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Utilities Bills
You want to see the owner’s paid-up receipts for such utilities as electricity, water, rubbish collection, and even telephone. This assures you that the bills are paid and also gives you an idea of what it will cost to run the place.
If you should get stuck with unpaid telephone bills by the previous owner, be aware that these are personal bills from private companies. They do not attach to the property, only to the person who signed the electric or water company contract.
The company will insist that they will cut off the service if the bills are not paid. Let them cut it off. For a reasonable fee, you simply go into the company office and sign a new contract, starting fresh without the previous owner’s bills. This fee is exactly the same as the charge for changing the electricity contract into your own name in any case.
Once you and your lawyer or adviser are satisfied with these checks into the situation of the property, and you and the seller have arrived at a price, you can factor into your calculations the amount of taxes and fees that will be paid on the transaction.
Transfer Costs
What are the taxes and fees going to cost you? They will probably be less than 10 per cent of the purchase price if the breaks are with you, but can go as high as 15 per cent if certain taxes turn out to be higher than usual in your individual case.
You have two taxes and two fees to pay on the transfer of property The two fees are for the notarisation of the deed and for its registry in the Property Registry The two taxes are the transfer tax and a sort of capital gains tax on the increase in value of the land, usually called the plus yalta tax. This tax is a municipal tax.
Notary: You pay the Notario a fee fixed by an official scale. The fee varies according to the amount of land, the size of the dwelling and its price, but let’s say between €350 and €600.
Property Registry: Then there is a fee for the inscription of the property in your name in the official Registro de Ia Propiedad. This will be a similar amount. Your lawyer or property consultant can tell you exactly how much these fees will be before you buy
Transfer Tax: The transfer tax, called Imp uesto de Transrnisiones Patrimoniales in Spanish, is 6 per cent of the value declared in the contract for private sales. If you purchase new property from a developer, this tax will be WA (value added tax), at 7 per cent because the sale is a business operation, not a private deal between two individuals. In addition to this, you pay a documents fee, or stamp duty, of one half of one per cent, so buying a new property will draw tax of 7.5 per cent.
Plus Valia: The other tax on property sales is the (irbitrio sobre el incremento del valor de los terrenos, the municipal tax on the increase in the value of the land since its last sale. This is usually called the p1 us yalta for short, and it can vary widely
In the case of an apartment or a townhouse in a new urbanisation, where little land is involved and where there has been no real increase in value because such a short time has passed since it was developed, the tax can be very low. It will be much higher if you buy a house with several thousand square metres of land, which has not changed hands for 20 years and which has been recently re-zoned from rural to urban land, thus jumping greatly in value.
This tax is based on the official value of the land, which is always lower than the market value, and it varies from 10 per cent up to 40 per cent of the annual increase, depending on the length of time between sales and the town where it is located. The land is officially re-valued periodically for this purpose.
Do not confuse thisplus va/ķa tax with the non-resident’s 35 per cent capital gains tax on profits from the sale. (See Tax section).
You can find out exactly how much your plus yalta will be simply by going into the municipal tax office in your town and asking. They keep the records there for each property and will be giad to tell you the assessed value, so you can find out in advance. Or have your lawyer or property consultant do it.
Warning to Buyers: Since January 1, 1999, the plus valta tax can be charged directly against the property itself, meaning that an unscrupulous seller might promise to pay it, then “forget” to pay it, leaving the new owner stuck with the tax, or losing his property.
Who pays what ?
In deciding who pays what, the buyer and seller are free to contract whatever terms they choose. There is no Spanish law that requires that one of the parties must pay any particular tax.
Traditionally, the seller has paid the notary’s fees and the plus yalta tax, as he is the one making the profit on the increase in the land’s value, while the buyer pays the impuesto de transmistones and the registry fee, as he is the one who is interested in making sure the property is truly registered to his name. Spanish consumer regulations state that this should be the normal division of costs.
It is a frequent practice, however, for the contract to state that the buyer will pay todos los gastos, all the expenses arising. There is nothing illegal about this. Remember that the two parties are free to make any contract they choose.
This practice, which may seem unfair to the buyer, has come about because tax bills, especially the plus yalta, have often gone unpaid, especially by non-resident sellers.
By the time the new purchaser realised this, the seller was gone and the buyer stuck with the taxes anyway as they were billed to the owner of the property if the seller did not pay. Charging the new owner with all the taxes is at least straightforward and avoids complications.
Nevertheless, you can use this point in negotiating your final price. If the contract you are offered states that you as the purchaser must pay all taxes and fees, you could suggest that the seller take something off the price.
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