The costs of owning property in Spain

This is a guide to the ongoing costs involved in owning property in Spain.

Running Costs
All bills must be paid by Direct Debit from a Spanish bank account.

Electricity, Water and Gas:
The standing charges are € 15 per quarter for water, and € 15.84 every two months for a 3.3 1Kw electricity supply. On top of this there is, of course, the actual consumption.
As gas is supplied in bottles it is possible to contract for 1 or 2 bottles. The cost for 1 is approx. € 42, and for 2 apprpx. € 66 Euros. Exchange bottles cost approx. € 6, and can be obtained from Repsol Butano or delivered to the client’s property.

Capital Gains
Capital Gains Tax in Spain for residents is a maximum of 15%, calculated as part of their Spanish income tax. As of January 1st 2007, Capital Gains Tax for non-residents has been reduced from 35% to 18%. 3% of the declared value of the property will be retained by the Notary on the day contracts are signed. The remaining amount is deductible with the subsequent year’s tax return. Any expenses incurred during the property sale (ie., Notary and solicitor’s fees) can be offset against this.

There are several exemptions from Spanish capital gains taxes:

• Residents over 65 yrs old selling their principal residence after a minimum of three years are not liable for capital gains tax in Spain.
• Residents who reinvest all of the proceeds of sale to purchase another principal residence can get capital gains tax relief, provided they have lived in the property for at least 3 years .
• If they use only a portion of the proceeds from a property sale, they will get a percentage relief up to the amount reinvested. (rollover credit)
• Property bought prior to 31st Dec 1986 is exempt from CGT liability for residents & non-residents, due to old legislation. Property bought between 1986 and 1996 is partially exempt.
• People over 65 who use the “inherit from yourself scheme” in which you sell your house but retain the right to live in it until your death are exempt from CGT. (“Usufructo.”)

Inheritance
Wills prepared by foreign nationals in their own countries can be executed in Spain so as to transfer ownership of property to beneficiaries within the wills.

The liability to inheritance tax in Spain depends partly on the relationship between the deceased and the beneficiary. There is a small threshold for close family such as parents, children and spouses but this threshold is far lower than people would expect in the UK. The threshold is reduced for nephews, nieces and cousins and could be nil for unrelated people, such as friends. The amount of inheritance tax payable in Spain will also depend on the wealth of the recipient. Non-Residents are liable on receipt of any asset situated in Spain on the death of the donor. Spanish resident individuals are liable to inheritance taxes on receipt of any asset on either the death of the donor, or as a lifetime gift.

How you plan for inheritance tax in Spain will also depend on where you are deemed to be domiciled. This is not always as straight forward as you think and may depend on where you hold assets and/or how long you spend in a certain country. Determining Spanish inheritance tax liabilities in Spain requires some detailed calculations and as you would expect a degree of documentation. However, the top rate of inheritance tax is as much as 34%. Most importantly, spouses are NOT exempt from inheritance taxes.

Mortgages

Available for existing and off-plan properties

Available to local and foreign buyers
Maximum 80% LTV
Maximum term 20 years
Minimum loan €40,000
Maximum loan € 200,000
Euros & Sterling only
Rates from 5.90% fixed for 1 year in Euros or
6.90% fixed for 1 year in Sterling

Cautionary Notes
Whether you are buying property in England or abroad there will always be potential risks. Spain is no different. You need to consider the following questions:

• Does the property have good title?
• Does the owner actually own it?
• Is the land/property clear of outstanding debts?
• Has the building been constructed legally?
• Do you understand the contract of sale?

See also:

The cost of buying property in Spain.