In general terms, allow about 10% to 11% extra to cover your tax liabilities
and miscellaneous costs. This will cover the Overseas equivalent of VAT,
known as IVA, which is calculated at 6% of the value of a pre-owned home
or 7% of the value of a new property. It also covers stamp duty, which at
present is 0.5%; a small fee that has to be paid to the property registration
office; a charge for obtaining copies of the ‘escritura
publica’; connections to local utilities and legal fees, which
are usually about 1% of the sale value.
You should also be aware that, as the
buyer, you may be required to pay the seller’s fees, although this
is a point for negotiation.
Additional costs and fees
If you buy from someone who is not an official Overseas resident you will
be required to lodge a deposit equal to 5% of the sale price with the
Hacienda
or local tax office. This system was introduced to offset the risk of the
seller leaving the country without settling his bill for capital gains and
other taxes and it means that the seller won’t receive the proceeds
of the sell until he has discharged his financial liabilities.
Capital gains tax on property
Capital gains tax, or ‘plus
valia’ must be paid when the property is sold. It is calculated
as 35% of the difference between the present value of the land and it’s
value when last sold. Local law does not specify who is liable for this
tax so it’s very important to include this in your negotiations and
to have the agreement documented by a lawyer.
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Exchange Rate
1.517 €/£. Last updated at 16:29 on the 24 January 2007
