buy property in spain - spanish property for sale

Inheritance Tax - Non-Residents

Assets of non-residents in Spain are subject to inheritance tax on death. The rules are complicated and it is not possible to generalise on the rate of the tax as this depends on individual circumstances.

As a non-resident, with assets in Spain, these can be distributed in accordance with the laws of the country of which you are a national. In effect this means that you can distribute the estate through your Spanish Will in whatever way you wish provided it accords with the law of your nationality.

It is advisable to make a separate Spanish Will dealing with your assets in Spain and if you have not already done so, we will be glad to assist. It is also important to remember that if you have made a Will in your home country, you should make your lawyer aware of the existence of the Spanish Will in order he or she can ensure that the contents are not in conflict or that your English Will has not inadvertently revoked your Spanish Will.

Inheritance Tax - Residents

For Spanish citizens and, in some circumstances, those who are resident in Spain, on death, their estate passes subject to the laws of forced heirship. Also their worldwide assets are, subject to what is said below, included for the purposes of inheritance tax in Spain.

For those who are resident or contemplating residency in Spain, there have been significant changes in the law in certain parts of the country, and more is proposed all with a view to the reduction or abolition of inheritance tax.

The Regional Government of Andalucia have produced some radical changes for those tax resident in the Region when the beneficiaries are relatives such as a spouse, children or parents, which may mean no inheritance tax is payable. To be eligible, each of the above beneficiaries (who must be resident in Andalucia and registered at the Town Hall) should be receiving less than €125,000 from the estate and have existing wealth of less than €402,000.

Further reductions refer to the "habitual residence" of the deceased when the beneficiaries are the spouse, parents or an uncle or cousin (the latter being over 65 years of age and having lived in the house for 2 years prior the death). If so there is a 99.99% reduction provided the beneficiary keeps the house for at least 10 years and their share in the estate does not exceed €122,606.47.

To benefit from the new regulations it is necessary to prove both the deceased and the beneficiaries of the deceased are registered at the local Town Hall and to produce their Spanish Residency Cards. Failure to do so will result in the deceased being treated as non-resident in Spain.

In other regions, which include Alicante and Murcia, there are similar proposals under consideration.

In Andalucia family members under 21 years of age (including adopted children) are exempted from Inheritance Tax. For other close relatives in the line of succession the proposals are for spouses and those over 21 years of age to benefit from a tapered reduction in inheritance tax of 25% in 2005; 50% in 2006, rising to 99% in 2007.

We understand that the proposals under consideration will include payment of a nominal 1% so as to enable the authorities to maintain and monitor tax information.

Unfortunately, non-residents will be unaffected by these changes as their estates are subject to the laws laid down by the Spanish National Government.

Tax Returns

This is a reminder that non-residents owning a single property in Spain need to file a Tax Return for the tax year ending 31st December 2004. If owning just one property, Tax Returns must be filed before 31st December of the following year after the purchase.

Tax Returns should be filed by May-June each year if you own more than one property.

As many of you are already aware, in the case of non-residents owning a single property in Spain, the requirement for the appointment of a Fiscal Representative has been dispensed with. However, owing to the bureaucracy and not being familiar with the language many of our clients prefer to use the service we have available for the completion and filing of the Tax Returns.

To complement this service, we are pleased to announce the Seville accountancy firm of Laffarga & Reina are now based in our offices in Marbella and are able to provide a full tax service to our clients.

For further information on this service, please contact us.

Transfer Taxes

These have now been increased throughout all regions and with the exception of the Canary Islands they are as follows:-
Resale Property    7%
New Property    7% IVA plus 1% Transfer Tax
Mortgages    1.7% (approximately)

As from 1st January 2005 in the Canary Islands the figure is as follows:-
Resale Property    6.5%
New Property    5% IGIC plus 0.75% Transfer Tax
Mortgages    1.7% (approximately)

Valencia Land Grab

There has been considerable press and TV attention to problem encountered by both foreign and Spanish property owners regarding the law passed by Valencia in 1994 ("Ley Reguladora de Actividades Urbanisticas"). The law was designed to give local Town Halls exceptional powers to take control of privately owned land with a view to providing low-cost housing where needed.

Initially the law worked well and was used for the purpose for which it had been created. Unfortunately, the law has been abused in many areas resulting in serious financial loss and hardship to both foreign and Spanish owners alike.

Whilst these abuses are unacceptable, it needs to be put into perspective and noted the law only applies in Valencia and not other regions. Unfortunately, this has not been made clear by the press and other media.

Rural Property

For anyone contemplating building a rural retreat, you will need to be aware that Andalucia and other Regional Governments are strictly enforcing planning laws and only permit new building in rural areas where it can clearly be demonstrated the building is linked to a agricultural, forestry or livestock purpose.

The authority of the Regional Government is superior to that of the local Town Hall and even where the latter has issued a permit it is essential to confirm approval has been given by the Regional Government otherwise you may risk a demolition order and at the very least heavy fines.

If you are contemplating purchasing a rural plot of land on which to build your country retreat, contact us in the first instance before parting with your money.

Buying Off Plan

This is a common practice where a buyer is invited to purchase prior to construction of the development having commenced. In some cases this may be before a Building Licence has been approved and obtained.

There can be inherent risks with buying off plan and you need to be aware of these at a very early stage. If you are thinking of buying off plan, consult us before making any commitment so that we can carry out preliminary investigations on your behalf and advise you of any potential risk so that you can make your own assessment.

Remember that if you are buying off plan, nothing is guaranteed - markets rise as well as fall!

Selling Property

If you are selling an existing property then, depending on the period of ownership and assuming you are non-resident in Spain, we would remind you that the transaction may attract a Capital Gains Tax liability. By law if you are non-resident your purchaser is required to deduct 5% of the sale price and account for this to the Spanish Tax Authority. Depending on your circumstances, it may be possible to reclaim that 5% although the process can be drawn-out.

We can assist you in all aspects of your sale and you should contact us to obtain an estimate of the likely costs and expenses either at This email address is being protected from spam bots, you need Javascript enabled to view it or telephoning our offices.

If you have purchased a property off-plan and are assigning your contract, again we can assist you in all aspect of the negotiations both with the developer and your buyer.