Important Tax Changes Affecting Some Property Vendors for 2015-In Andalucia,Spain

Posted by Daniel Martinez in Legal Matters, Spanish Property Tax | Tagged , | Leave a comment

Personal Income Tax Reform: what you need to do before the 31st December 2014

This is the time when you need to think about how to pay less tax when submitting your next Income Tax Return. Enjoy tax benefits which will disappear from the law, from our memory and, what is worse, from our pocket.

In one month and a CGT Changes for 2015half, the 2014 tax year will have finished and also the opportunity to exploit to the full the advantages offered by what it will then become the old Personal Income Tax Law on the 1st of January 2015.

It is the time to think about how to pay less tax on your next Personal Income Return. Please bear in mind that to deduct the contributions that you make to a pension plan, to sell or to give a property, to sell a flat or to benefit from a dividends concession, it will no longer be the same from next year onwards.

You should know that although it is true that the Personal Income Tax will generally imply for most of tax payers a lower taxation, some new elements may also increase the amount of tax that you may end up paying. We advise that within the last months of 2014 you adapt yourself to these changes, in order to avoid paying more tax and to reduce the impact that the suppression of deductions and exemptions may have in your annual return. Below you will find some hints:

  1. To sell or to give property

If you have planned to sell a property, it is better in tax terms that you do it within 2014, since the new law that the Spanish Inland Revenue has drafted pursues to put an end in one go, from the 1st January 2015, to the two instruments that have traditionally been used to reduce the tax burden on any capital gains obtained from the increase in value of property at the time of sale: the abatement coefficient and the inflation adjustment factor.

The Government’s law reform bill relating to Personal Income Tax includes a change in the taxation of capital gains, which in practical terms will involve tougher tax measures for those selling a property. So the older the property is, the higher the tax burden will be.

In order to illustrate the situation we provide the following example, which might be real if you do not do anything about it:

With the law that is currently in force, if for example you bought a property in 1998 for €120,000, upon having taken into account inflation for personal tax income purposes, the price of that property would be €156,492. So if the property is sold in 2014 for €180,000 you would pay tax on the difference between €180,000 and €156,492, that is to say, on €23,508.

If, from the 1st of January 2015 the inflation adjustment factor disappears (which is determined on an annual basis pursuant to certain coefficients that the Spanish State Budget Law provides), tax may be applied on the difference between the sale price (180,000) and the purchase price (120,000), i.e. €60,000.

We will look strictly to the numbers, which is what matters in these cases, if the property is sold before the 31st December, you, as tax payer, will have to pay €5,171 euros for Personal Income Tax. But if it is sold after the 1st January, you will pay €13,056. That is to say €7,885 euros more, even though the tax rate has decreased.

But the Government reform goes further, since it does not only eliminate the inflation factors, but it also abolishes other elements that are also used to reduce capital gains tax for owners of property (shares and other types of assets) purchased before 1994: the abatement coefficients.

Until now, in order to calculate the profit obtained from the sale of a property, a reduction coefficient used to be applied (the abatement coefficient) in order to adjust any changes in the price. Now, these coefficients will disappear and it will be calculated on the difference between the sale price and the purchase price. So anyone selling after the 1st of January a property that was purchased at least 20 years before, that is to say before 1985, will have to pay up to 55% more for this, unless they complete the sale before the 31st of December 2014.

Let’s see another example: As a result from this reform, a property that was purchased in 1980 for €12,000 euros and that will be sold next year for €220,000 euros will be taxed on the total amount considered for capital gains purposes (the €208,000 difference between the purchase and the sale price), which means that €45,260 will be paid as tax.

But, if the property is sold before the end of 2014 it will be taxed on a lower capital gains amount, since the abatement coefficients until 1996 and the inflation adjustment factor apply.

Remember

Not withstanding the aforementioned and taking into account that in 2015 the rates applicable to savings are reduced (20, 22 and 24% as compared to the present 21, 25 and 27%), as a rule of thumb it will be more convenient to sell any property that has been purchased after 2004 in 2015.

But, such tax toughening will not affect properties used as habitual homes. In that case any capital gains obtained will continue being tax free, provided that they are reinvested by the tax payer in a new habitual home.

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Latest Laws on Residency in Spain- May 2013

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Residency After- Property Purchase over 500.000€ – Creating Employment etc

In May of 2013, the government detailed a new law which would aid residency in Spain. However, these laws are ultimately aiming at recovery of the economy in Spain.  For example, its states that those who do not reside within the EU community such as Russia, China, etc, will need to purchase a property over the value of 500.000€ in order to be facilitated residency in Spain. Initially last year, there was speculation on the limit being 160.000€, but this limit did not receive a majority vote.

The government also detailed other conditions which may facilitate residency, for example any entrepreneurs, investors who would be able to introduce employment, create businesses good for the economy with good figures would also be studied for residency rights. They also specifically mentioned any investors who would cancel public debt with a minimum of 2million € would also claim this right. There has been speculation also on  Indivuals who come to Spain with higher income rates of around 3000€ per month plus an extra amount per member of family.

Below are some news articles on this matter.

http://elpais.com/elpais/2013/05/26/inenglish/1369576180_396569.html

 

http://www.telegraph.co.uk/expat/before-you-go/10063966/Residency-law-gives-the-Spanish-market-a-boost.html

 

Sale of Apartments in Benalmadena-Most of Our Current stock has Sold!!

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Availibility of Apartments which we had for Sale in Benalmadena Costa has changed

Dear Readers,
We have updated the availability of Apartments which were for sale in Benalmadena Costa. Most have now sold, you can check some of the availabilty at http://http://propertybenalmadena.com/apartments_for_sale_in_benalmadena_costa We will do our best to replenish our portfolio with some equally attractive properties.
All recent sales have been made to Swedish,Finnish,Belgian,Morrocan,Saudi Arabia,Austria and Spanish. There have been numerous reports of a sudden rush of sales before the end of 2012. Check our post http://propertybenalmadena.com/blog/2012/11/23/tax-benefits-of-purchasing-in-2012/ on one of the reasons for this. Hopefully this is a sign of an improvement in the economy.

Villas for Sale in Benalmadena – Which area is right for you?

Posted by Daniel Martinez in Areas of Benalmadena, Before Property Purchase, Spanish Property Tax | Tagged , , , , , , , , , , , | 1 Comment

Here we provide information on the different areas in Benalmadena where you will find Villas for sale.  For Each area we give an approximate time in driving to the beach and amenities , as well as an approx year of build for villas in the area. NOTE Please also refer to our section on Purchase Costs, as there are differents rate of tax applicable depending on the price of the villa.

Benalmadena can be divided into three main areas, these are as follows:

  • Benalmadena Pueblo
  • Arroyo de la Miel
  • Benalmadena Costa

 

Benalmadena Pueblo(apx 10min drive to beach)

The Pueblo is ideal place for those who like a real community feel which is typical of an Andalucian village. The centre of the pueblo is really composed of village townhouses with little parking, no terraces and no community pools, which in my opinion is a good thing because it means that the heart of the pueblo should maintain its Spanish presence and therefore Spanish tapas bars, restaurants etc which it what make the Centre of the Pueblo so charming and a real piece of Andalucian Village.  The areas in the Benalmadena Pueblo where you will find villas for sale will be in the following Urbanisations: Rancho Domingo (5-10 minute walk to Pueblo and Villas date back to 1970s but here you will find some of the largest luxury villas or mansions around), La Vista (this area of villas is immediately adjacent to Rancho Domingo and immediately below the Pueblo, distance to pueblo 1-10 minute walk and here some villas were built in 1980´s but there are a few built a little later), Casablanca (this area is considered rather exclusive and villas built around 2006. Casablanca villas are around 5-10 minute walk to Pueblo).

The area of La Capellania and El Higueron are sometimes categorised by some agents as Benalmadena Pueblo but are really about a 25 minute walk away.  The villas for sale in La Capellania and Higueron tend to range in age, but the area originally dates back to early 80´s, but there are a fair number of newer build.

 

Arroyo de la Miel (apx 8 mins drive to beach)

This area is below and East of Benalmadena Pueblo.  It can really be regarded at the “Town Centre” of Benalmadena with its high streets and good sense of residence and shopping activity ALL YEAR round.  There is also a useful Train station on the main high street.  The trains tend to run every half hour and stops include Malaga Centre , the Airport and Fuengirola amongst many aother stops in between. The downside of property hunting in Arroyo de la Miel is that the property here tends to be quite old and therefore many apartments located close to centre may not have community pools and/or be a bit dated. Nevertheless its a good place to live given that the beach is not that far and shops/restaurants galore in this immediate vicinty. If you are looking for a Villa for sale in Arroyo de la Miel…..Good luck!  there tend to be very few villas located close to Arroyo de la Miel Centre!  However, you may find the Urbanisations of Veracruz, Monte Alto and Santangelo good options for a Villa. (Click here for Villas on Sale in Veracruz) Each of these areas are a very short drive to Arroyo centre , or even a short walk away.  Santangelo Villas tend to be fairly recent in their year of build but many of the villas there although some modern and new tend to have plots of around 500m2 and rarely will you find a flat plot there.  However the views from this area to the sea are spectacular. Many of the villas in Veracruz and Montealto date back to 1980´s and there are few new builds in the area but beacuse of this, the area have much charm.

 

Benalmadena Costa

Benalmadena Costa is referred to generally by most as the whole coastline of Benalmadena.  However, when you see some properties described as Benalmadena Costa by some agencies it doesnt neccesarily mean that it is walking distance to the beach, so please take this with a pinch of salt!  I always like to give my clients a good description of Benalmadena Costa, dividng it into different areas.  The villas for sale in Benalmadena Costa can vary in price dramatically depending on the area.  Here are the main areas of Benalmadena Costa:

Central Areas (Close to Amenities (walking distance) etc)

Distant from Central Main Amenities (not practical walking distance)

  • Nueva Torrequebrada (lower)
  • Torremuelle
  • La Perla
  • Carvajal

Villas for Sale in Benalmadena Costa tend to be located closer to Puertomarina or in the the area directly above Palm tree avenue.  An exclusive area of luxury villas with some for sale in the area of Torrequebrada.  Other villas on sale can also be found in Torremuelle, La Perla and just above Carvajal in Torremar.

If you are unsure of which area suites you best please drop us an email or comment and we will be happy to help.

 

Change in Law for Residency for Russian,Chinese etc

Posted by Daniel Martinez in Legal Matters | Tagged , , | 2 Comments

Spain looks to be changing its laws in relation to application for residency for countries such as Russia,China,Middle East, Egypt,South America etc.  If the new regulations come into place it would mean that property purchased over the value of 160.000€ will allow the purchaser to apply for residency.

http://www.cbsnews.com/8301-505123_162-57551801/spain-tries-to-lure-foreign-real-estate-buyers/

Tax Benefits of Purchasing in 2012

Posted by Daniel Martinez in Post Property Transaction Information, Spanish Property Tax | Tagged , , , , , | Leave a comment

The government announced this year that anyone purchasing a property before 2013 will be entitled to a 50% discount on Capital Gains tax when they come to sell in the future.

Also those who are fiscal tax residents and purchase before the end of the year will be able to get tax relief on their mortgage payments.

Please remember that on a calender year basis the fiscal value of the property may be subject to change, therefore your purchase tax (ITP) may no longer no valid (this would only be applicable to purchases where fiscal value is higher than the actual purchase price).

Another important note, if you are a vendor the plusvalia will increase at the turn of each calender year, so if you think that completion is going to run into the new year be aware that there will be a higher figure of plusvalia pending.

 

Increase of PurchaseTax for 2013

Posted by Daniel Martinez in Before Property Purchase, Post Property Transaction Information, Spanish Property Tax | Tagged , , , , | Leave a comment

This is only currently applicable to New developments/promotions. i.e properties that are being sold for the first time.  This puchase tax is NOT the standard ITP (impuesto de Tramisiones Patrimoniales) BUT is actually IVA (VAT).  The central government announced that this rate will be increased to 10% in 2013 from the rate of 4%.

There is speculation that the governments of autonmous areas such as Andalucia etc may follow a similar pattern and increase the ITP purchase tax from 8% (property below value of 400.000€ to 10%. But as yet this has not been announced and in my opinion unlikely to be annouced at this stage for 2013.

Lawyers-Solicitors in Spain

Posted by Daniel Martinez in Before Property Purchase, Legal Matters, Post Property Transaction Information, Spanish Property Tax | Tagged , , , , , , , , | Leave a comment

Do you Need a Lawyer/Solicitor When Buying or Selling?

In Spain , you may sometimes come across estate agents who may advise you not to use a lawyer , they may say it is simply not necessary and they actually may offer do the conveyancing for you free of charge or for no fee at all. Remember, firstly that a lawyer/solicitor may give estate agent a hard time when representing his/her client.  Therefore, it is obvious that the agent may not want these complications.  I would advise all my clients to use a lawyer.  One that perhaps has been recommended to you by family or good friend.  Before using the lawyer you can check with the Bar of Malaga if the lawyer of choice is a registered one.  I will soon look for an online version and add this to the post if it exists.  At the moment i have access to a physical directory of this but will do my best to get hold of the online version.

In the purchase, your lawyer will firstly apply for your NIE number.  In his conveyancing he/she would check all debts on the property i.e mortgage,utilities,townhall fees,possible embargos etc. Also they would check to see that the property has the correct building licenses in place (first occupation).  Be sure to ask your lawyer to translate the contents of the “Nota Simple”. This document provides a summary of the property in relation to its size, rooms,percentage share of community (if any), and neighbouring properties. This is very important, remember that your lawyer hasnt seen the property and normally a client may not describe the property in detail to the lawyer. For eg, lets assume the property is a 3 bed villa and the “Nota Simple” descibes the property as one with 2 bedrooms, kitchen, lounge and and terrace. At the viewing, there was no terrace? Well, this may represent a terrace that had been converted into a further bedroom. As it doesnt appear on the deed, it could possibly have been converted illegaly and there may actually be a case pending at the townhall which may only be brought to your attention after completion!

Following the document check, your lawyer will also retain amounts from the property price in order to pay the taxes such as Plusvalia and initial 3% capital gains.  This is important because if not paid they be placed against the property. After the transaction, your lawyer will pay the Notary, collect the Deed, pay ITP purchase tax or IVA, present the deed with relevant tax forms to Land Registry, Collect deed from land registry and finally set up the new title for council tax, basura , community , utilities as well as set up direct debit payments for each.

Should you have any specific queries about lawyers, their work or concerns about a property, I would be happy to advise.

 

After Purchase Checklist

Posted by Daniel Martinez in Post Property Transaction Information | Tagged , , , , , , , | 1 Comment

After your Purchase, it would be advisable that you follow the following checklist to be sure that you can enjoy your new home in the best possible way.

  • Change the locks
  • Direct Debit your Community fees
  • Direct Debit IBI tax
  • Direct Debit Basura tax
  • Direct Debit Electricity Bills
  • Direct Debit Water Bills
  • Apply for Building insurance

Should you gave any queries on any of the above please contact me or leave a comment and I will reply as soon as possible. Enjoy your new home!

Completing at the Notary

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Completion at Notary

On this day, all parties are either present or legally represented at the Notary and the deed is signed by all parties for the tranaction of the property to take place.  If a mortgage is required or for that matter cancelled, separate deeds for acquisition of mortage (purchase) or cancellation (sale) of mortgage will also be signed by the appropriate party and their bank.  It is when these deeds are signed that the keys are normally handed over to the buyer and the buyer takes possesion of the property free of tenants.  The buyer will normally be required to pay notary fees and the land registry and will have a period of 30 days to pay ITP tax, plusvalia and 3 % capitals gains (if retained from vendor).