7% TRANSFER TAX (I.T.P.) payable by the buyer for the purchase of any Real Estate (villas, flats, land, commercial premises, garages), provided the vendor is not a developer or normally trading in the business of resale properties.

8% (7% VAT and 1% STAMP DUTY) for any VILLA or APARTMENT, or GARAGE that is annexed to an apartment, where the vendor is a developer, promoter or habitual trader in these generally new properties.

17% (16% VAT and 1% STAMP DUTY) for PARCELS OF LAND, COMMERCIAL PREMISES, or COMMERCIAL GARAGE SPACES, where the vendor is a developer, promoter or habitual trader. This covers virtually all NEWLY URBANIZED LAND PARCELS and NEWLY BUILT COMMERCIAL PREMISES. This only covers resale properties when the vendor falls into one of the above categories.

Notary Fees & Property Registry Inscription Fees

Notary fees should amount to no more than €1000/£715, although the cost increases according to the number of pages or complexity of the title deed (e.g. transcription of statutes, payment in stages, property partially finished, etc.). As an example, an apartment costing €300,000/£215,000 will cost around €650/£464 in notary fees, whilst a property costing €600,000/£429,000 will cost around €800/£571in notary fees. Any higher than this amount, the fees go up marginally. The property registry inscription fees, providing the purchase is straightforward, run at around 65% of the notary fees.

Plus Valía

This is an "added value" tax based upon the increase of the Town Hall index value of the land only, from the prior (vendor's) purchase to the present sale.

This tax corresponds in principle to the seller, but, in common practice, is often paid by the purchaser, especially with respect to apartments or townhouses. As there are several variable factors used in calculating this tax, especially the length of time of ownership of the property, the amount payable can vary substantially and should be verified before proceeding with the purchase.

Summary

The total official costs involved in purchasing property should be less than 8% if it is a resale property, or less than 9% if VAT is paid on the purchase price, plus the PLUS VALIA, if applicable.

Other costs involved in owning Spanish property

Local Rates

Local rates are payable annually, and are calculated from the catastral or rateable value of the land assigned by the Spanish Tax Office. The catastral value takes into account the value of the land plus the value of the building, according to type, location, and usage. Upon this value, each municipal Town Hall decides on the percentage to be charged in respect of local rates. In the case of Marbella, the formula applied is 0.85% of the rateable value of the property, which is almost always far less than its true market value.

Examples: A 2 bedroom apartment in the beachside complex of Marina Puente Romano which is in the heart of the "Golden Mile" paid rates of €1.219/ £870 in 2003. A free standing, large beachside villa in the heart of the "Golden Mile" paid annual rates of €2,500/£1,785 in 2003.

Rubbish Collection & Water Rates

The rubbish collection rate is applied by the Town Hall according to the property and payable every 6 months, at a maximum rate of €258/£184 per year. Water consumption is calculated by the water meter consumption in cubic meters and is payable every 3 months. Payment can be made directly at the Town Hall or by bank with direct debit instructions.

Community Fees

Generally speaking, the Community of Co-Proprietors or Homeowners' Association is a legal entity comprised exclusively of the owners of the apartments in a building, or villas on an estate. The purpose of the Community is to own and maintain the common elements of the building or estate in question, and each homeowner is obliged to participate in the expenses of the upkeep of the community areas and services on a prorated basis with the other owners. Usually, a homeowner's percentage of the costs is fixed by the size of the apartment, or plot, divided by the total area of all the apartments or plots.

A budget for the annual community expenses is presented at the annual general meeting of the homeowners, and they or their authorized representatives must approve the budget by majority vote of those present at the meeting. Expenses can vary substantially according to the services provided, and normally include salary and social security of the hall porter, common garden maintenance, lift maintenance, repairs to common elements, rubbish collection, water for watering community gardens, electricity for lighting communal areas, insurance, security, and administration fees. The President of the community must, by law, own a property within the complex itself and is chosen by way of vote by the co-owners. The President has no remuneration for this role.

A typical 2 bedroom apartment in a building or area with a hall porter, swimming pool, and a small garden, could cost between €120/£85 to €300/£215 per month in community fees - but could go up to €600/£428 or more per month in a high luxury building with a large community staff and many services.

In the case of an individual villa in an estate of villas, community fees are often less since the private gardens and exteriors of such properties are generally not maintained by the community, and the community fees are limited to road and roadside garden maintenance, basic common service maintenance, and security.

Insurance

A standard insurance cost for a €300,000/£215,000 apartment with contents valued at €48,000/34,300 would be €280/£199 per year. One should note that in an apartment building, the Homeowners' Association is required to insure the building for its reproduction cost. Therefore, the individual's insurance policy for the apartment need not cover the entire value of the apartment, but only damages to the interior of the apartment, its contents, and third party liability. It is also advisable to insure the building at first risk in case the Community insurance is not comprehensive. For a villa with a reproduction value of €500,000/£357,000 with contents insured at €180,000/£128,600 the annual insurance would be in the area of €1,550/£1107.

Gardeners

The upkeep of a private garden is essential to the maintenance of your property and its cost will, of course, depend on its size. As a rough guide, the hourly rate is about €14/£10. A full-time gardener on salary would cost in the area of €1000/£715 per month, whilst a half-time salary would be in the area of €600/£430. Apartments and townhouses have the communal garden areas tended by a contracted gardener and the cost is included in your community fees. A villa on a plot 2,500m2 might require a gardener a few hours a week. A large parcel of a full acre or more may require a half or full-time gardener. Social security is an additional cost to full time wages and runs in the area of 40% of the salary.

Cleaning Service

Cleaning service is generally available on a full-time salary or hourly basis. Full-time salaries range from €600/£428 to €800/£571 per month plus approximately €120/£85 per month social security contributions. Part time help is usually charged by the hour with rates varying from €8 to €10 / £5.7 to £7.15.

Electricity

Electricity is billed bimonthly. Minimum rates are applicable whether you are in residence or not, and the minimum varies according to the amount of electricity your house could potentially use with all power and lights turned on. The minimum charge for an apartment might be between €24 and €36 / £17 and £26 per month. Charges for a villa are from about €60 to €90 /£43 to £64 per month, depending largely on the extent of the electrical installation. Usage is €0.08 /5.7pence per Kwh plus tax. With all the sunshine in Marbella, you will nevertheless be using less lighting and heating than in a lot of other countries!

Fixed-line telephone

The telephone bill is also charged bimonthly. Standard rates vary according to the equipment installed, but can be in the region of €18.50 / £13.21 per month including a touch dial telephone. A 3 minute call (daytime business hours) to any European Community country, direct dial, presently costs about €0.41 /30 pence (including VAT). There are many local and national telephone companies that can offer substantial savings to those who wish to spend some time studying the market., and ADSL broadband services are available virtually anywhere.

Miscellaneous questions & answers

Q: What if I want to buy a plot and build my own home?

A. Providing that a building plot is situated within an urbanization, or an area zoned within the Municipal Plan for such use, outline planning permission will already have been granted for the construction of a detached home. However, building regulations, which vary considerably, dictate the permissible size of the villa according to the size of the plot. Care should therefore be taken before proceeding with the land purchase that one will be allowed to construct one's chosen home on it. Panorama will be pleased to provide a list of bilingual architects, and to arrange viewings of some of their previous work.

Q: Are technical surveys available?

A. A building survey, as it is understood in the U.K., is not necessary in Spain for mortgage purposes. It is nonetheless advisable when purchasing an older property. Common things to check for are the condition of the plumbing and electrical installations, waterproofing, roofing, and so on. These checks, as well as a full structural survey, can be carried out by a Spanish technical architect (aparejador) or indeed by a qualified British Chartered Surveyor. Any fees involved would be to the account of the prospective purchaser.

Q: Is financing available?

A: Spanish banks are highly competitive when offering mortgages on both new properties and resale properties. It is now common practice for most Spanish banks to offer mortgages to non-residents, although some banks do offer a wider variety of financing packages than others. Common terms offered are mortgages from 5 to 15 years, often of up to 80% of the purchase price, at around 1 point over current EUROBOR rates. The applicant must of course qualify for the loan, especially from the standpoint of having sufficient income to afford the monthly payments, and the bank must appraise the property value. The appraised value, generally speaking, coincides with the market value of the property.

Q: When I sell my property, may I remit the proceeds of sale back to my own country?

A: A foreigner who is a non-resident of Spain has the right to sell his property to another non-resident foreigner entirely in foreign currency, with payment made outside of Spain. It should be noted that, since 1997, a 5% tax retention is effected by the tax authorities upon the sale of any property owned by a non-resident vendor, which is applied towards the capital gains tax (currently 35%). The profit on the sale is reduced by a small percentage for each year of ownership in compensation for inflation. If the amount withheld is greater than the tax due, it can be reclaimed in part from the tax office. Those sellers today who have owned their property prior to 1986 currently pay no capital gains tax on a sale.

Q: Who pays estate agency fees in the sale of a property?

A: The seller always pays agency fees, unless you come up with a different agreement with your agency. Although the seller remunerates his agency, the agent has an ethical obligation to see that the purchaser gets fair value for money, and at the end of the day, a good agent's job is to bring the buyer and seller together in harmony. This highlights the importance of working with an established estate agency with a strong reputation. The agency also has an obligation to see that the title deed to the property is passed free of all liens and encumbrances. Panorama provides an exceptional after-sales "settling-in" service for its clients, totally free of charge, as part of general company policy.

A: Frequently the administrator for the Community of Homeowners will settle these bills, but, if not, it is common practice in Spain to issue standing instructions to your bank to pay them on your behalf.

Q: What is an urbanization?

A: An urbanization is a planned community which has met the standards of the various governmental agencies with respect of the use of the land (residential, commercial, sports area, green zones), and to providing a specific set of services and a minimum level of quality in the construction of roads, sidewalks, drainage, sewage systems, electricity and water installations, and so on. Obtaining permission to develop land into an urbanization can take a developer up to several years and several million euros of expense. The most obvious advantage to the owner of a property within an urbanization is the fact that the land usage is strictly controlled. If one decides to build a house on a plot in a section of an urbanization zoned exclusively for single family dwellings, you are assured by law that neither an apartment block nor a rabbit farm can be located on the adjacent single family plot!

There are several zoning classifications for rural land outside of urbanizations. Marbella is in the process of updating its master plan, and great care should be exercised in purchasing land outside of an urbanization: under most circumstances, one may not be able to build upon land which is not within an urbanization.

Q: What about taxes?

A: In addition to the annual Impuesto sobre Bienes Inmuebles or IBI (the equivalent of Rates) paid on all property to the Town Hall, non-residents must pay a WEALTH TAX (impuesto de patrimonio) on their assets in Spain. The amount of tax is determined based on the individual wealth. The cost price of the property is usually the basis for the calculation of the tax.

Here are two examples on how to use the tax table below:

If you have assets in Spain of €150.000/£93,000 you simply multiply this amount by 0.2% and find that the tax is €300/£186.

If you have assets, of, let us say, €240,405, the calculation is the following:

On the first €163,848, you pay the fixed amount of €328.
On the difference up to the total amount of your assets (€240,405), that is €76,557, you apply 0.3%, that is, €230. Added to the fixed payment, your total tax payment for wealth will be €558.

Non residents are wise to appoint a fiscal representative to handle all tax matters relating to ones assets in Spain. Official notifications regarding your property will be delivered to your fiscal representative, which is highly advantageous to the foreign owner as it protects an owner from having his or her assets repossessed by the Inland Revenue due to non-payment of taxes, for example. In previous years, there were cases of non-residents coming to Spain only to find their properties had been embargoed and even sold over, all due to the fact that the owner had been officially notified at a local address and found to be absent! To contract a fiscal representative one need look no further than one's own lawyer who will refer you to his own tax consultant.

Non residents who use their property themselves must also file for Income Tax and must pay tax for any income received in Spain at the flat rate of 25% (including real estate rental income) even if the income was received abroad. Every non-resident is assessed on income tax even if there is no real income (on the theory of derived benefit) at 25% of 2% (or ½%) of the rateable value of the property value (valor catastral), which is generally a fraction of a property's market value. This tax is not applicable if the owner is leasing the property to third parties, but it is applicable with respect to the rental income received, which is taxable at 25%.

Upon the sale of real estate (when the seller is a non-resident), there is an automatic tax retention of 5% of the sales price, payable against a 35% capital gains tax. If the seller is a resident in Spain, with residency permit issued six months or more, there is a flat rate of 15% capital gains tax if the property has been owned 1 year or more, adjusted to compensate for inflation.

RESIDENTS in Spain must of course file Income Tax and declare the income they receive regardless of source. For tax purposes, one is considered a FISCAL RESIDENT if one resides in Spain over 183 days per calendar year, regardless of whether one is officially resident or not.

Q: How long can I stay in Spain as a tourist?

A: Europeans from the E.U. can stay in Spain indefinitely. Visas are not required for some other countries such as the United States, but are still required in other cases, depending on one's country of origin, and with varying lengths of stay permitted.

Q: Where can I send my children to school?

A. There are several international schools in the area, including one in the Sotogrande area which provides weekly boarding facilities. Pupils are taught in English, and a choice of curriculum is offered between G.C.S.E.s and A-Levels, and the International Baccalaureate, the latter placing an emphasis on course work over exam results. For further information, check out the below e-mail addresses:

Spanish state schools are based on the Baccalaureate system. Any pupil whose year's work is considered to be inadequate is relegated to stay in the same class for a further year and repeat the curriculum. In general, very good results are achieved, with a high percentage of pupils going on to University. However, as all classes are naturally conducted in Spanish, the age at which a child can be expected to cope with a change of language and of curriculum should be taken into account. The younger the child, the easier they will pick up the language. Most under-12s can become fluent in Spanish in 3 or 4 months.

For an in-depth guide to schools in the Costa del Sol area, please consult the website: http://andalucia.com/education/schools/home.htm

Q: Are there medical and health insurance facilities?

A: Marbella has the newest, most modern and well-equipped Regional Hospital in Spain (Hospital Costa del Sol), in addition to a good, well-equipped Clinic with a substantial selection of general practitioners and specialists.

Private medical insurance is available through various groups such as SANITAS. This can cost about €65/£46 per person per month, depending on their age and the state of their health. Spain's social security system now allows E.U. residents access to the health network via a special form (E-101). For residents who are self-employed, own a company, or are employees, your social security contributions automatically entitle access to the Spanish health network.

Panorama considers the above information to be current and accurate at the time of writing, but it is nevertheless by its very nature abbreviated and intended to serve only as a guide and subject to errors or omissions.

Panorama always recommends purchasers or sellers of property to consult qualified Lawyers and Tax Advisors.

The exchange rate used in the above figures is 71.5 pence to 1 Euro (€1.40 to the pound).

by, Christopher Clover