Frequently Asked Questions about Marbella

A building survey, as it is understood in the U.K., is not necessary in Spain for mortgage purposes. It is nonetheless advisable when purchasing an older property. Common things to check for are the condition of the plumbing and electrical installations, waterproofing, roofing, and so on. These checks, as well as a full structural survey, can be carried out by a Spanish technical architect (aparejador) or indeed by a qualified British Chartered Surveyor. Any fees involved would be to the account of the prospective purchaser.

Spanish banks are highly competitive when offering mortgages on both new properties and resale properties. It is now common practice for most Spanish banks to offer mortgages to non-residents, although some banks do offer a wider variety of financing packages than others. Common terms offered are mortgages from 5 to 15 years, often of up to 70% of the purchase price, at around 1 point over current EURIBOR rates. The applicant must of course qualify for the loan, especially from the standpoint of having sufficient income to afford the monthly payments, and the bank must appraise the property value. The appraised value, generally speaking, coincides with the market value of the property.

A foreigner who is a non-resident of Spain has the right to sell his property to another non-resident foreigner entirely in foreign currency, with payment made outside of Spain. It should be noted that, since 1997, a 5% tax retention is effected by the tax authorities upon the sale of any property owned by a non-resident vendor, which is applied towards the capital gains tax (currently 18%). The profit on the sale is reduced by a small percentage for each year of ownership in compensation for inflation. If the amount withheld is greater than the tax due, it can be reclaimed in part from the tax office. Those sellers today who have owned their property prior to 1986 currently pay no capital gains tax on a sale.

The seller always pays agency fees.

It is the duty of the client or his lawyer to settle these bills via direct debit.

An urbanization is a planned community which has met the standards of the various governmental agencies with respect of the use of the land (residential, commercial, sports area, green zones), and to providing a specific set of services and a minimum level of quality in the construction of roads, sidewalks, drainage, sewage systems, electricity and water installations, and so on. Obtaining permission to develop land into an urbanization can take a developer up to several years and several million euros of expense. The most obvious advantage to the owner of a property within an urbanization is the fact that the land usage is strictly controlled. If one decides to build a house on a plot in a section of an urbanization zoned exclusively for single family dwellings, you are assured by law that neither an apartment block nor a rabbit farm can be located on the adjacent single family plot!

There are several zoning classifications for rural land outside of urbanizations. Marbella is in the process of updating its master plan, and great care should be exercised in purchasing land outside of an urbanization: under most circumstances, one may not be able to build upon land which is not within an urbanization.

In addition to the annual Impuesto sobre Bienes Inmuebles or IBI (the equivalent of Rates) paid on all property to the Town Hall, non-residents must pay a WEALTH TAX (impuesto de patrimonio) on their assets in Spain. The amount of tax is determined based on the individual wealth. The cost price of the property is usually the basis for the calculation of the tax.

Here are two examples on how to use the tax table below:

If you have assets in Spain of €150.000/£93,000 you simply multiply this amount by 0.2% and find that the tax is €300/£186.

If you have assets, of, let us say, €240,405, the calculation is the following:

On the first €163,848, you pay the fixed amount of €328.

On the difference up to the total amount of your assets (€240,405), that is €76,557, you apply 0.3%, that is, €230. Added to the fixed payment, your total tax payment for wealth will be €558.

assets €	Fixed Payment €	Rest upto €	% on surplus
0	0	163,848	0.2
163,846	328	163,848	0.3
327,696	821	327,696	0.5
655,392	2,458	655,392	0.9
1,310,206	8,356	1,310,783	1.3
2,621,567	25,396	2,621,567	1.7
5,243,133	69,963	5,243,133	2.1
10,486,267	180,069	whatever	2.5

Non residents are wise to appoint a fiscal representative to handle all tax matters relating to ones assets in Spain. Official notifications regarding your property will be delivered to your fiscal representative, which is highly advantageous to the foreign owner as it protects an owner from having his orher assets repossessed by the Inland Revenue due to non-payment of taxes, for example. In previous years, there were cases of non-residents coming to Spain only to find their properties had been embargoed and even sold over, all due to the fact that the owner had been officially notified at a local address and found to be absent! To contract a fiscal representative one need look no further than one's own lawyer who will refer you to his own tax consultant.

Non residents who use their property themselves must also file for Income Tax and must pay tax for any income received in Spain at the flat rate of 25% (including real estate rental income) even if the income was received abroad. Every non-resident is assessed on income tax even if there is no real income (on the theory of derived benefit) at 25% of 2% (or ½%) of the rateable value of the property value (valor catastral), which is generally a fraction of a property's market value. This tax is not applicable if the owner is leasing the property to third parties, but it is applicable with respect to the rental income received, which is taxable at 25%.

Upon the sale of real estate (when the seller is a non-resident), there is an automatic tax retention of 5% of the sales price, payable against a 35% capital gains tax. If the seller is a resident in Spain, with residency permit issued six months or more, there is a flat rate of 15% capital gains tax if the property has been owned 1 year or more, adjusted to compensate for inflation.

RESIDENTS in Spain must of course file Income Tax and declare the income they receive regardless of source. For tax purposes, one is considered a FISCAL RESIDENT if one resides in Spain over 183 days per calendar year, regardless of whether one is officially resident or not.

Europeans from the E.U. can stay in Spain indefinitely. Visas are not required for some other countries such as the United States, but are still required in other cases, depending on one's country of origin, and with varying lengths of stay permitted.