Starting June 2013, Property owners are required to provide a Spanish issued ENERGY CERTIFICATE for properties offered for sale or for rent ( for a rental period of 4 months or more). There are companies specialized in evaluating the energy efficiency of a dwelling, so that property owners can fulfill this government requirement. Failing to comply with this new legislation can result in heavy fines. The certificate is valid for 10 years from date of issue. It need renewal every 10 years or if there are renovations or upgrades done to the structure. Once this certificate is issued by a certified technician the seller registers it with the local office. If the property building has a Home Owners Association ( HOA) or Community Administrator, a copy of the certificate must be kept in their files
Appreciation or “Plusvalia”
Upon the transfer of property ownership, the seller is required to pay to the Spanish Government a
Plusvalia Tax. This tax is calculated according to the perceived increase in value of the property. The base for the appreciation is the “ Valor Catastral”, The “IBI” found in the Registro Catastral.
The rate of income tax is 21%. The Capital Gains tax is calculated as the difference between the purchase price and the selling price of a given property. To this effect there are a number of deductions available to the seller such as Improvement expenses, and the inflation rate. If the seller is not a Spaniard or a permanent resident of Spain, the buyer is required to withhold 3% of the selling price as an advance on the income tax the seller must pay. This 3% is paid to the Tax Office.
The Option Agreement ( Contract to Purchase Agreement)
The option agreement is a legally binding document where the seller and buyer agree on the terms of the sale of a property. Usually there is an initial deposit of 10% of the purchase price giving the buyer the right to acquire the property within the stipulated period of time stated in the contract. This deposit will be accounted for as credit to the buyer at closing. During his time the seller cannot enter in a contract agreement with another buyer. If the terms in the contract are met by the buyer and the seller cancels the contract to purchase agreement, he/she must repay twice the amount of the deposit to the buyer.
The Deed ( The Closing)
At an agreed date and time the buyer and the seller meet at a Notary’s office to finalize the sale and sign all the pertinent documents. At this time the Notarial Contract of sale or property deed ( Escritura) is executed and the recording of the sale takes place at the Land Registry office. The Deed contains all information pertaining to the buyers and sellers, official description of the property, purchase price, payment terms and charges.
The notary obtains a certification before hand to verify the identity of the buyer and seller. The seller provides the last receipt of the Council Tax ( IBI), and a certificate issued by the Home owners’ Association or administrator of the community stating that all community fees are paid by the seller up to date.
Typicall charges for executing the deed at the Notary’s office are 3% of the purchase price and are paid by the buyer. Transfer tax varies between 9 and 12%.
After the new deed ( Escritura) is registered in the name of the buyer as a new owner, the keys are handed over to the buyer.
Real Estate Transfer Tax ( ITP )
For all sales that are not subject to VAT , the transfer tax ( ITP ) applies. The real estate transfer tax is a regional tax , which is highly different in the different autonomous regions.
As of January 01, 2013 is calculated on the Balearic Islands , the land transfer tax as follows :
• For example: a sales price of € 400,000.00 be taxed at 8 %
• A sales price between € 400,000.01 and € 600,000, the transfer tax is 9 %
• Sales over 600,000.01 carry a transfer tax of 10 %
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