absence of debt or taxes affecting the property. With regard to the Property Tax lien, and according to state regulations, it could result that the responsibility of settlement of the last four yearly rates (if unpaid) are to be settled property acquirer. Therefore, it is necessary to demand a Non-debt certificate from the vendor. The certificate should be issued by the corresponding District Council (in many cases the latest payment certificate is presented, this does not mean that no previous debts exist)

 

• NON-RESIDENT INCOME TAX (IRNR). In accordance with the regulations in force, non-resident taxpayers who are owners of property in Spanish territory for their own use, are subject to Non-Resident Income Tax corresponding to that property. This is an annual tax that should be settled before the 31^st of December subsequent to their accrual (the Non-Resident Income Tax corresponding to 2016, should be settled before the 31^st of December 2017)

 

 Expert advice.

The tax rate is published officially for each year, for 2016 the following rates are applicable:

• Citizens of the European Union, Island and Norway. 19%
• Other taxpayers. 24%

Therefore, the taxpayer’s country of origin determines the tax rate applicable, as we can see, this is one of the few clear suppositions where the consequences of BREXIT could directly affect the legal rights of non-resident British citizens owning property in Spain. On the other hand, and as we stated in a previous post, it is also relevant to mention that citizens of some non-EU countries (Island and Norway), have the same fiscal/tax rights as EU citizens via the corresponding bilateral agreements.

Do not hesitate to contact MSG LEGAL for advice on the different fiscal/tax and legal aspects our CONVEYANCING service comprises.

This post will provide you with an estimate of the taxation obligations that the acquisition and sale of properties in Spain are subject to.

The act of acquisition and sale is subject to tax settlements which vary according to the category of property acquired, therefore we can differentiate between:

 

PURCHASE OF A NEW BUILD PROPERTY

This scenario applies to cases in which the property is purchased directly from the property developer or builder, and is subject to two types of taxation:

• Value added tax (VAT), which will vary according to the type of property:
  • 21% for garages and parking spaces, storage rooms and premises
  • 4% for state subsidised dwellings
  • 10% for dwellings

The VAT amount shall be handed over by the purchaser to the vendor at the time of the purchase, for payment to the Inland Revenue.

• Stamp Duty Tax. A taxation rate is applied to the property purchase price which varies in this case according to the region in which the purchase takes place. In the case of the Region of Valencia (Costa Blanca Alicante) the taxation rate is 1.5% applicable to the total purchase value.

Stamp Duty Tax is settled by the purchaser, In the Region of Valencia the payment should be made to the Regional Ministry of Finance, Inland Revenue and Employment within a maximum of thirty working days from the date of signing the deeds.

 

PURCHASE OF A USED OR SECOND HAND PROPERTY

In this scenario the purchase is subject to Property Transfer Tax. A taxation rate is applied to the value declared in the notarial deeds which varies according to the region in which the purchase takes place. In the case of the Region of Valencia (Costa Blanca Alicante) the taxation rate is 10% applicable to the total purchase value.

 

Expert advice.

 For this taxation the Administration can carry out a check on the value declared in the sale, and in the case that it is inferior to the value proven, they can issue a complementary taxation settlement. Given the importance of this matter due to unexpected financial repercussion purchasers tend to encounter, we will deal with it in greater detail in our coming publications. This will be from two angles, one preventative with the aim of declaring the minimum values required by the Inland Revenue (as part of the conveyancing services provided by MSG Legal), and from perspective of a legal defence when facing verifications on purchase values by the Administration.

 

Property Transfer Tax is settled by the purchaser, In the Region of Valencia the payment should be made to the Regional Ministry of Finance, Inland Revenue and Employment within a maximum of thirty working days from the date of signing the deeds.

 

MUNICIPAL TAX ON INCREASE IN URBAN LAND VALUE (CAPITAL GAINS TAX)

This tax is of a municipal nature, and is payable directly to the District Council where the property is located.

The taxpayer required to pay this tax is always the vendor.

Capital gains tax is settled by the vendor. the payment should be made to the corresponding District Council within a maximum of thirty working days from the date of signing the deeds.

 

Expert advice.

 The Spanish regulations, in particular the Royal Legislative Decree 1/2007, General Law on Consumer Protection, states that if the vendor of the property is a Property Developer (Professional), any clause agreed in the contract which transfers the payment obligation to the purchaser is considered abusive, and therefore void.

If the vendor of the property is resident in a foreign country, the law states that the taxpayer required to pay this tax is the purchaser. In this scenario it is advisable to make a retention of the equivalent amount of the capital gains tax applicable to the total purchase price.

The CONVEYENCING legal service provided by MSG LEGAL comprises control and management of all fiscal obligations throughout the process of acquisition or sale of the property.

As a start for our Blog, we are going to analyse, from a legal point of view, the consequences that Brexit will entail for British citizens residing in Spain.

As we have said, our analysis is from a legal and objective point of view, and the effectiveness so that Brexit legally starts having consequences for citizens will begin with the formal request by the British Government to effectively withdraw from the EEC.
According to Article 50 of the Lisbon Treaty, which governs the process for any country to withdraw from the EEC, the withdrawal process may last 2 years, and such period may even be extended by common agreement of the parties.
Therefore, when the British Government formally requests to leave the EEC, the governmental rules, agreements and decisions that will govern the process will start to be established, and in particular when the legislative changes directly or indirectly affecting the rights and obligations of British citizens residing is Spain can be assessed.
For that reason, any statement or forecast analysed at this moment of uncertainty is speculative, even from a comparative point of view, as there is no precedent of similar situations.
From our point of view, the important bilateral interests existing between Great Britain and Spain, the large number of British citizens living in Spain and the previous record of bilateral cooperation policy, with their respective collaboration agreements between Spain and different non-EU European countries, makes us feel optimistic with regard to the solutions that will be adopted.
In conclusion, it is a time to be well informed, to wait until the necessary formal actions take place in the various governments and, when the time comes, you need to look for specialised counselling, both legal and fiscal, in order to adopt the necessary decisions, if they are really necessary…
From MSG LEGAL we will keep our clients permanently informed of the latest news arising during the Brexit process.