Diana Zuuring Ricardo Soriano nr 20, 3C 29601 Marbella, Malaga, Spain Tel: (34) 952906185 Fax: (34) 952816813 www.zuuring.com e-mail: diana@zuuring.com Rechtsanwälte, Lawyers, Abogados, Advocaten Introducing Diana Zuuring Lawyers Diana Zuuring Lawyers is a multi-lingual and independent law firm based in the centre of Marbella, Costa Del Sol, Spain, which operates throughout SPAIN. The company founder, Diana Zuuring, initially practiced law in Germany and has an indepth knowledge of law with experience in some of the most prestigious law firms in Málaga and Marbella. She is a registered lawyer in both Germany and Spain and speaks fluent German, Spanish, English and Dutch. Diana Zuuring Lawyers offers one of the most focused and dedicated services available to property purchasers in Spain. They understand the concerns of being a foreign investor in another country and it is their primary goal to give a professional, friendly and efficient service which is guaranteed throughout your transaction. At Diana Zuuring Lawyers we provide a complete legal, tax and management service to both foreign citizens and companies in Spain. We are offering legal services in the following areas: - Conveyancing and Real Estate Law - Urbanistic Law - Company foundation, tax and accountancy - Fiscal advice on personal, property and business taxation - Probate and wills - Litigation - Civil, Fiscal, Mercantile and Trading Law If you are looking for the peace of mind provided by leaving your affairs in professional hands, then please contact us or visit us at our Marbella office. We look forward to meeting you! 1
The purchasing process Choosing the right Estate Agent Always select an established real estate agent who will find you the right property and be able to guide you through the preliminary negotiations with the seller. Choosing the right lawyer It is advisable to use a lawyer based in Spain who will provide the legal guarantees for the purchase of the property, ensuring that Spanish legal requirements are met. Your lawyer will check to ensure that the property is bought free of encumbrances, liens, charges or debts and that all payments of local contributions and community charges are up to date. Property searches The property searches may vary depending on the kind of property that you have chosen to purchase. Using a lawyer from your home country could substantially increase your legal fees and most certainly will delay the sales process. Reservation deposit and contract Once you have found the right property, the purchase process begins with a reservation agreement, which takes the property off the market and also freezes the purchase price. The deposit to be paid at this stage is between 3,000 and 12,000 Euros. Before arriving in Spain, ensure you have funds available. The best way to pay the reservation fee is by credit card or transfer. It is not advisable to pay by cheque, especially if drawn on a foreign bank account, as it can take approximately 14 days to clear at a Spanish bank. Such a delay could cost you your property. Exchange of private contracts Within approximately 14 days of signing the reservation agreement, the private purchase contract is to be signed between the buyer and the seller (or their authorized representatives). During this time, the lawyer should have completed the investigations and searches in relation to the property and will have arranged with the seller the procedure for cancellation of any outstanding debts. It is customary practice at this point to pay between 10 to 50 % of the purchase price. Funds can be lodged in your own Spanish bank account and your lawyer can arrange for an account to be opened for you Or on your lawyer s escrow account. Diana Zuuring lawyers have negotiated some competitive rates with local Spanish banks for their clients. 2
Formal completion and exchange at the Notary A property sale is formally completed in Spain when the title deed (escritura de compraventa) is signed before a Public Notary in Spain, the agreed final payment is made and possession of the property is passed to the new owner. In the case of new builds, it can take up to 18 months before completion and usually payments are in stages of two to four months, for example by bankers draft, cheques from a Spanish bank account or bank transfer. Registration Once the title deed is signed, the notary will fax a copy of it to the local land registry. Your lawyer will pay on your behalf all the relevant transfer taxes and will deal with the formalities of registration of your title deed. Final registration of the title deed may take several months. Your lawyer will arrange for the transfer of the utility service accounts, such as water and electricity, to your Spanish bank account. Purchasing a property on a new development When purchasing a property on a new development, the developer should provide bank guarantees against each payment made on account of the purchase price. Many developers offer these bank guarantees free of charge whilst others make a percentage charge. A bank guarantee protects your payments. In the unlikely event that the developer fails to complete the property, it will go into liquidation or where they fail to complete on time and you do not wish to wait, all funds will be returned in full. New property is handed over without water and electricity connection. This can however, be arranged by a lawyer. Connection of such services can take up to four weeks following completion. Therefore, we suggest that you do not make any plans to use the property during that period. Under Spanish law, the developer will issue you with a liability construction guarantee. Costs There are in principle three fees and one tax to pay when purchasing property in Spain. You should budget that the costs involved purchasing a property in Spain are approximately 11-14% of the purchase price. If you have a mortgage there is an additional cost of approximately 2% of the property purchase price. The fees 1) Legal fees: The legal fee depends on the service you require, plus VAT (IVA) currently charged at 21%. We have a transparent fee structure with clear advice of any charges and fees. 2) Notary fees: the notary charges according to a fixed scale, depending upon the official value of the property. The charges may range from 300 to 1200 Euros. 3) Property Registry: Generally 60-80% of the notary fee. 3
The tax 1) On a resale property, Transfer Tax (ITP) at 8% is applicable on purchases up to 400.000 Euros, from 400.000 Euros up to 700.000 Euros the rate is 9%, and from 700.000 Euros the rate changes to 10%, which is payable upon completion. Example: Purchase price of 450.000 Euros; then you pay 8% of 400.000 Euros and 9% of 50.000 Euros. The transfer tax has to be paid after completion. When buying from a developer, you will pay VAT (IVA) at 10% which is payable with each installment, plus Stamp duty at 1,5 % of the property price. A VAT rate of 21% is applicable when buying commercial premises, plots of land or garage spaces. Other costs to bear in mind are as follows: - Change of utility contracts and organising their payment by direct debit - Fiscal representation - Community representation - Wills - Insurance - Water and electricity connection charges - NIE number This is the Spanish Tax number which will be requested by the notary in order to sign the title deed. We recommend that you apply for your NIE number at an early stage as you need to be present in person at the local Spanish police station to do so. We can organise an appointment at the police station for you and will accompany you there. - Power of Attorney You should provide your lawyer with a power of attorney in order to act on your behalf with regards to your purchase. Bear in mind Annual Property Costs. 1) Community fees 2) Local Real Estate Tax (IBI) 3) Annual Income Tax (non resident tax) 4) Utility Services 5) Insurance Mortgages Spanish banks are willing to give mortgages to non-resident purchasers of property in Spain. The period of the mortgage depends upon the age of the buyer but can be extended up to a maximum of 30 years. The amount borrowed is 60 to 70% of the property s value, depending upon your income and assets. You will need to provide proof of your capacity to repay the mortgage and most banks will look for earnings per month in excess of three times your expected monthly mortgage repayment. 4
Documents required by the Spanish bank to apply for a mortgage: Wills 1) Last three pay slips 2) Last tax return 3) Banks reference to include telephone, fax number, name of manager and account numbers 4) Last three statements of your bank account 5) Statements of current assets and liabilities 6) If employed, a letter from your employer stating the length of employment, salary, etc. is required. If self-employed, profit and loss accounts signed by a Chartered Accountant are required. You should make a separate Spanish will dealing exclusively with your Spanish assets in order to avoid time-consuming and expensive legal problems for your heirs. As a foreigner, you will usually find that Spanish authorities do not oblige you to follow the Spanish law of compulsory heirs. You can leave your property to whomever you choose, as long as your own national law permits it. Selling a Property 1) Capital gain is due on the sale of the property. The tax is calculated as the difference between the value of the property at the time of its acquisition and the value at the time of its sale. The tax rate is 21 % for both non-residents and residents. 2) If the vendor is a non-resident in Spain, the purchase will need to retain 3% of the purchase price and pay it to the Tax Office Treasury on account of the potential liability to Capital Gains Tax. Your lawyer will inform you about existing exceptions. If you have no benefices on the sale, you can ask the Tax Office to refund this 3% (or a part of it) retained. 3) Plus Valia: This is a Municipal tax paid on the increase in value of the land since the previous sale and is fixed by the local Tax Authorities. It is calculated based upon the size of the land. By Law, the vendor is obliged to pay this tax. 4) Lawyer s fees. 5) Real Estate commission 6) Mortgage costs. If there is a mortgage on the property, you must consider the bank costs for the cancellation of the mortgage and the notary and registry fees. 5