SPAIN
Buying Real Estates Taxation Inheritance
& Inheritance Tax
TABLE OF CONTENTS
BUYING REAL ESTATE
1.- DIFFERENCES BETWEEN NORWAY AND SPAIN
2.- QUALITY CONTROL WHEN BUYING REAL ESTATE IN SPAIN
2.-1) INTRODUCTION
a) Registration certificate (Nota Simple) / copy of title deed
b) IBI receipt – property tax
c) Basura receipt – waste disposal charges
d) Community of Owners – rules & receipt for payment of communal charges
e) Copy of electricity and water receipts
f) Plan parcial – development plan
2.-2) LEGAL & FINANCIAL TRAPS WHEN BUYING REAL ESTATE IN SPAIN
a) Mortgage transfers
b) Bank guarantees
c) Inventories
d) Inspecting the property
e) Certificate – completion
2.-3) BUYING OFF-PLAN
a) Introduction
b) Contract requirements
c) Bank guarantees
d) Developer’s obligation to rectify discrepancies and faults
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TABLE OF CONTENTS
TAXES AND CHARGES
1.- SALES TAXES AND CHARGES
a) New properties
• VAT – IVA
• Notary costs
• Land Registry fees
• Solicitor’s fees
b) Second-hand properties
• Transfer tax
c) Financing and financing charges
• Currency
• Setup fee
• Interest (fixed/variable)
• Mortgage bond charges
• Valuation fee
• Land Registry fee
• Stamp duty
• Insurance
2.- OWNERSHIP TAXES – NOT RESIDENT IN SPAIN FOR TAX PURPOSES
a) Income tax
b) Tax on capital (abolished 2008)
c) Property tax-IBI
d) Waste disposal charges – Basura
e) Communal charges
3.- NORWEGIAN TAXES ON PROPERTY OWNERSHIP IN SPAIN
4.- SALES TAXES
a) Private ownership - Capital gains tax
b) Corporate ownership
c) Calculating capital gains
d) Retention
e) Changes in exemptions from capital gains tax
f) What are the tax effects of these changes for persons
resident in Norway for tax purposes?
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TABLE OF CONTENTS
5.- RENTING OUT YOUR APARTMENT/HOUSE IN SPAIN
5.-1) CONTENTS OF RENTAL AGREEMENT
a) Duration of rental contract
e) Payment of costs during the tenancy
b) Rent and deposit
f) Terminating the tenancy
c) Inventory
g) Selling the apartment
d) Inspecting the property
h) Right to conduct viewings
5.-2) MONEY LAUNDERING REGULATION
SPANISH WILLS AND INHERITANCE TAX
1.2.3.4.5.-
How to create a will in Spain
Why create a will in Spain?
Inheritance tax
Calculating Spanish inheritance tax
Inheritance planning
GENERAL INFORMATION ABOUT
VOGT ADVOKATFIRMA ESPAÑA S.L. (see also www.vogtlaw.com)
QUALITY CONTROL BY VOGT ADVOKATFIRMA
PROFESSIONAL - ACCESSIBLE - EFFICIENT
Preface
This brochure is intended to serve as a guide for those considering buying, or who have already bought, real estate
in Spain. The brochure contains practical and general advice and does not require any legal knowledge. However,
the brochure should not be used in isolation when dealing with the buying process, tax or inheritance issues. We
recommend taking professional advice on issues concerning buying, selling, tax and inheritance in Spain.
The brochure has been updated to reflect changes in legislation as at 1.12.2015
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BUYING REAL ESTATE
1.- DIFFERENCES BETWEEN NORWAY AND SPAIN
The Spanish buying process differs significantly from that in other countries.
Firstly, there are no government-authorised estate agents in Spain. Nor is authorization required to
act as an estate agent. Estate agents do not provide financial guarantees, and many of them are
not insured for the financial commitments that may be undertaken. There are no formal viewings
like we are used to in Norway. Properties are advertised online by all or many Spanish estate
agents. It is therefore important to ascertain that the estate agent you are dealing with actually has
the property on its books and is authorised to sign on behalf of the vendor.
Secondly, the actual contract obviously also differs from the one used abroad. An initial reservation
contract is usually signed whereby the buyer pays a deposit (between €3,000 and €6,000) to take
the property off the market. The next step is to draw up and sign a purchase contract (Contrato de
Compraventa).The transaction only becomes final once the title deeds (Escritura Publica) are
registered with the notary.
Thirdly, all contracts are in Spanish and are normally regulated by Spanish law. Get a solicitor to
help you with this process – ideally one who speaks both your language and Spanish and a
company who employs both Spanish and Norwegian solicitors.
Where to buy?
The first thing to decide is which country? And then, where in the country? Even when you have
chosen a region, you still have to make decisions about which resort/city along with issues such
as proximity to the sea, services, transport, schools etc. Your budget will of course limit your
freedom of choice.
Once you have found a property that meets your criteria, you need to obtain the necessary
information to allow you to ascertain the legal and financial status of the property. This is what we
refer to, in short and somewhat inaccurately, as quality control.
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2.- QUALITY CONTROL WHEN BUYING REAL ESTATE IN SPAIN
2.1 Introduction
First we should like to stress that few foreigners are in a position to assess the risks and potential
problems linked to buying real estate in Spain. Investing in real estate often involves large sums of
money, and you have to deal with a different legal system and laws and rules that are considerably
different from those in other countries. Few people are also fluent in Spanish.
The quality control process varies depending on whether you are buying off plan, a new
apartment/house or a second-hand property.
a) Registration certificate (Nota Simple) / copy of title deed.
A Nota Simple is a registration certificate from the Land Registry. The certificate contains
information about:
1. Who owns the property, including ownership stakes if there are multiple owners
2. A description of the property and details about its boundaries
3. Encumbrances on the property and their size. However, please note that not all
encumbrances are listed on the Nota Simple, e.g. encumbrances such as unpaid property
tax and communal charges, ref. below
4. Other ownership limitations, such as any rights of use to the property, servitudes, etc.
A registration certificate should be obtained even before signing the reservation contract. That way
you will know with certainty that the vendor holds the registered title.
Please note that the solicitor carrying out the quality control will not inspect the property. The
physical state and actual size of the property are therefore not inspected. We recommend that
you instruct a surveyor to inspect the property.
The surveyor will produce a report describing the condition of the property. This will also provide the
buyer with the estimated floor space of the property. As mentioned, the solicitor will not look at the
size of the house/apartment. He will only compare the previously registered title deeds with the details
provided on the registration certificate (from the Land Registry). Technical survey costs aprox €600.
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The Nota Simple should be recent and no older than 10 days. A registration certificate is not a
guarantee that further encumbrances have not been placed on the property after the certificate
was issued. A new certificate should therefore be obtained just before the final transfer.
The certificate obtained by the notary in connection with the transfer of the property is valid for 10
days. The Land Registry issuing the certificate is obliged to inform the notary if there are any
changes to the status of the property in this period.
The Nota Simple contains simplified information, and a copy of the title deeds should therefore be
obtained and thoroughly examined.
b) IBI receipt – property tax.
IBI (Impuesto sobre Bienes Inmuebles) is the Spanish term for property tax. When buying real
estate in Spain it is recommended that the vendor is asked to produce a receipt for paid property
tax. Property tax is levied on the actual property and will follow the property in the event of a sale.
This encumbrance will normally not be described on the registration certificate. The IBI receipt
contains a due date, and overdue interest is charged in the event of non-payment. If the
Owners/Sellers are in default with payment of the Property Tax this will be attached to the property.
The new purchasers will be jointly liable for the payments.
c) Basura receipt – waste disposal charges.
The vendor should also produce a copy of the receipt for payment of municipal waste disposal charges
(Basura). Unpaid waste disposal charges are an encumbrance that follows the property, and overdue
interest is payable in the event of non-payment. Defaulted invoices do not appear in the Nota Simple.
d) Community of owners – rules and receipt for payment of communal charges.
A community of owners will have been established if the property is part of an urbanisation.
The community of owners will have rules that regulate communal issues within the urbanisation.
The rules may include clauses that limit your freedom if you are planning to rebuild your terrace,
put up awnings, keep animals etc.
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An urbanisation will normally hold a general meeting once every year. The general meeting debates
and adopts the accounts and budget, and it raises issues that are important to the owners. Minutes
from a general meeting can therefore provide a good indication of which problems may be
expected in the future when buying a property. Spanish law does not require minutes to be
published in any language other than Spanish. Spanish law also stipulates how the voting is
effected and how many votes are required in each case.
When purchasing real estate the vendor should produce confirmation from the administration
of the community of owners stating that the vendor has no communal costs outstanding.
Unpaid communal charges follow the property.
The Law provides that the purchaser of a home or business premises within a system of
condominium ownership, is liable with the property purchased for any amounts owed to the
Community of Owners up to a maximum of the community fees issued for the part of the current
year until the moment of purchase and the three previous years.
This encumbrance will normally not be revealed by the registration certificate until the joint
ownership organisation has taken distraint action against the property, which will only happen if
the vendor has not paid the communal charges for a long time.
The administrator should also be asked to give a statement to the effect that no major repairs,
refurbishments or expansions are being planned that would leave the buyer with higher than
expected communal costs.
e) Copy of electricity, gas and water receipts.
If you wish to continue an existing water, gas and electricity contract, you should investigate
whether the vendor has paid these bills up until the date the title deeds are signed.
f) Plan parcial – development plan.
The development plan for the area should be examined. It will reveal any planned roads,
preservation areas, new areas of development etc.
When buying a property under construction you should check that the developer has planning
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permission (licencia de obra). If the development is within a “green zone” (an area that should
not be developed), you should check whether dispensation from the development plan has
been granted.
A bank guarantee should be issued for part payments during construction. It is common for
developers not to produce a bank guarantee until requested to do so by the buyer or the buyer’s
solicitor. It is also important to obtain a so-called licencia de primera ocupacion – First Occupation
Licence – before moving in. This licence is necessary in order to enter into permanent water and
electricity contracts.
This is just a basic checklist of the information you should obtain in order to quality-assure a real
estate purchase. However, the quality control must be tailored to each individual purchase. If the
owner of the property is a Spanish company, the quality control process will be more extensive. For
example, quality control will then include due diligence of the company’s financial and legal status.
If the owner is a Spanish company owned by a foreign enterprise, you should be very wary of taking
over the parent company without conducting a thorough preliminary investigation.
In recent years, great efforts have been made in the standardisation of town planning, with the
intention of regularising and legalising buildings that are not in line with current planning regulations.
The planning regulations of many Town Halls now include the terms and conditions that have to be
complied with by developers and owners in order to legalise those buildings: transfer of land for
public use, better infrastructure and urban services, monetary compensation to the Town Hall, etc.
Apart from the standardisation mentioned, we would highlight two important situations:
Buildings with the status of “outside of planning regulation”, built with planning permission which
at the time complied with the regulations then in force, but not with the current ones. This means
that the owner may only carry out renovation work for repair and conservation as strictly necessary
for conserving living conditions or conditions for the use intended, without in any event making any
extensions or improvements.
Buildings with the status of “equivalent to outside of planning regulation”, which is given to works,
constructions and buildings that infringe planning regulations, and were carried out without
permission, or they contravene the rules and these have now expired, or in other words, the legal
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period established for taking any action, 6 years, has expired without the Administration having
opened any proceedings or passed any decision ordering the restoration of legal order in respect
of that infringement.
Properties in this situation cannot obtain their First Occupation Licence but they can execute a deed
of new construction and have it registered in the Land Registry with that status.
It is necessary to remark that the Spanish Supreme Court has declared as null and void the 2010
Marbella PGOU (General Plan for Urban Zoning). This means that from now on the town will have
to comply with the terms of the 1986 Plan, which had been in force before approval was given for
the one which has now been declared invalid. This situation requires a common effort to be made
by the Town Hall and the Regional Government in order to set up the proper regulation to
guarantee the judicial security for buyers, investors and promoters.
It is very unlikely that any of the complexes declared illegal by the courts would be demolished.
Therefore most of the 16.500 affected dwellings will remain in a situation outside of planning
regulation or equivalent to outside of planning regulation, until the approval of the new Marbella
urban planning, which will be developed looking of the total normalization of Marbella.
2.2 Legal and financial traps when buying real estate in Spain
a) Mortgage transfers
In the case of new-builds the vendor will normally take out a mortgage loan to finance the
construction project (building loan). The buyer will often be offered to take over the loan secured
against the property (subrogation). The benefit of doing this is that the subrogation costs are often
lower than the set-up fee when taking out a mortgage in Spain.
If the buyer shall have the right or obligation to take over the mortgage, this will normally be stipulated
in the purchase contract. Before signing the purchase contract you should obtain the terms of the
mortgage along with details of the loan currency and then make a final decision as to whether or not
you want to take over the mortgage. You can get an unpleasant surprise if you first decide to take over
the mortgage but then change your mind at a later date. You will then have to meet the cost of
cancelling the loan.
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You can also enquire about the possibility of taking over the mortgage secured against the property
when buying second-hand property.
b) Bank guarantees.
Under Spanish law it is mandatory for the vendor to produce a bank guarantee for any monies paid
during the construction period. The law does not stipulate who should meet the cost of issuing the
bank guarantee, however. The objective of the law dictates that the vendor shall meet the cost, but
it does happen that developers sometimes try to make the buyer cover the cost by including it in
the contract. The cost of issuing a bank guarantee varies from bank to bank but is around 1–1.50%
of the guaranteed amount. You should therefore ascertain that the vendor will pay the cost of
issuing a bank guarantee and include this in the purchase contract.
c) Inventory
When buying an apartment/house in the second-hand market it is often agreed that fixtures,
fittings, furniture, etc. be included in the sale. If so, a detailed inventory should be drawn up.
Photographs can also be a useful form of documentation. The inventory should be signed by both
vendor and buyer and should be included as an appendix when signing the purchase contract. That
way you prevent the vendor from taking with him any of the inventary and claiming that they were
personal property.
d) Inspecting the property.
When buying a new apartment the buyer is given a 1-year warranty for hidden faults in the
apartment and a period of up to 10 years for construction faults. When buying a second-hand
apartment it may be worth hiring a surveyor to inspect the property.
e) Certificate – completion.
A purchase contract will often stipulate that the buyer can take possession of the property once the
apartment has been completed. But at which point can an apartment be deemed to have been
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completed? Many contracts define completion as the point at which the vendor submits an
application for a First Occupation Licence – a licencia de 1ª occupacion. The First Occupation
Licence is the document issued by the Administration accrediting that the work carried out
conforms to the permit granted, i.e. it confirms that the building work is in accordance with the
project for which the building permit was issued and that it meets the conditions for safety and
habitability. On a practical level, this document is essential mainly for new constructions so that
utility services can be contracted for the first time.
However, the First Occupation Licence application form, provided by the vendor, does not mean
that a licence has been granted. It will usually take at least one month (often up to 6 months)
from the date, when the application is submitted, until the certificate is issued. The result is that
the new owner will have no water, gas or electricity in this period. This problem is often solved
by the developer’s making electricity and water available from the building site. We still
recommend that the certificate be produced before the title deeds are signed. Only once the
certificate has been produced, the property can be deemed to have been completed from a legal
point of view.
One peculiar but not unusual practice, is for the developer to obtain a certificate, by way of
passivity on the part of the municipality. Under Spanish law the municipality has 3 months to
give a positive or negative response. If no response is forthcoming within the mentioned time
limit, relevant Spanish law stipulates that the application shall then be deemed to have been
granted. However, you should not automatically assume this to be the case, as the municipality
may in certain circumstances investigate a particular case if the developer is guilty of serious
misconduct (e.g. if planning permission has been obtained based on corruption and where
permission should not have been granted, e.g. in connection with the development of
communal gardens).
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2.3 Buying off-plan
a) Introduction
The developer’s obligations towards the buyer are regulated by law. For example, there are
requirements for the contents of the contract and for the issuing of guarantees for any monies paid
during the construction period. Once ownership of the property has been transferred there are also
rules on the developer’s obligation to rectify any faults and discrepancies with the property.
b) Contract requirements
Firstly, there is a general legal requirement that the contract must be clear and concise. It must also
be balanced, and the terms and conditions must be “reasonable”.
Examples of unreasonable terms and conditions in a contract:
• When buying real estate off-plan the buyer is often offered to take over the existing mortgage
on the property. The mortgage often accounts for 70% of the total purchase sum. Buyers are
not obliged to take over the mortgage, but some contracts stipulate that the buyer must pay
cancellation fees for the mortgage if he does not agree to take it over. This clause is frequently
abused, as it is in principle the developer’s duty to pay cancellation fees for his own mortgage.
These costs are often around 0.5–1% of the mortgage. Land registry fees and notary costs of
up to some €1,000 are also payable.
• Contract terms and conditions stipulating that the buyer must pay any costs that under the
law should be met by the vendor – such as the cost of dividing up the apartments (División
Horizontal) – are deemed to be “unreasonable” according to Spanish law.
• We have often seen contracts specifying that the buyer is obliged to take possession of the
apartment once the developer has obtained a so-called Acta fin de obra – a certificate issued
on completion of the building. According to Spanish law, the property only becomes habitable
once the developer has obtained a Licencia de 1ª ocupacion as described above. Legally,
the property does not become habitable until this certificate has been produced.
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Under Spanish law the contract must contain the following:
• Information about the contract parties.
The contract should contain the buyer’s name and address. Similarly, it should specify who the
developer is. If the developer is a company, it must state where the company is registered, which
type of company it is, its organisation number/CIF number and its address. The contract must
also contain a detailed description of who is authorised to sign on behalf of the company. If it
refers to a power of attorney from the developer, Spanish law requires this to be a notary power
of attorney. The contract should contain a description of where and in the presence of which
notary the power of attorney was signed.
Buyers often decide to change the name on the contract during the construction period. For
example: a buyer has signed in her own name but then decides that she wants her
Norwegian/Spanish company, or her children, to be the legal owner of the property. If this buyer
has been farsighted enough, the contract would contain a provision stating that the contract can
be transferred to a third party without requiring the permission of the vendor. If the contract
does not stipulate such an entitlement, the buyer must rely on the vendor’s goodwill. Vendors
will occasionally refuse such a transfer without giving any reason whatsoever. Nor does Spanish
law require the vendor to give a good reason for such a refusal. If it is a case of a genuine sale
before completion, the vendor will often demand a certain percentage of the profit that is
generated by the buyer. In other cases it may be stipulated that any profit is to be shared equally
between the buyer and vendor.
A transfer of the purchase contract during the construction period may render the vendor liable for
capital gains tax on any profit, and the transfer itself may be subject to transfer charges or VAT.
• Description of the property
The contract should include a detailed description of the property, and it should state where
the property is registered. It should also contain plans of the apartment, showing room divisions
etc. If the apartment is in an urbanisation (joint ownership), plans should be attached showing
the location of the apartment within the urbanisation. The plans should be signed by both the
buyer and the vendor.
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Communal areas should also be defined, as should the developer’s obligations in terms of
building swimming pools, tennis courts, club houses etc. if these are described in the prospectus.
• Price and delivery date.
The contract must contain information about the price and completion date. The completion
date should correspond to the date on which the developer receives the so-called licencia de
1ª ocupacion – a completion certificate required to enter into water and electricity contracts.
• Building specifications
The contract should also include a list describing materials, colours and standards in detail.
For example, the list should specify whether there should be marble floors, which type of
marble should be used etc. It should also specify what will be included in terms of white
goods, air conditioning, alarms etc.
c) Bank guarantees
Spanish law requires a bank guarantee or insurance guarantee to be produced for any monies
paid in during the construction period. This is a mandatory legal requirement, which means
that the developer has a duty to issue an insurance/ bank guarantee for any monies paid in
during the construction period. An agreement between the parties stating the no bank
guarantee will be issued is not valid under Spanish law. The law also prescribes a duty on the
part of the buyer to return the bank guarantee(s) when signing the title deeds and taking
possession of the property.
Spanish law also stipulates that monies paid in during the construction period shall be placed in a
separate account and used only for construction. The bank guarantee shall also guarantee the
amount paid in interest per annum.
The purchase contract should expressly refer to the bank guarantee, and it should specify that the
developer guarantees the return of the monies paid in interest per annum if the developer has not
completed the property within the agreed time frame. The purchase contract should also specify
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that the vendor shall meet the cost of obtaining a bank guarantee. It is also important to obtain a
licencia de primera ocupacion (completion certificate) before moving in.
This certificate is necessary in order to enter into permanent water, gas and electricity contracts,
for example. For practical reasons it is common for the buyer to receive the bank guarantee
around 14 days after the money has been paid in.
d) Developer’s obligation to rectify discrepancies and faults
When building new homes the developer is obliged to rectify any faults and discrepancies with the
property. In Spain there are generally speaking three differentdeadlines for requesting rectification.
The various deadlines depend on the nature of the discrepancy.
Firstly, the buyer is entitled to demand that the developer rectify any faults and discrepancies with
the property provided he makes such a demand within one year of taking possession of the
property. This mostly relates to visible faults and discrepancies.
The buyer may also demand that the developer rectify hidden faults by making a claim to that effect
within three years of taking possession of the property.
For construction faults and discrepancies there is also a 10-year deadline for making a claim for
rectification.
If you buy real estate where the previous owner purchased the property from a developer 6
months ago, the previous owner’s rights vis-à-vis the developer will be transferred to you. This
means that you must make any demand for rectification of visible faults and discrepancies within
6 months etc.
We should also like to add that if the developer fails to meet his statutory obligations, the case must
be brought before a Spanish court of law. It should not come as a surprise to anyone that the
Spanish legal process is very time-consuming. We are sorry to say that we have seen several
examples of developers simply speculating in buyers’ not going to court, instead agreeing to rectify
the discrepancy at their own expense.
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TAXES AND CHARGES
1.- Sales taxes and charges
a) New properties
• Value added tax – IVA.
IVA (value added tax) is payable when buying property off-plan. IVA, on the purchase
of newly constructed properties, is charged at a rate of 10% – this also includes garages and
storage rooms. If a garage or storage rooms is purchased separately, IVA will make up 21%
of the purchase sum. The latter IVA rate also applies when buying land. 1,5% stamp duty
on the purchase price is also payable.
IVA is calculated on the basis of the title deed value of the property.
• Notary costs.
Notary cost of around €800 is payable by the buyer. Notary costs vary depending on the
complexity of the title deeds and on the number of notarial pages used when producing
the title deeds.
• Land Registry fees.
The title deeds must be registered in the Land Registry. The registration costs are normally
in the region of €700.
• Solicitor’s fee.
The solicitor’s fee when buying property is normally between 1% and 1.25% of the
purchase price, albeit minimum €3,500.
• Estate agent fees.
Estate agent fees have fallen in recent years and are now usually around 5%.
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b) Second-hand properties
• Transfer tax
The rate applicable to the sales price in the case of residential property:
Up to 400,000 €:
8%
From 400,001 € to 700,000 €: 9%
Over 700,001 €:
10%
The rate applicable to the sales price in the case of garage spaces, except for garages
annexed to a house, with a maximum of two:
Up to 30,000 €:
8%
From 30,001 € to 50,000 €:
9%
Over 50,001 €:
10%
The rate applicable to the sales price in the case of furnishings: 4%
The rate applicable to the sales price in the case of boats of more than 8 metres in length: 8%.
For calculating Property Transfer Tax or Stamp Duty arising from the purchase or sale of a property, it
is important to bear in mind the tax value of the property, which is the value established for the
purposes of the Tax Settlement Office, regardless of its market value. If tax is paid based on an
amount below that value, the Tax Authorities will claim payment of the full amount of the tax relative
to that tax value, plus the corresponding surcharges and interest. However, it is possible to appeal
against any supplementary tax claim.
At the same time, if these taxes are settled for an amount less than the rateable value of the property,
it could involve a penalty equivalent to 50% of the portion of the full amount of the tax that was not
paid correctly
• Other costs.
Notary costs, solicitor’s fees and Land Registry fees are also payable as mentioned before.
• Real estate agency commissions.
It is recommended to always pay commission against an invoice issued by the agency with
its corresponding VAT.
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c) Financing and financing costs.
• Spain or abroad?
Whether to take out a mortgage in Spain or abroad should be considered on a case-by-case
basis. We will provide clients with an overview of costs that are incurred when taking out
mortgages in Spain.
Non-residents will normally be granted a mortgage for up to 70% of the value of the
property. The financial crisis has led Spanish banks, in particular, to be more restrictive when
issuing mortgages.
You should study the terms and conditions of the mortgage carefully. A fee is payable when
you take out a mortgage (ref. below), when you change the terms and conditions, and when
you cancel the mortgage. Please note that all of the terms and conditions can be negotiated,
and it is often possible to slightly reduce the fee that you pay, but it is important that you
negotiate more favourable terms before the mortgage is granted. The mortgage is set up with
the notary, usually at the same time as when you sign the title deeds for the property.
Overview – the cost of taking out a mortgage in Spain.
• Setup fee
Varies from bank to bank but is normally between 1% and 2% of the mortgage.
• Technical survey fee
Approx. €600
• Interest (fixed/variable)
If you think interests rates are likely to rise, you should fix the interest for as long as
possible. If you believe the opposite to be a more likely scenario, you should agree a
3-month variable rate.
• Notarial fee
Depends on the complexity of the title deeds and on the number of notarial pages that
are used but is in the region of €750.
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• Valuation fee
Approx. €400–700
• Land Registry fee
Normally €500-600
• Stamp duty
Stamp duty of 1.5% is payable on the liability of the mortgage, i.e. the total sum of capital,
ordinary interest, overdue interest and collection costs. Stamp duty is calculated on the
basis of the total liability, which is around 150% of the amount borrowed.
• Insurance
It is a requirement that the property is insured.
• The bank will retain a local lawyer.
The costs – approx. €1000-1.500, will have to be paid by you as borrower.
2.- Ownership taxes and other costs – not resident in Spain for tax purposes.
a) Impuesto sobre la renta de no residentes – income tax for non-residents
A non-resident must pay income tax on any earnings generated in Spain, including from renting out
property. The income in this respect is the actual rent that you have received or a percentage of the
rental value (comparable to Norwegian taxation rules on the imputation of rental income from
holiday homes).
Income tax for non-residents who have not rented out their property is calculated in the same way
as imputed rental income in Norway. The taxable gain is 2% of the Spanish rateable value of your
property, the so-called valor catastral. Beyond that, the applicable tax rate is as follow:
The rate applicable from 12 July 2015, for citizens resident in the EU, Iceland and Norway is 19.50%.
The rate applicable as from 1st January 2016, for citizens resident in the EU, Iceland and Norway
will be 19%.
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Let’s imagine that the Spanish rateable value of your property is €50,000. The taxable amount is
2% of €50,000, which is €1,000. Income tax is 19,00% of € 1.000, which is €190. If the Spanish
rateable value has been revised after 01.01.1994, the taxable amount is 1.1% of the Spanish
rateable value.
b) Impuestos sobre el patrimonio – tax on capital.
Wealth tax was abolished in Spain as from 2008. However, it has been reintroduced in 2011. The
Wealth tax is only effective after the deduction of €700.000 per person. If a couple co-owns real
estate is thus the deduction €1.400.000. 300.000€ if permanent recidence per person.
Table for Wealth Tax in Andalucia:
22
Taxable amount
Up to in euros
Payment fee Euros
Rest of taxableamount
Up to in euros
Applicable
Precentage type
0,00
0,00
167.129,45
0,24%
167.129,45
401,11
167.123,43
0,36%
334.252,88
1.02,75
334.246,87
0,61%
668.449,75
3.041,66
668.449,50
1,09%
1.336.999,01
10.328,31
1.336.999,02
1,57%
2.673.999,01
31.319,20
2.673.999,02
2,06%
5.347.998,03
86.403,58
5.347.998,03
2,54%
10.695.996,06
222.242,73
Onwards
3,03%
c) Property tax – IBI – impuesto sobre bienes inmuebles
IBI is an annual municipal tax payable by both residents and non-residents in Spain. A bill will be
sent to your registered Spanish address once a year, usually by July in Marbella and by March in
Mijas. The amount of property tax you have to pay will vary depending on where the property is
and the value of same.
d) Basura / municipal waste disposal charge.
The municipal waste disposal charge is payable by both residents and non-residents in Spain.
The bill will arrive by mail twice a year and is around € 70-200 per year
e) Community charges
Community charges vary depending on which services are provided as part of the joint ownership
(gardener, security guards etc.). The communal charges are set on the basis of a budget adopted
by the annual general meeting. These charges are not distributed equally to each apartment (or
house) but according to the number of square metres you own (including terraces and your
notional share of the building’s communal areas).
3.- Norwegian taxes on property ownership in Spain.
According to Article 6 of the tax treaty between Norway and Spain, Spain may collect tax on income
from real estate in Spain owned by a person resident in Norway. The same applies to profits from
the use of real estate in Spain.
However, Spain’s right to tax such income and capital under the double taxation treaty does not
limit Norway’s right to tax the same income and capital. Income from and capital held in real estate
in Spain are also taxed in Norway. However, when calculating your tax in Norway, deductions
should be made from your Norwegian tax for tax already paid in Spain, based on the so-called
credit method.
You must give details of any real estate in Spain on your Norwegian tax return. A request for tax
credits should be made and you should attach your Spanish tax return.
23
How is the Norwegian rateable value of real estate in Spain determined?
According to a statement by the Norwegian Ministry of Finance, the setting of the Norwegian
rateable value of real estate abroad should be based on “approximately the same ratio between
the assumed market value and rateable value as for similar property located in the Norwegian
municipality where the taxpayer is resident”. This can be illustrated by the following example:
you buy an apartment in Spain for NOK 2 million, and the rateable value of real estate in your
municipality in Norway is 20% of the market value. Your Norwegian tax return stipulates that
you should give the value of the apartment as NOK 400,000. However, a number of our clients
have given the Spanish valor catastral as the basis for Norwegian tax on capital, and this has
been accepted.
4.- Taxes when selling
a) Private ownership
Capital gain tax.
Before the tax reform that came into effect on 1.1.2012, vendors were taxed differently with regard
to capital gains tax depending on whether or not they were resident in Spain for tax purposes.
This difference has now been eliminated, and all vendors are now treated equally. Tax on capital
gain is a rate applicable on the total gain.
The rate applicable since 12 July 2015, for citizens resident in the EU, Iceland and Norway
is 19.50%.
The rate applicable as from 1 January 2016, for citizens resident in the EU, Iceland and Norway
will be 19%.
The capital gain generated by the sale of a property acquired between 12 May 2012 and 31
December 2012 is exempt from paying 50% of the tax.
24
b) Corporate ownership.
If the property is owned by a Spanish Company, the capital gain is included in their profit and
loss account. The general rate is 30%. For PYMES- (Small and Medium Businesses) the rate is
25% for the first 300.000€ profit and after that profit amount, 30%.
New companies incorporated are taxed the first 2 years at 15 % for the first 300.000€ profit and
profit exceeding this amount is taxed at 20%.
Norwegian and other non-resident companies not conducting business in Spain, are charged at 21%.
c) Calculating capital gains.
The capital gain is the difference between the entry value (title deed value upon purchase) and exit
value (title deed value upon sale). The entry value is the official purchase sum with the addition of
a given tax index rise for each year that the property has been in the vendor’s ownership. The entry
value will also increase with any investments made (less depreciation) and with any direct
purchase costs. The exit value is reduced by all relevant sales costs.
d) Retention
A few inequalities still remain between residents and non-residents. If a buyer conducts a
transaction with a vendor who is non-resident, the buyer must withhold 3% of the purchase sum
which must then be transferred by the buyer to the tax authorities as an on account payment for
capital gains tax in a term of 30 days If this on account amount exceeds the amount of capital
gains tax due, the buyer must request a refund of the balance. The processing time for such
requests is between 6 months and 1 year.
Once the refund of the withholding has been applied for, it must be taken into consideration that
the Tax Authorities will check the tax status of a non-resident seller, mainly in respect of NonResident Personal Income Tax corresponding to the last four years, and if there is any outstanding
tax owed for any concept, this will be paid from the withholding, with surcharges and interest
included, before making any refund.
25
Plusvalia
Plusvalia is a tax on the increase in value of the land on which the house/apartments is built and
becomes payable each time there is a change in ownership.
The extent of the Plusvalia depends on the length of ownership and the size of the plot. Under
Spanish law, the vendor is generally speaking liable for paying Plusvalia, but the law does allow for
vendors and buyers to make their own arrangements in this respect.
When a non-resident individual sells a property, it is the buyer who has the obligation to pay the
municipal plusvalia tax to the corresponding Town Hall, replacing the seller as taxpayer; but as the
real taxpayer is the seller, the latter has to pay the buyer for the amount of that tax, and this is
usually handled by retaining the amount calculated for the tax from the sales price to be paid to
the seller.
The Land Registry will not register the sale without seeing evidence of having made voluntary
settlement of the tax, or presented the tax return for the Plusvalia.
Private ownership – resident in Spain for tax purposes.
• A resident who sells his main home and invests the money in a new home (within 2
years) is exempt from capital gains tax when selling. Under Spanish law, a villa is
considered your “main home” if you have lived in it for the last 3 years.
• Residents aged over 65 and over are exempt from capital gains tax when selling their main
home. The person must have lived in the home for 3 years before selling, but persons aged
66 and over are not required to invest the proceeds from a sale in a new home.
26
e) Changes in exemptions from capital gains tax
Properties purchased before 1.1.1984, are granted a reduction of capital gain tax. This means that
the benefit obtained between the years 1984-1994 is exempt of capital gain tax. If the property is
sold now with a profit only a proportion of this is taxable, namely the relative proportion of the
capital gain as from 1994.
f) What are the tax effects of these changes for persons resident in Norway for tax purposes?
Capital gains on the sale of real estate abroad are in principle taxable in Norway under Norwegian
taxation rules. Losses on the sale of real estate abroad are only deductible in Norway in cases where
any capital gain would have been taxable in Norway. Real estate abroad includes own homes and
holiday homes. Timeshare apartments may also be considered real estate for tax purposes.
According to Article 6 of the tax treaty between Norway and Spain, Spain may impose tax on income
from real estate in Spain owned by a person resident in Norway. This also applies to profits from the
disposal of real estate in Spain, ref. Articles 13 and 22 of the tax treaty. However, under the tax treaty
you may request tax credits for tax paid in Spain when paying Norwegian tax on the profit.
In other words, you should not be double-taxed.
Norwegian tax legislation does contain a few exceptions from the general rule of 28% tax on profits
from the sale of real estate. The legislation stipulates the following criteria in order for any profit to
be tax-free:
1. Firstly, the exemption only applies to the sale of holiday homes. Holiday homes are real
estate with buildings used for leisure purposes, such as cottages or country homes.
2. Secondly, the owner must have used the property as his own holiday home for at least
five of the last eight years (residency period).
3. Thirdly, the property must have been sold or a sale must have been agreed more than
five years after it was purchased and more than five years after it was put into use or,
according to the completion certificate, after it was completed. Only residency periods
during the owner’s period of ownership will be taken into account.
27
EXAMPLE
Selling a holiday home in Spain
IN SPAIN
IN NORWAY
In Spain The taxable profit is calculated according to Spanish rules and is taxed
in Spain.
Tax liabilities are calculated according to Norwegian rules. If you have owned
and used the holiday home for long enough to meet the criteria for a tax-free
profit when selling, the profit will be exempt from tax in Norway. In this case
you may not request tax credits in Norway for the Spanish tax paid on the
profit. If the profit is taxable, the profit is calculated according to Norwegian
rules and is taxed in Norway. In this case you may request tax credits for tax
paid in Spain from the Norwegian tax on the profit
As the taxable profit is calculated according to both Spanish and Norwegian rules, the taxable
amounts in Spain and Norway will differ.
5.- Renting out your apartment/house in Spain.
Many Norwegians who buy homes in Spain plan to finance their purchase by renting out their
property for shorter or longer periods. In order to limit potential problems, home owners should
be aware of their rights and obligations as landlords. One basic precautionary measure is to ensure
that any rental agreement is put in writing, even though the law also allows for verbal agreements.
In this article we will look at what a landlord should be aware of when drawing up a rental
agreement.
Spain has several laws on property rental. In addition to national tenancy laws, there are various
laws on property rental in some of the autonomous regions.
We will be looking at the urban tenancy act, recently modified by the Law (Ley medidas Flexibiliación
y Fomento del Mercado de Alquiler). We consistently use the term apartment, but the Tenancy Act
covers all types of accommodation (with specific exceptions – ref. next paragraph, for example).
28
The Tenancy Act contains certain mandatory provisions, which means that they cannot be set aside
by an agreement between the parties. The law distinguishes between the renting out of holiday
homes and more permanent tenancies. A home is classed as a holiday home if the rental period
is specified in days or weeks, the property is fully furnished, and the tenant keeps his permanent
home elsewhere. In practice, a tenancy less than 12 months is classed as a longterm tenancy, but
disputes do arise.
5.1 Contents of rental agreement.
a) Duration of rental contract
Tenants in a permanent tenancy enjoy protection against termination of the tenancy. The contract
should contain a clause describing that the tenant has a permanent residence in Norway, for
example, and that the agreement covers a tenancy, not a permanent residence. The agreement
should also be limited to less than 12 months. If the tenancy is defined as permanent, Spanish law
allows the tenant to automatically extend the tenancy by up to 3 years – even if the tenancy
agreement stipulates a shorter tenancy.
b) Rent and deposit
The rent may be agreed by the parties as they wish. It should of course be agreed that a minimum
deposit of 1 month to be paid.
c) Inventory
The landlord should draw up a detailed inventory of furniture and fittings. The inventory should be
included as an appendix to the tenancy agreement and signed by both the tenant and the landlord.
d) Inspecting the property
Before signing a tenancy agreement the tenant and the landlord should inspect the apartment. A
survey report should be included in the tenancy agreement, e.g. in the form of a clause stating
that the tenant has taken possession of the property in the condition described in the survey
29
report. At the end of the tenancy the tenant and landlord should again inspect the apartment. The
deposit should be returned only once the landlord has checked that everything is in order. If the
tenancy is of a more long-term nature, the landlord should include the right to a mid-tenancy
inspection in the tenancy agreement.
e) Payment of costs during the tenancy
For short-term tenancies it is common for the landlord to pay for water, electricity, communal costs
and other costs relating to the tenancy. For permanent tenancies, the cost of water and electricity
should be charged to the tenant. Communal charges and property tax are normally paid by the
landlord, although other arrangements can be made.
f) Terminating the tenancy
The tenant may withdraw from a rental agreement after a minimum of six months have passed,
providing that he informs the landlord with at least thirty days advance notice. The parties may
arrange in the contract that, in the case of withdrawing, the tenant shall compensate the landlord
with an amount equivalent to one month’s rent at the current rate for each year of the contract still
to run. For periods of time less than one year, the proportional part of the indemnity will apply.
g) Selling the apartment
If the landlord wishes to sell the apartment, the tenant has the right of first refusal. The tenant may
then purchase the apartment subject to the same terms as those offered to other interested parties.
In any case the apartment may not be sold without also transferring the rental agreement if such
his last agreement was registered in the Land Registry.
h) Right to conduct viewings
It is often practical to include a clause on the landlord’s right to show the apartment to potential
buyers in the event of a future sale.
Please note that no matter how well you try to protect yourself in your tenancy agreement, you will
be relying on the Spanish courts if something were to go wrong. In this respect we should stress
30
that Spanish legislation offers a great deal of protection to the tenant, and evicting a tenant is a
very long-winded process. We should also like to add that rental income is taxable and should be
included in your Spanish tax return.
Tax treatment for leases of commercial premises:
The lease for business premises has a special tax treatment. On the gross amount of rent the tenant
has to withhold 19.50% on account of the landlord’s Personal Income Tax. And in turn, the landlord
has to apply VAT at the rate of 21% on the gross amount of the rent.
5.2 Money Laundering Regulation.
Regulations in Spain for the prevention of money laundering require lawyers to obtain from their
clients the information necessary for demonstrating the legal origin of the funds to be used in a
property transaction, which requires us to draw up an action protocol that involves asking our
clients to provide the following documentation:
• Copy of their last tax return.
• Copy of bank statements for the accounts from where the funds are transferred
corresponding to the last six months.
• Copy of the last three salary-slips for each person involved in the purchase.
• Copy of pension slips corresponding to the last three months.
• Bank recommendation letter.
• If the funds come from a loan or credit, copy of the document formalizing the loan.
• If the funds come from an inheritance, copy of the documents evidencing this.
• If the funds come from the sale of a property, shares, bonds or any other financial assets,
copy of the document evidencing the sale.
31
SPANISH WILL AND INHERITANCE TAX
There are three sets of rules that you ought to be familiar with in relation to wills and inheritance.
a) Formal rules – these are the rules on making a will, e.g. that it must be in writing, etc.
b) Substantive rules – rules that regulate the way in which inheritance is divided, e.g.
Norwegian rules on inheritance and succession.
c) Inheritance tax rules – the rules stipulating how much inheritance tax the heir has to pay.
Many people put off thinking about how to divide up their inheritance. This often leads to
unexpected and unnecessary problems for the heirs, particularly if the deceased leaves behind
assets in a different country. Few heirs know how to approach a Spanish inheritance case.
Inheritance is sadly also often the root of unnecessary family disputes. Good planning can prevent
conflicts and safeguard the deceased’s wishes. Starting the planning early can also reduce
inheritance tax in many cases.
1.- How to create a will in Spain.
Creating a Spanish will involves certain formal requirements. They depend on which type of will
you want to make. The most practical type of will – and the one we will look at here – is a socalled open will.
An open will must be signed in the presence of a notary. The notary’s task is primarily to verify that
the testator is in fact who he says he is, that the will has been created of the testator’s own free
will, and that the testator is “of sound mind and memory”. The testator must attend in person to
sign the will and may not appoint a proxy to sign the will on his behalf. If the testator expresses his
last will and testament in a language that the notary does not understand, Spanish law requires
the testator to appoint a translator. In a Spanish will created by a foreign national, the testator’s last
will and testament must be expressed in both Spanish and one other language, e.g. English (in the
same document).
32
Normally a will made in Spain does not refer specifically to a particular asset or interest, but instead
covers all the properties, interests and obligations held by the testator in Spain, or in any other
country at the time of his or her death.
The notary keeps the original will and notifies the central Spanish will registry in Madrid (Registro
Central de Ultima Voluntad). The testator will receive a certified copy.
Under Norwegian inheritance law, a valid Spanish will is also valid in Norway. It is important not to
create a Norwegian will that contradicts the content of any will created in Spain. Norwegian
nationals who own real estate in Spain should therefore limit the Spanish will to cover assets that
are left behind in Spain. When creating a Spanish will it is wise to think carefully about the wording.
For example, if the Spanish will specifically refers to the address Urb. Santa Maria, Apt. no. 1, please
note that you must create a new will when purchasing a new property. It may therefore be practical
if the will regulates the testator’s assets in Spain at the time of his death.
2.- Why create a will in Spain?
Spanish law permits Norwegian nationals to manage their assets in Spain via a Norwegian will.
From a legal perspective it is therefore not necessary to make a will in Spain.
However, a Spanish will does make the distribution of the estate in Spain considerably easier,
quicker and – in financial terms – cheaper. The Norwegian will must also be translated and
legalised. A number of facts must also be verified, including the validity of the will and the testator’s
legal ability to create a will, while all documents must be translated, certified and legalised.
3.- Applicable Law
The new European Regulations on Succession, Regulation number 650/2012, enacted on 17
August 2015, is applicable in all Member States, with the exception of the United Kingdom, Ireland
and Denmark, and to all successions of persons who die on or after the enactment date.
This Regulation provides that the law applicable to a European citizen should be that of his last
habitual residence at the time of his death. However it does allow for the testator to choose which
legislation to apply, which could be that of his or her own country at the time of making that choice,
33
or the law of the nationality that they held at the time of their death. This choice must necessarily
be set out in the will, and of course, may be altered or cancelled at any time, using the same type
of instrument.
The provisions of this Regulation will be applied to persons who die on 17 August 2015. However,
the choice of law to apply made by the testator before 17 August 2015, and for wills made prior
to 17 August 2015, shall be valid if they meet the conditions established in that Regulation, or if
they meet the conditions for validity in application of the rules of private international law in force
at the time when the choice was made, in the State where the testator had his habitual residence
or in any of the States of which he was a citizen.
Another important change in EU regulations is the creation of a European Certificate of Succession.
This basically consists of a public document that enables an EC citizen to prove his or rights as an
heir, after establishing the law applicable to the deceased.
4.- Inheritance tax
The amount of inheritance tax due is the same regardless of whether or not a will has been created.
5.- Calculating Spanish inheritance tax
The key factor to calculate Spanish inheritance tax is the size of the inheritance. Factors such as
the heir’s relation to the deceased, age, whether the inherited property is the heir’s principal home
or family business are also taken into account when calculating inheritance tax. If the inheritor
belongs to Group 1 or 2 (see page 35) and receives less than 175.000€ there is no inheritance
tax to be paid. However any amount above 175.000€ shall be the subject for inheritance tax from
zero euros.
For inheritance passed on to close family members the tax-free allowance according to the tax
rates of 2015 has been set at €15,956.87 per heir. For real estate the main rule is that
inheritance tax should be calculated on the basis of the market value. In our experience the tax
authorities will accept the rateable alue (valor catastral) multiplied by the local coefficient, e.g.
Marbella 4.5.
34
This means that the tax authorities currently exercise a degree of discretion, the golden rule is that
the declared value of the property in the inheritance title deed will never be lower that the rateable
value of the property. On the other hand, it is not necessary to set the market value higher than the
valor fiscal of the property.
Roughly translated, the valor fiscal is the rateable value of the property, and it is set by the
municipality in which the property is located. If you set the market value too low, you may find that
the tax office intervenes and sets a new, higher market value.
Motor cars:
Every year the Spanish tax office publishes a table with the values of motor vehicles.
Bank account:
The balance at the time of death shall be used.
Tax-free allowance:
As mentioned above, the amount of inheritance tax payable depends on the heir’s relation
to the deceased and on the heir’s age. Here is an overview:
Group 1:
For heirs younger than 21 years of age, the tax-free allowance per heir is €15,956.87.
Heirs younger than 21 are also granted an additional tax-free allowance of a further €3,990.72
for each year under 21 years, with a total maximum allowance of €47,858.59.
Group 2:
For heirs who are aged 21 or over and for spouses and parents the tax-free allowance is €15,956.87.
Group 3:
For what Spanish inheritance law defines as second and third degree heirs
(siblings, nephews and uncles) the tax-free allowance per heir is €7,993,46.
35
Group 4:
There is no tax-free allowance for fourth degree
relatives and persons with any family relation to
the deceased.
On this page you will find a simplified inheritance tax
table. Using the table, here is a practical example of
how to calculate inheritance tax: Imagine that the
deceased owned an apartment worth €96,000. First
we need to add 3% for furniture and fittings, taking
the taxable amount to €98,889. If the heirs are the
deceased’s children, deduct €15,956 for each child.
According to the Spanish inheritance tax tables, you
will in this case be liable for inheritance tax of
around 11.6%. The above-mentioned additional 3%
should be calculated from the total net value of the
deceased’s estate, i.e. not just from the value of the
house but also from other assets.
Inheritance tax must be paid no later than 6 months
after the death of testator. Spanish inheritance tax is
calculated according to the following table:
According to the table, inheritance tax starts at
7.65% on amounts up to €7,993.46. The table is
simplified in the sense that the percentage rate
increases gradually as the amount nears €7,993.46.
The highest rate according to this table is 34%, but
the percentage rate may be even higher depending
on the heir’s existing assets and family relation.
36
Basic amount in euros
Percent
0,00
7,65
7.993,46
8,50
15.980,91
9,35
23.968,36
10,20
31.955,81
11,05
39.943,26
11,90
47.930,72
12,75
55.918,17
13,60
63.905,62
14,45
71.893,07
15,30
79.880,52
16,15
119.757,67
18,70
159.634,83
21,25
239.389,13
25,50
398.777,54
29,75
797.555,08
34,00
7.- Inheritance planning.
The inheritance tax can be reduced by planning your inheritance. Inheritance planning means
making financial decisions while you are alive. Inheritance tax can in fact be reduced by as much
as 95%, but only if you meet certain criteria.
When buying real estate in Spain it can sometimes be sensible to consider various ownership
structures in order to reduce inheritance tax. Transaction costs when buying real estate in Spain are
around 10% of the title deed value. It can therefore be an expensive experience if, after signing the
title deed, you wish to change the ownership structure for inheritance reasons.
We should also add that Spain comprises regions that are largely autonomous (comunidades
autonomas). Inheritance tax varies within the different regions. We should also like to point out that
some regions have rules that deviate from the provisions described in this article.
Moderate valuation
Inheritance tax on real estate is calculated on the basis of the property’s market value. Inheritance
tax can therefore be reduced by way of a moderate valuation, but if the value is deemed to be far
too low, the Spanish authorities may increase it. A moderate title deed value will also mean higher
capital gains tax when the inheritor sells sell, because the apartment’s entry value is often set to be
the same as the title deed value.
On the other hand, if the property is to be sold immediately after being transferred, it would be
sensible to aim to achieve the highest possible inheritance tax basis. This is because capital gains
tax is higher than inheritance tax. Capital gains tax for non-residents is 21%, as mentioned
previously. The capital gain is calculated on the difference between the value at the time the
property as inherited and the value it is sold for. Based on a reduction in capital gains tax, it is
obviously something that must be considered on a case-to-case basis.
The property’s net value is used for calculating tax. A mortgage on the property will also reduce the
taxable amount. It may therefore be sensible to consider taking out a mortgage on the property.
37
One particular problem is when the market value of the inherited property falls significantly. The
Spanish tax authorities use the valor catastral as a starting point, and to identify the basis for
calculating tax they multiply this with the local coefficient. This coefficient varies from town to town.
For example, in Mijas it is 1.21 and in Marbella 1.25. The result is often that the basis for tax
calculation is higher than the market value. In several cases we have pleaded that this is clearly
unreasonable and probably unlawful, but without being heard. This practice is unlawful in our
opinion, but we assume that the tax authorities will not change their practices until a final legal
ruling is made in relation to this issue.
Should your children be registered as the owners of the property instead of you?
In some cases it may be an advantage to register your children as the owners of the property. The
benefit of this approach is that there will be no taxes or charges payable in Spain when you pass
away. However, be aware that the transaction can be seen as a gift and thus subject to inheritance
tax. You can avoid this by drawing up loan agreements between parents and children.
Although this may initially seem like a good way to reduce future inheritance tax, you need to be
certain that your own interests are being looked after. The person named in the title deeds is the
official owner of the property with the rights and obligations that this entails. The person may sell
the property, take out loans or rent it out, for example. However, you can circumvent this by
securing a right of use to the property, which is then registered in the office copy of the property
in the Land Registry. A right of use refers to the right to use the property, and you may decide
exactly how long this right of use should last.
You should also be aware that if the child is a minor, i.e. under the age of 18, the Norwegian public
guardian office will become involved. For example, you will need the consent of the public
guardian office if the property is to be sold. Another scenario is that you may wish to become
resident in Spain in the long term, while your child is less interested in putting down roots in
Spain.
Residents in Spain enjoy certain tax benefits compared with non-residents. Capital gains tax on
property sales for non-residents is 19.5%, for example, while residents pay the same 19.5% rate
but with additional allowances. If you are planning to become resident in Spain for tax purposes,
it may be useful if you stand as the registered the owner of the property.
38
It may also happen that the person registered as the owner passes away before you. If that were
to happen, you must pay inheritance tax since you are the heir! If the official owner of the property
has not created a will, the property will be handed down to the person who is the legal heir. You
can safeguard yourself against such a scenario by making the official owner create a will in which
you, alternatively your grandchildren, are named as the sole heir to the Ownership property.
However, in such a situation you must consider whether the deceased has sufficient assets so that
the distribution of the will is not in breach of the compulsory inheritance rights of the children or
the minimum inheritance rights of the spouse.
Undistributed estates – right of use
The concept of undistributed estates does not exist in Spain. If, under Norwegian inheritance law,
the surviving spouse is in possession of an undistributed estate that includes an apartment in Spain,
distribution will most probably take place by registering the surviving spouse as the sole owner of
the property. If the spouses were joint owners, the surviving spouse will normally be liable for
inheritance tax on half of the net value of the property. After the death of the surviving spouse the
children will again be liable for inheritance tax on 100% of the property’s market value. In other
words, inheritance tax is paid twice.
One way to avoid this situation is to grant the surviving spouse right of use to the first deceased
spouse’s share of the property, while the actual right of ownership is transferred to the children.
The surviving spouse must pay inheritance tax on the right of use, but the tax is lower than when
transferring the right of ownership to the surviving spouse. The person will then be granted a 50%
right of ownership and a 50% right of use. In this case the children may not sell the property
without the consent of the surviving spouse.
Another way could be to use the inheritance agreement between the inheritors which is legally
valid in Norway.
Final observations
Inheritance planning requires careful individual planning, taking into account the current family
situation. Planning can be difficult as nobody can foresee what will happen in the future.
The European Court of Justice Ruling of 3rd September 2014 required Spain to amend its domestic
legislation on Inheritance Tax.
39
It excludes non-residents in Spain who are not resident in any of the 28 Members States of the
European Union, (EU) or in any of the three EFTA States (Iceland, Liechtenstein and Norway).
a) If the deceased was resident in Spain:
• When the heirs are EC residents, the legislation of the autonomous region where the
deceased died is applied.
• When the heirs are non-EC residents, national legislation is applied.
b) If the deceased is resident in the EEA but non-resident in Spain:
• When the heirs are EC residents, the legislation of the autonomous region where the
properties with the highest overall value are located is applied. If there are no assets in
Spain, they are only subject under the personal obligation of successors resident in Spain
in the autonomous region where they have their residence.
• When the heirs are non-EC residents, the legislation of the country is applied.
c) If the deceased is resident in a State not included in the EEA:
• The successors shall be subject to the application of national legislation, regardless of
whether they are residents or non-residents in Spain (EC or non-EC).
Shared ownership of the inheritance and Usufruct.
If the widow is given the usufruct of the inherited property, then inheritance tax will be less, as the
estate is distributed among more people. The mother will pay inheritance tax on the value of the
usufruct which will depend on her age and that value will decrease as the years pass. The children
will pay inheritance on the value of the percentage of bare title received by each one, and
subsequently, upon the death of their mother, they will have to settle the tax for the value of the
usufruct at the date of her death, which will be less than at the time when it was acquired.
Among the tax costs for inheritances in Spain, the municipal Plusvalia tax must be borne in mind
in respect of the properties included in the inheritance.
Conclusions.
Lastly, it should be said that if Norwegian law is applicable to the inheritance, any succession
arrangements validly formalised in Norway between the heirs will be valid in Spain.
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GENERAL INFORMATION ABOUT
Vogt Advokatfirma España S.L
• Vogt Advokatfirma España S.L. is one of few law firms in Spain employing both Spanish
and Norwegian solicitors, allowing it to approach legal matters from both a Spanish and a
Norwegian point of view.
• The firm provides legal assistance in the fields of real estate, tax, inheritance, emigration
and immigration to Spain, corporate law, maritime law and general issues concerning
business law – Spanish, Norwegian and international.
• The firm has been established in Spain since 1999, and the senior partner has 40 years’
experience serving Norwegian clients abroad (private individuals, public authorities,
institutions and businesses).
• You can find more information about the company at Vogt’s website:
www.vogtlaw.com.
• If you require references, please contact solicitor Einar Askvig, the senior partner at
Vogt Advokatfirma España S.L.
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QUALITY CONTROL BY VOGT ADVOKATFIRMA
01. Drawing up powers of attorney.
02. Negotiation reservation contracts.
03. Obtaining and reviewing building specifications.
04. Checking that the developer has obtained the necessary permits.
05. Checking that there are no encumbrances on the property at the time of transfer.
06. Negotiate purchase contract (compraventa) with the developer’s solicitor.
07. Checking that the developer provides an adequate bank/insurance guarantee.
08. Assisting with financing. Tax advice (Norway and Spain).
09. Advising on optimal tax structure – should you own the property personally or via a company?
10. Obtaining NIE number (Spanish tax identification number).
11. Inheritance issues (should the children be registered as owners?).
12. Drawing up title deeds in consultation with the vendor’s solicitor and notary.
13. Representing the buyer when signing the title deeds.
14. Payment checks.
15. Arranging water and electricity connections.
16. Payment of taxes and charges in relation to the transfer of the property.
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Our staff;
Einar Askvig, Solicitor and Senior Partner:
[email protected]
José Luis Rojas, Senior Lawyer and Partner:
[email protected]
Christine Sollie Jensen, Senior Paralegal and Partner:
[email protected]
Lydia Moya Megias, Accounts Manager:
[email protected]
Carin Gustavsson, Lawyers Assistant:
[email protected]
Kristin Bjøran, Lawyers Assistant:
[email protected]
Rocio Prados Trillo, Lawyers Assitant:
[email protected]
Susanna Lindblad, Receptionist:
[email protected]
Salvador Romero Castillo, Administration dept Coordinator:
[email protected]
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Avda. Ricardo Soriano 65 · 2-3
29601 Marbella · Spania
Tel.: +34 952 77 67 07 · Fax: +34 952 77 05 01
E-mail: [email protected] · [email protected]
www.vogtlaw.com