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The right time to invest in properties in Spain?

Keep in mind: Taxation and other costs!

(PresseBox) (Munich , ) Due to the real estate and economic crisis in Spain, real estate prices have fallen, even in prime locations. As a result, Germans now have what appear to be favorable opportunities to buy properties in Spain. Should one take a chance now, or wait to see how things develop? That is the question many prospective buyers are asking themselves now.
Many foreign and resident investors are still hesitating, because real estate prices are expected to fall even further. Once the economy starts picking up, one could consider reacting swiftly and purchasing property in preferred locations.
In any case, private buyers would be well advised to weigh the pros and cons carefully before coming to a final decision. Anyone buying a vacation home in Spain just to use it once to four times a year should be doing so for pleasure and not purely as an investment.
Spanish tax authorities impose considerable taxes on any property purchases – in the form of the TIP (real-estate transfer tax) at a rate of at least 7% to 8% of the purchase price. If a company handles the purchase of a building site, as much as 21% in value added tax plus stamp duty of 1.5% to 2.5% can be added (see table). The real-estate transfer tax is charged to the customer, as is the value added tax. Of less importance, relatively speaking, is the municipal capital gains tax, usually only a few hundred or a thousand euros.

Notary fees are money well spent.
A notarized bill of sale and an entry made in the land register are not necessary to validate the purchase of real estate in Spain. However, it is highly recommended if you want to save yourself some nasty surprises. There have been cases of real estate having been sold several times over. Trying to get your money back is a long ordeal. When the services of a notary are employed to have the real estate recorded in the land register, the transaction can be regarded as watertight.
Private individuals who own real estate in Spain are responsible for filing their own income tax returns. Not only rental income earned is taxable (at a rate of 24.75% of the gross rental revenue), but also personal use, at a rate of 24.75% on 1.1% - 2% of the cadastral value. Spanish municipalities also impose property tax, at rates of 0.6% to 1.3% of the cadastral values.

The Spanish inheritance tax law and the gift tax may be time bombs waiting to go off for foreign owners of Spanish estate if they are not familiar with the Spanish tax system. Therefore expert advice is essential.

Author
Joerg Hörauf, ECOVIS Barcelona, Spain, joerg.hoerauf@ecovis.com

Co-Autor
Larsen Lüngen, ECOVIS Köln/Krefeld/Düsseldorf, Germany, larsen.luengen@ecovis.com

ECOVIS AG Steuerberatungsgesellschaft

About Ecovis
Ecovis is a leading global consulting firm with its origins in Continental Europe. It has over 4000 staff operating in 40 countries. Its consulting focus and core competencies lie in the areas of tax consultation, auditing, legal advice and accounting and management consulting services. The particular strength of Ecovis is the combination of personal advice at a local level with the general expertise of an international and interdisciplinary network of professionals. Every Ecovis office can rely on qualified specialists in its back offices as well as on the specific industrial or national know-how of all the Ecovis experts worldwide. This diversified expertise provides clients with effective support, especially in the fields of international transactions and investments - from preparation in the client's native country to support in the target country. In its consulting work Ecovis concentrates mainly on mid-sized firms. Both nationally and internationally- from preparation in the client`s native country to support in the target country. In its consulting work Ecovis concentrates mainly on mid sized firms. Both nationally and internationally, its one-stop-shop concept ensures all-round support in legal, fiscal, managerial and administrative issues.

The name Ecovis, a combination of the terms economy and vision, express both its international character and its focus on the future and growth.