General advice on buying a Property

This buying guide is for general guidance only. Professional Legal advice should always be sought in any matters relating thereto. Richardsons do not make representations or warranties of any kind with respect to the content.

Once you have found a property Richardsons will guide you through the purchase process. Your offer will be passed on to the vendors and once the price is agreed you will be required to pay a Subject to Contract deposit . This deposit is fully refundable should the purchase not proceed to completion.

Who Can Own Property in Gibraltar?

Any person of any nationality may own property in Gibraltar

Who can own a Gibraltar Company?

Any person of any Nationality may own a Gibraltar Registered Company. Purchasing through a Gibraltar Registered Company may have Tax advantages.

How does the Conveyancing System work in Gibraltar?
(Subject to Contract Procedure)

The sale procedure in Gibraltar is similar to that in the UK

  • Any receipt of an offer to purchase through an agent should be on a "subject to contract" basis. Agent usually receives 2% subject to contract deposit
  • Once an offer is received, Solicitors are instructed
  • Vendor's Solicitor prepares draft contract
  • Purchaser's Solicitor considers draft contract and makes local searches and Enquiries
  • Meanwhile purchaser may arrange structural survey, mortgage survey and arranges finance
  • Contracts are approved after amendments agreed
  • Contract then exchanges and a deposit paid. Parties are then bound to transaction

Stamp Duty in Gibraltar and Costs?

Any person of any Nationality may own a Gibraltar Registered Company. Purchasing through a Gibraltar Registered Company may have Tax advantages.

Stamp Duty 2012/2013 is now payable as follows:

  • On a purchase of up to £200,000 Pounds NIL
  • Between £200,001 and £350,000 Pounds 2% on first £250,000 and 5.5% on balance
  • Over £350,000 3% on first £350,000 and 3.5% on balance

Other disbursements:

  • Supreme Court Registration Fee £20 to £40 per document
  • Land Registry Fee £52 per original document & 50p per duplicate
  • Legal Fees
  • Normally on a scale can be up to 1% of purchase price

 

What are the Advantages in Buying Property in Gibraltar?

Taxation and Residency

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HIGH NET WORTH INDIVIDUALS Qualifying (Category Two) Individual status limits the taxation payable in Gibraltar to monies remitted to Gibraltar up to a maximum of £80,000 taxable income. The minimum tax payable is £22,000 and the maximum is approximately £30,000.

(Conditions on residential accommodation and previous residence/activities in Gibraltar apply) A category 2 individual cannot generally engage in a trade , business or employment in Gibraltar (there are some specific exceptions to this).

Capital Gains Tax

There are no capital gains taxes in Gibraltar. On the sale of property, any profit made is free of all taxation provided that the company is not actually trading in property. This may occur where a company purchases for example five properties and sells the properties individually over a period of time. Effectively, if the company buys five properties and sells all five properties simultaneously at a later date, then no income tax liability will arise. However if the company sells the properties at different times then the likelihood is that the Commissioner of Income tax will consider the company to be trading and assessable to income tax at the company rate in Gibraltar of 10%.

This liability to income tax can be avoided by purchasing individual units in separate Gibraltar companies. If one Gibraltar company is incorporated for the purchase of each unit then on re-sale of that unit there will be no income tax liability.

Income Tax

The corporate rate of tax on profits is 10%. (Only those profits accruing or deriving in Gibraltar are taxable) . This tax is payable on profits after all deductions. Full mortgage interest relief is given against income received and therefore it is an advantage to purchase by obtaining a loan facility if it is intended to rent out the property. In certain circumstances it may be possible for the mortgage to be given by a foreign entity although a liability to withholding tax may arise.

Estate Duty

There is no Estate Duty in Gibraltar

Other Capital Taxes

There are no wealth, gift or other Capital Taxes

Value Added Tax

There is no VAT in Gibraltar

 

Other Advantages

Currency and Exchange Control

Gibraltar's currency is the Gibraltar pound. The sterling pound is also accepted in Gibraltar on a one to one basis with the Gibraltar pound. There are no exchange controls in Gibraltar.

Communications

Gibraltar enjoys a sophisticated communications system boasting the most up to date telephone and satellite communication systems as well as regular air services to London.

Financial Services Commission

With the passing of the Financial Services Act and the appointment of a Financial Services Commission dedicated to regulating investment business in Gibraltar people should be confident that Gibraltar has the necessary expertise, regulation and supervision to ensure the maximum protection for the investor or client whilst at the same time ensuring the development of Gibraltar as an offshore finance centre.

The functions of the Commission are to keep under review the operation of Gibraltar legislation and the effectiveness of supervision of financial services; to monitor the extent to which Gibraltar legislation and supervision complies with European Union obligations and supervisory standards governing financial services in the United Kingdom where Community law applies; to protect the public against financial loss arising out of dishonesty, incompetence or malpractice; to advise the Government of Gibraltar and the Government of the United Kingdom on matters concerning financial services; and to draw up codes for regulating the terms of service of persons employed by the Commission.

Title to Property

In all modern developments in Gibraltar the land is owned by the Government of Gibraltar which grants a lease to the development company for 150 years. The development company then sells on to a purchaser. The purchaser receives a lease over the property for 150 years less 7 days.

Management Company

A management company manages the development as a whole. Usually the purchasers own the management company and contribute to the running costs of the development by way of service charges payable quarterly or annually in advance.

For further information on the management of buildings and for advice how your development could be managed more efficiently, click here.

Rates relief

The Rating system has developed from the old UK model and all premises are re-assessed annually to ascertain their Net Annual Value. Rates are generally charged at 60% of the Net Annual Value and are paid quarterly in advance with a 10% discount for early payment in the case of non-domestic premises. Most new developments however enjoy rates relief so that the tenant does not pay rates for the remainder of the first tax year (July to June) of occupation which is thereafter based on a rising scale until the 6th year of occupation when full rates become payable.

 

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General advice on buying a Property in Spain

This buying guide is for general guidance only. Professional Legal advice should always be sought in any matters relating thereto. Richardsons do not make representations or warranties of any kind with respect to the content.

Once you have found a property Richardsons will guide you through the purchase process. Your offer will be passed on to the vendors and once the price is agreed you will be required to pay a Subject to Contract deposit .This deposit is fully refundable should the purchase not proceed to completion.

Guide to the Start of the Buying Process

  • Open a bank account in Spain
  • Apply for a NIE no. (numero de identificacion fiscal de extranjeros) at the offices of the Local Policia Nacional nearest to the location of the property you are purchasing
  • Instruct a lawyer to monitor the conveyance of the property. This is strongly recommended although there is no legal requirement to use a lawyer’s services for the conveyance
  • Ask for a Registry extract (Nota Simple). This is an up to date record of the property you are about to purchase (it will show any legal interests or encumbrances on the property). Richardsons are able to provide this within 48 hours.(this will be needed by the bank if you are applying for a mortgage)
  • Once your finance is in place you will be required to sign a purchase agreement containing all the relevant conditions and date of completion
  • A date will be fixed for signing the title deeds at the Notaria

Guide to New Development Taxes

  • 7% VAT payable on the purchase price. The tax is normally applied to any deposits and instalments paid during the construction period.
  • 1% Stamp Duty payable within 30 days of completion
  • Notary Fees & Land Registry Fees applied on a sliding scale (typically not more than 1000 Euros on a property valued at 250,000 to 300,000 Euros)
  • Connection costs for electricity, 150 Euros, and water, 90 Euros, approximately
  • Legal Fees which are typically 1% of the purchase price

Guide to Resale Property Taxes

  • 7% transfer tax (Impuesto Sobre Transmisiones Patrimoniales)
  • Notary Fees (only for the second & any further copies of the Transfer deed)
  • Land Registry Fees
  • Connection costs as above
  • Legal Fees as above

The Civil Code (Codigo Civil) in fact provides that the vendor pays the Notary Fees for the Escritura (Transfer Deed) and the purchaser for the second and any further copies.

This is usually a matter of negotiation at pre contract stage as it is common that the purchaser pays for all costs as part of the overall deal.

Another Municipal tax called Plus Valia Tax, which is levied on the increase of urban land is payable by the vendor.
This Tax is a Local Tax and should not be confused with Capital Gains Tax.

Spanish Wills

Whether or not you have included your Spanish property in your will, it is advisable to make a Spanish will. This is a relatively simple procedure and will save your beneficiaries a considerable amount of time and expense in the future. The distribution of your Spanish estate will not depend on your obtaining probate of your native will. Your Spanish will is drawn up in double column in your native and Spanish language and will refer to your present and future assets in Spain. The document is signed in the presence of a Spanish Notary Public and filed in his office. A copy is also filed in the Central Registry in Madrid.

Upon the death of a grantor, a death certificate is sent to the Registrar in Madrid, who will then issue a certificate containing details of the will and the details of the Notary Office where it was issued. The beneficiary will then make a notarised statement accepting the inheritance, pay the Inheritance Tax and take over the estate. This process takes approximately 30 days to conclude. The Inheritance Tax is payable by the beneficiary and not by the estate. The amount payable will depend on the number of beneficiaries.

Fiscal Requirements and Obligation of Non-Resident Property Owners

Any non-resident owning property in Spain is liable for the payment of three taxes:

  • Local (Town Hall) Real Estate Tax
  • Income Tax
  • Wealth Tax (Capital Assets tax)

These taxes must be paid on an annual basis. Failure to pay your income and wealth tax may result in heavy fines and penalties being imposed which could eventually result in an embargo against all your assets in Spain.

N.I.E Foreigners Fiscal Identification Number for Tax Purposes

In order to pay your taxes you must apply for a “numero de identificacion fiscal de extranjeros” applicable to foreign residents and non-residents alike. All foreigners who have assets i.e. property, investments etc in Spain are required by law to be in possessions of a N.I.E.

Taxpayers are obliged to appoint an individual or legal person with residence in Spain, to represent them before the tax authorities in relation to their tax obligations.

The taxpayer or his representative will be obliged to notify the tax authorities of the appointment, duly evidenced, within two months as from the date thereof. The notification must be addressed to the Tax Administration or Agency Branch, at which the return must be filed, enclosing the representative’s acceptance with the said notification. Breach of these obligations constitutes a “simple tax infringement” and may be penalized by a fine of between 1,500.00 Euros to 6,000.00 Euros.

The fiscal representative assures the Spanish Tax Authorities that they are reliable contact within Spain for the non-resident taxpayer. The fiscal representative is not a property manager but can ensure that you will be properly represented in relation to any official matter concerning your property in Spain. The type of issues, which the fiscal representative will process, includes governmental and local tax notifications.

Our undertaking as your fiscal representative refers to the following:

  • Filing of your annual property Wealth and Income Tax Return.
  • Checking that all local taxes and rates are paid on time.
  • Keeping you advised of fiscal matters related to your property.
  • Acting as your official representative in Spain.
  • Processing all official correspondence received on your behalf.

Non-residents who have one property reserved exclusively for their own use and enjoyment are not bound by this obligation. However the Tax Authorities will not communicate with them directly but will send notifications to the property itself giving 15 days grace in which to deal with the requirement before taking the pertinent legal action or imposing a fine. It is therefore advisable to name a Fiscal Representative in order to avoid action.

Wealth Tax

Non-residents must file a Property Tax Return, if they own property in Spain on the 31st December of each year regardless of the value of property.

Urban property must be declared at the highest of the following three values:

  • The catastral value (assessed value for urban properties according to the Town Hall and listed in its Land Office), as reflected in the Property Tax receipt (local rates) to the year to which the return refers.
  • The value assessed by the states administration for purposes of other taxes (example Stamp Duty, Death Duty, Gift Tax….)
  • The acquisition price as reflected in the title deed “Escritura”.

The net wealth (which is the taxable amount) is determined by the difference between the value and the charges (if any) registered against the Property. The most usual debts or charge are Spanish bank mortgages.

Non-residents file an income and wealth tax return every year until the 31st of December if they only own one property and receive no income from it in respect of rentals etc. otherwise the returns must be filed and the taxes paid between 1st May and 20th June each year. Each individual property owner must file a separate return. If you purchase a property during 2010, the year 2011 is the first year you will have to pay your taxes.

Income Tax

A non-resident whose only taxable property in Spain is a dwelling fundamentally for own use is liable to pay income tax on assumed income derived from the use and enjoyment of that property i.e. income in kind received from the personal use of the property. The Fiscal Authority deems that the owner of the property is receiving an annual income equal to 2% of its value (or 1.1% if the value has been revised) and a flat rate of 25% tax is imposed on that income. The valuation for the Deemed Income Tax is the one shown on the rates receipts (catastral value).

Annual Real Estate Tax

This tax, based on the catastral value, can vary widely from town to town for the same type of property because it is a municipal tax. Each municipality has elaborated a census and with assigned value for each property. The amount payable is calculated by applying the tax rate set by the Municipal Authorities to the catastral value. The tax is raised every year as a result of inflation.

The Real Estate Tax is commonly called IBI “impuesto de Bienes Inmuebles”.

Each year a Real Estate Tax Payment slip is issued for each property in the census. Municipal Authorities normally allow the payment to be made by direct debit to a bank account, which makes it easy for the taxpayer to pay the tax before the deadline and thus avoid surcharges.

The time for payment of this tax varies in each municipality, but is normally paid around the months of September. October and November in each year.

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