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Frequently
asked Questions
Borrowing
money to finance the project - If
you live in the UK for example and work there, should you
borrow to buy a Spanish property in the UK? One way is to
re-mortgage the UK property, however there is an argument
that the debt that you have created by purchasing the property
should be in the same currency as the country you purchased
it in. You would have to obtain a Euro mortgage and then service
the mortgage either from local rental income or transferring
money from the UK. There are plus sides and negative sides.
The interest rates on euro mortgages might be lower
than sterling rates for a while to come, the strength of the
£ pound might weaken so your pound does not buy so many
euros and then you have to pay currency transfer charges on
every payment. See independent professional help and check
out costs from lenders in Spain and the UK.
FACT
File - Property Taxes in Spain
So you are about to purchase that ideal property - If you
require finance or don't you still have to take into account
the payment of property taxes. In Spain.
You have to pay an income tax "Impuesto de la renta"
and a wealth tax -"Patrrimonio". This is arranged on
a sliding scale climbing to 2.5% on properties over €10.7m.
The base rate for the tax"Impuesto de la renta" - income
tax is 1.1% of the cadastral value of the property. This determined
by the size and location. Non residents pay 25% of the tax
base.
If
you are renting out the property the tax rate you have to
pay is 25% of the annual rent. You are not allowed to make
deductions for expenditure.
When
you sell the property a non-resident is subject to 35% capital
gains tax, however you can take off the costs for improvements
during ownership.
There is also a local tax"Impuesto sobre bienes inmuebles"
This based on the cadastral value of the property.
Inheritance
tax rate varies from 7.65 per cent to 81.6 per cent.
Holiday
rental income is subject to VAT at 16 per cent.
It
is probably worthwhile using an accountant to assist you with
these tax returns.
N.B.
This information should not be relied on for accuracy and
is presented here without the responsibility of jml Property
Service and the website it is being displayed at. ©jml property
Services 12-05
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