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Off shore companies
You might be offered property already owned by an offshore wmpany registered in one of the many “tax havens” around the world.
This means that the property is not registered in the name of the owner but in the name of a company located in Gibraltar or Panama or the Caiman Islands. The owner of the company owns the property.
These “tax havens” earn their name because they are legal jurisdictions where taxes on locally registered companies are nil or very small, and secrecy is assured from the owner’s own tax jurisdiction.
The advantages are clear. When you sell your Spanish property, it is only the company that is transferred. The same company continues to own the same Spanish property, so no Spanish transfer taxes are charged. Only the offshore company has a new owner. The same applies for inheritance tax when the company is bequeathed to an inheritor. The offshore location charges no tax on this.
The disadvantages are that Spain, keenly aware of the tax loss, has placed a flat tax of three per cent per year on any property held by an offshore company. They have a list of tax havens. European Union authorities are also preparing to place restrictions on these companies, so it is becoming a doubtful proposition.
As a buyer, you have a choice between purchasing the offshore company itself or buying as an individua’ and paying the transfer taxes. See section on Taxes for advantages and disadvantages of off-shore companies.
Bank repossessions and public auctions
After the 1990 crash of the Spanish property boom, the sunshine coasts were littered with real bargains, Some of these bargains were on sale by people who could not keep up the payments on their property, some of them were offered at cut-rate prices by developers who were stuck with stock they couldn’t sell, and some of them were villas and apartments that had been repossessed by banks.
Bank foreclosure of mortgages is one of the few Spanish legal procedures that works quickly and effectively. A few of the properties were even those seized by courts and sold at auction to satisfy a debt against the owner.
The consensus of opinion in the property world is that most of these bargain properties have been sold and the few remaining are so undesirable that nobody wants them at any price. This is mainly true, but there are still some bargains available if you look for them.
One of the easiest ways to make a stab at buying a cut-price property is simply to walk into the offices of bank managers in an area where you would like to live. Go into the bank and say that you would like to speak with the manager about a business matter. He will probably speak English and he will probably receive you after a short wait. Say to him you are interested in buying a repossessed property. Reposesión. Ask him if he has any on his books.
You may be as astonished as I was when he points to a stack of escrituras on his desk and says, “How about one of these?” If the bank is a bit more modern, he may punch up a list on his computer terminal and inquire about the price range that interests you. So, you look at the list and pick a villa or an aparfment that seems promising. You view it, like it, and buy it from the bank for maybe half what it would fetch on the market. It can be that easy. Or you might find that banks in your area do not have anything that interests you.
So why aren’t these properties already sold, you ask. Good question. The answer seems to be that banks simply don’t know how to sell real estate. A few of them have established their own departments for selling their repossessed properties, but most of them just sit in the files until the court gets around to auctioning them off at official proceedings.
If you really feel like getting into the system, you could even try the court-ordered auctions of property being sold to satisfy debts. These auctions, called subastas, can offer some incredible buys to those who get into the inside on how they work. Properties have been sold at one-tenth their real value, for example.
In northern European countries this simply cannot take place, but under the Spanish system the court is obliged to take the highest offer, no matter how low, after the property has been offered several times.
You are right if you think that this system attracts abuses. In many courts there are professional subasteros who work together, sometimes in collusion with corrupt court officials, to offer low bids. Later, these professionals split the take among themselves. They often assign the properties to third parties, who are not real buyers, but who also get their share of the profits once the property is sold on again.
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