1. INTRODUCTION
Spain makes distinctions between tourists and residents. Each
category has its own advantages and disadvantages. There are
no formalities, other than a current British passport, for a
tourist. A resident needs a residence card which has more formalities,
though they are not particularly onerous.
A tourist is normally limited to a 90-day stay, though this
can usually be extended for a further 90 days, by obtaining
an extension called a permanencia (permanencer means to stay
or to remain, it does not mean to be permanent). The Spanish
law actually states that if you spend more than six months in
Spain during one calendar year you are required to take out
a Spanish residence card. This still applies even if you are
a member of the EU.
Since 1992 the lack of a residence card by someone who should
possess one cannot be punished by deportation. However, discovery
may involve a penalty of up to 2 million pesetas.
Being a temporary resident does not mean an automatic liability
for Spanish income tax, which is assessed on de facto residents.
Nor does it affect your rights to drive a car.
This is an area where there is plenty of bad advice, and there
are still many residents who would rather stay in Portugal or
France every 90 days than become a resident. The consequences
of getting it wrong can be disastrous, so the relevant procedures
must be strictly followed.
2. SPANISH IMMIGRATION AND RESIDENCE
European Union Tourists
Spanish law grants generous concessions to European Union members'
tourists. Many of these concessions are not available to Spanish
nationals or other foreign residents.
You are a tourist if your stay in Spain is for no more than
90 days. You may bring your belongings, money and car into Spain
without official permission; you only need a full British passport.
You may bring in your car, but you will need your registration
certificate and a copy of your insurance certificate. A green
card is no longer essential, since Spain's entry into the EU,
but your insurance company may require you to have one. It is
wise to check with them. You may bring in your car and keep
it on foreign registration permanently in Spain as long as the
vehicle is not operated for more than six months in any calendar
year.
A tourist may open non-resident bank accounts and foreign currency
accounts at banks in Spain.
A tourist wishing to stay beyond 90 days must pay for a temporary
residence card to stay for up to 90 days more. There is usually
no problem in obtaining an extension. You should apply to the
provincial foreigners' office (oficina de extranjeros) or police
station about two weeks before the previous 90-day period ends.
You must take with you your passport and proof that you have
a regular pension or enough resources to live on for the time
you wish to stay. The requirement varies from place to place
but proof of around 100,000 pesetas per month coming in should
be sufficient.
Having a temporary residence card does not mean you will not
become a tax resident. Whether or not you have a temporary residence
card you will be regarded as a Spanish resident for tax purposes
if, for instance, you are unable to give evidence of your stay
in another country for more than 183 days in a calendar year
3. RESIDENCE CARDS - EU CITIZENS
If you wish to stay in Spain for more than an additional 90
days, you must apply for a residence card.
It is illegal to live in Spain as a "permanent tourist".
Before 1986 many people got away with being permanent tourists.
All they did was cross the border to France or Portugal (Gibraltar
did not count) from time to time and have their passports stamped
to that effect. They did not even stay overnight in the other
country.
Since 1986 the position has changed, and you may now only stay
in Spain for more than 90 days if you:
- Are a Spanish resident already
- Have obtained a temporary residence card
- Have a residence card
To obtain a residence card (not working), you do not need any
entry visa from the Spanish Consulate in the UK.
To obtain your residence card for the first time you must have:
- A current passport and one complete photocopy
of it.
- Evidence of means: a basic EU retirement
pension should be acceptable as a means of support. The
Spanish social security pension is 65,000 pesetas per month
for a married couple and if your pension exceeds this amount,
there should be no problem. Your pension document and a
photocopy; a Spanish translation is not required. If you
are not a pensioner, evidence of income or capital will
be required and this may need to be translated.
- Evidence of medical insurance: if you are
retired and have paid into your own EU country's social
security system then you must obtain form E121 from your
local social security office before you leave for Spain.
You should present this to your nearest social security
office in Spain and they will then issue a Spanish social
security card (cartilla). If you are not covered by the
social security system then it will be necessary to produce
a private medical insurance policy and a photocopy.
- If one spouse is dependent then an original
marriage certificate and a photocopy must be shown. It does
not have to be translated into Spanish.
- 865 pesetas in Spanish Government bonds
(papel de Estado) which can be purchased from the tobacconist
(Estanco).
- The official forms requesting a residence
permit.
- Three passport sized photos.
You can use a business agent (gestor) to handle your application
or you can deal with it yourself at the oficina de extranjeros
or comisaria de policía. The application for the card
should be made within 30 days following your arrival in Spain.
The residence card is now issued for five years, being automatically
renewable. The former provisions are applicable to any EU citizen's
dependent relatives, whatever their nationality, however, they
may need a visa.
If you are an EU citizen and you intend to work in Spain, you
can apply for a work and residence permit combined.
4. BRINGING YOUR CAR INTO SPAIN & DRIVING
LAWS
Do you intend to stay in Spain for more than 6 months in a
calendar
year? (which makes you Spanish tax resident).
NB: Whilst driving in Spain it is an offence not to have your
driving licence with you. A non-resident does not require a
Spanish driving licence.
Note 1: Non Spanish resident
If you leave your car in Spain when you leave the country for
more than six months you must ask Spanish customs to "seal"
it. Customs will send the Guardia Civil to put strips of tape
across the steering wheel, designed to prove that you have not
used it. On your return, you contact them again to unseal the
car. In fact, you are supposed to do this if you are a non-EU
citizen and you leave the car for more than two months whilst
you are absent from Spain.
Note 2: New Spanish resident importing a car
You must have owned the car for six months before you come
to Spain and have paid the VAT in the other country, if applicable.
You cannot sell, rent or transfer the car within one year of
its registration. You will need to obtain your residence permit
in Spain, and procedures to import a car must have started one
month before date of issue of residence permit. Employ a gestor.
The British vehicle's registration documents will have to be
surrendered to the DVLA in the UK and a Certificate of Permanent
Export (V561) obtained from them for presentation in Spain.
Roadworthiness certificates for right-hand drive cars are now
generally available from Spanish ITV (MOT) centres but headlights
may have to be realigned.
4.a. BUYING A NEW CAR IN SPAIN
Note 3: Non-resident buying a car in Spain
An EU citizen can avoid paying the 12% special registration
tax (7% if 1600cc or; if diesel, 2000cc). You have to drive
on tourist plates which are annually renewable. The process
is complicated and you will need to employ a gestor. It may
be simpler to pay the tax, especially if it is only a modest
car, but you would have to provide evidence of owning a house,
or a rental agreement.
4.b. DRIVING LICENCE
To apply for a Spanish driving licence (or a renewal) you require
the following:
- A completed application form TASA 2.3 (solicitud
de carnet del permiso de conducir), available from the información-impresos
counter at the local provincial traffic department (jefatura
provinciano de trafico).
- Your Spanish residence card (residencia)
and a photocopy.
- Your current foreign driving licence and
a photocopy.
- The registration number of a Spanish registered
vehicle or a sworn statement that you do not own a vehicle
with Spanish registration (not required for renewals).
- One passport-size photograph.
- The fee of 2,450 pesetas (there is no fee
for drivers over 70), payable at a caja postal (post office
savings bank), which also applies to renewals and the replacement
of a lost or damaged licence. If a Spanish licence is being
renewed and is over 30 days out of date, an additional fee
of around 1,000 pesetas is payable.
If a person other than the new owner makes the application,
they must provide written authorisation from the owner and supply
their own resident card and copy.
Medical certificate
If you need a medical certificate for your driving licence
to be issued, then the medical examination is carried out in
special clinics (centro de reconocimiento médico para
conductores) open from 10 am to 2 pm and from 4 pm to 8 pm,
Monday to Friday. The examination consists of eyesight, hearing,
pulse and blood pressure tests, plus tests for speed of reaction,
judgement of the speed of other vehicles and acuteness of visual
identification. If you wear glasses or contact lenses you will
be tested with them and your licence will be annotated to indicate
this (note also that you must carry a spare pair when driving).
The examination takes around half an hour and costs 3,400 pesetas
for those aged under 70 and 800 pesetas for those aged 70 or
over. The medical certificate is valid for 90 days and the examination
should be performed around one month before you make your application
for a licence (or a renewal). A passport-size photograph is
required.
It usually takes two or three months to obtain a Spanish licence.
You are given an official receipt for your application and a
copy of your foreign licence, which is valid until you receive
your Spanish licence. When you receive your Spanish licence,
your foreign licence is returned to the issuing authority abroad.
If you change your address, you must apply to have the address
on your licence changed (there is no fee). A Spanish driving
licence is a standard (pink) EU licence and contains a photograph.
Note, however, that although it has the EU logo on it, it is
not an EU licence and must be replaced by a national licence
after it expires if you move permanently to another EU country.
You can use a gestor to obtain a Spanish driving licence or
the services of a Spanish motoring organisation such as the
Real Automóvil Club de España (Royal Automobile
Club of Spain). A gestor will charge you 5,000 to 10,000 pesetas
for the work involved. You must carry your foreign or Spanish
driving licence at all times when driving in Spain. Note that
many Spaniards drive without a valid licence or when their licence
is suspended, although they are liable for a fine of up to 250,000
pesetas.
You can apply for a Spanish licence if your foreign licence
has lapsed or you never had one. You will have to take a written
exam (it can be in English or French) and a practical test.
The minimum age is 18, and a maximum of 65 if it is your first
ever licence. Licences are issued as:
Under 45 Issued for 10 years
45 - 70 Issued for 5 years
Over 70 Annual
4.c. CAR INSURANCE
Under Spanish law, all motor vehicles plus trailers and semi-trailers
must be insured when entering Spain. However, it is not mandatory
for cars insured in most European countries to have an international
insurance "green card" (see below) in Spain. Motorists
insured in an EU country, the Czech Republic, Hungary, Liechtenstein,
Norway, Slovakia and Switzerland are automatically covered for
third-party liability in Spain. The following categories of
car insurance are available in Spain:
Third-party (responsabilidad civil obligatoria or seguro obligatorio)
Third-party insurance is compulsory and is the minimum insurance
required by law. It costs from around 25,000 pesetas a year
to insure against the minimum third party claims of up to 56
million pesetas for personal injury and 16 million pesetas for
damage to third-party property. Extra cover can be purchased
(see Third-party personal/property limits below). Roadside assistance
(asistencia en viajes), glass cover (rotura de lunas) and legal
expenses (defensa penal) in the event of a court case may be
included in basic third-party cover or can be included for an
additional premium.
Third-party, fire and theft (responsabilidad civil obligatoria,
incendio y robo)
Third-party, fire and theft insurance, known in some countries
as part comprehensive, includes cover against fire (incendio),
natural hazards (e.g. rocks falling on your car), theft (robo),
broken glass (e.g. windscreen), legal expenses (defensa penal),
and possibly damage or theft of contents (although this is rare).
Insurance against the theft of a radio or stereo system is usually
available from the manufacturer only, e.g., for one year after
purchase (it may be included in the purchase price) or under
a separate (very expensive) insurance policy. Fire cover may
be able to be taken out independently, although theft cover
may be available with fire cover only.
Full comprehensive (todo riesgo)
Full comprehensive insurance covers all the risks listed under
third-party, fire and theft (above), and includes damage to
your own vehicle irrespective of how it is caused. Note that
some insurance companies do not provide full comprehensive cover
for vehicles older than two or three years (although you can
get comprehensive cover on vehicles for up to 10 years of age).
Full comprehensive insurance may be compulsory for lease and
credit purchase contracts. Spanish insurance does not usually
pay for a replacement car when your car is being repaired after
an accident. When a car is declared a write-off, the Spanish
insurance companies usually only pay a percentage of its value.
Third-party personal/property limits
The minimum third-party cover required by Spanish law is 56
million pesetas for bodily injury and 16 million pesetas for
third-party property damage. You should always make sure that
you fully understand the cover provided for the driver and passengers
and that it meets your needs. You can choose to pay an extra
premium for additional cover up to a specified or unlimited
amount (ilimitado), which is highly recommended. Unlimited third-party
cover usually costs around 5,000 pesetas extra a year. Note
that a driver and their family do not count as third parties
and must be insured separately.
Driver and passenger insurance
Driver and passenger insurance (seguro de ocupantes) is usually
optional in Spain and can be added to insurance policies. Driver
protection allows the driver of a vehicle involved in an accident
to claim for bodily injury to them self, including compensation
for their incapacity to work or for their beneficiaries should
they be killed. There are usually various levels of driver and
passenger accident insurance, e.g., from 1 to 4 million pesetas
for a driver for death and permanent disability and unlimited
medical assistance.
Premiums
Insurance premiums in Spain are among the lowest in the EU,
although they vary considerably depending on numerous factors
including the type of insurance; your car, age and accident
record; and the area where you live. Cars are divided into eight
categories in Spain, based on their performance (power), the
cost of repairs, where they are used, whether they are garaged
and what they are used for, e.g., business or pleasure. Premiums
are highest in Madrid and other major cities and lowest in rural
areas. Some premiums are based on the number of kilometres driven
each year. Full comprehensive insurance is generally available
on cars under three years old only, although some companies
offer full comprehensive insurance on vehicles up to 10 years
of age. Insurance companies must give two month's notice of
an increase in premiums, otherwise you can pay the same premium
for another year.
In addition to the many Spanish insurance companies, car insurance
is available from a number of foreign insurance companies in
Spain, including direct insurance companies who do not use agents,
such as the British Direct Line insurance company. Among the
cheapest insurers for residents in Spain are the Expat Club
and Extran Direct, both of which are underwritten by Royal Insurance.
Always shop around and obtain a number of quotations. When choosing
a company, bear in mind that a number of Spanish car insurance
companies have gone bust in recent years, leaving tens of thousands
of motorists blissfully unaware that they no longer had any
insurance!
Some companies do not insure high performance vehicles, while
others offer special low-cost policies for experienced older
drivers, e.g., those over 50 or 55, with a good safety record.
Premiums vary from around 25,000 pesetas a year for third-party
insurance for a small family saloon, to 150,000 pesetas or more
a year for full comprehensive insurance for a high-performance
sports saloon (such as a BMW). Short term policies for periods
of less than one year are available from some companies, although
premiums are high, e.g., 50% of the annual rate for three months
and 70% of the annual for six months. Value added tax (IVA)
at 16% is payable on insurance premiums.
Excess premiums
You can reduce your premium by choosing to pay a voluntary
excess (franquicia), e.g., the first 10,000, 15,000, 30,000
or 50,000 pesetas of a claim. Special insurance can be purchased
for contents and accessories such as an expensive car stereo
system. Drivers with less than two or three years experience
usually pay a penalty (multa) and drivers under a certain age,
e.g., 25, also pay higher premiums. Drivers aged over 70 may
also pay a penalty. Some insurance companies refuse to insure
young drivers aged under 23 because their accident rate is so
high. If you are convicted of drunken or dangerous driving,
your premium will be increased considerably.
No-claims
A foreign no-claim bonus (bonificación/sistema bonus-malus)
is usually valid in Spain, but you must provide written evidence
from your present or previous insurance company, not just an
insurance renewal notice. You may need an official Spanish translation.
Always insist on having your no-claims bonus recognised, even
if you do not receive the same percentage reduction as you received
abroad (shop around). If you have not had car insurance for
the previous two years, you are not usually entitled to a no-claims
bonus in Spain. The no-claims bonus in Spain is not always as
generous as in some other countries, although some countries
offer 10% a year up to five years and 5% for the next two years,
making a total discount of 60% after seven years. Foreign insurance
companies may offer a more generous no-claims bonus than Spanish
companies, some of which offer a maximum of 50% only (or less).
If you have an accident, you are usually required to pay a penalty
(multa) or your bonus is reduced, e.g. one accident may lose
you two years' no-claims bonus. You can usually pay an extra
premium to protect your no-claims bonus. No-claims bonuses usually
also apply to a second family car. Some insurance companies
give additional discounts of from 10 to 20% for experienced
drivers and you may also receive a discount (e.g. 5%) if a vehicle
is garaged overnight.
Claims
In the event of an accident, claims are decided on the information
provided in accident report forms (declaración de siniestro
de automóvil) completed by drivers, reports by insurance
company experts and police reports. You must notify your insurance
company of a claim within a limited period, e.g. two to five
days. If you have an accident, the damage must usually be inspected
and the repair authorised by your insurance company's expert,
although sometimes an independent expert's report may be permitted.
An inspection may be unnecessary for minor repairs. Note that
when a vehicle is a total loss, a Spanish insurance company
may pay only a percentage of its "book" value, which
is less than its actual value.
If your car is stolen you must report it to the local police
immediately and submit a copy of the police report with your
claim. After reporting your car stolen, 30 days must elapse
before an insurance company will consider a claim. Note that
some Spanish insurance companies are very slow to pay claims
(delays can run into years) and you may be better off insuring
with a foreign company. There is little communication or co-operation
between insurance companies in Spain and trying to recover uninsured
losses is a nightmare. Some insurance companies have 24-hour
helplines for claims, both in Spain and abroad.
Green cards
All Spanish and most insurance companies in western Europe
provide an automatic "green" card (certificado internacional
de seguro de automóvil), which extends your normal insurance
cover (eg, full comprehensive) to other European countries.
This does not include cars insured in Britain, where insurance
companies usually provide a green card for limited periods only
(eg, 30 or 45 days) and for a maximum number of days a year,
e.g. 90. However, you should shop around, as some companies
allow drivers a green card for up to six months a year. Green
cards are also expensive. This is to discourage the British
from driving on the continent, where they are a menace and a
danger to all road users (most of them do not know their left
from their right, particularly the politicians!). If you are
British and have full comprehensive insurance, it is wise to
have a green card when visiting Spain.
If you drive a British-registered car and spend over six months
a year on the continent, you may need to take out a special
(ie, expensive) European insurance policy or obtain insurance
with a European company. Another alternative is to insure with
a British insurance company in Spain. Note that from 1995, EU
rules require that all vehicles be insured in their country
of registration. For example, if you keep a British-registered
car in Spain, you can insure it through an insurance agent in
Spain, but it must be with a UK-based insurance company. Similarly,
if you have a Spanish-registered car, it must be insured with
a Spanish insurance company (or a foreign insurance company
with an office in Spain).
Breakdown insurance
Spanish insurance companies provide an optional accident and
breakdown service (asistencia en viajes), adopted by some 75%
of Spanish motorists. The breakdown service usually covers the
policy-holder, the spouse, single dependent children, and parents
and grand-parents living under the same roof. The 24-hour telephone
number of the breakdown service's head office is shown on a
card, which should be kept in your vehicle. If you break down
anywhere in Spain, you simply call the emergency number, give
your location and a recovery vehicle will be sent to your aid.
Although accidents are covered anywhere in Spain, in the event
of a breakdown you need to be a certain distance from your home,
e.g. 15 or 25km. The insurance provides for transportation in
the event of a breakdown or illness, in which case transportation
to hospital (if necessary) plus medical treatment is recompensed
up to a limited amount, e.g. 60,000 pesetas. An interest free
loan is provided in the case of a robbery and an emergency message
service. The retrieval of your vehicle is also guaranteed from
within Spain or abroad. If you are unable to find spare parts
locally, your insurance company will arrange to have them shipped
to you (at your expense).
Driving without insurance is a huge problem in Spain where
an estimated 1.5 to 2 million drivers are without insurance.
(Spain has more insurance fraud than any other EU country.)
However, driving without obligatory insurance (seguro obligatorio)
is a serious offence in Spain, for which you can be fined up
to 500,000 pesetas or even imprisoned. You must carry insurance
documents when driving and can be fined 10,000 pesetas for not
having them if you are stopped by the police.
4.d. TRAFFIC LAWS
Here is a summary of some of the more important laws
- Licence and insurance documents must be carried
with you whilst driving.
- Red warning triangle must be carried, along
with a full set of bulbs and fuses, spare wheel and tools
for changing the wheel.
- Speeding fines and other offences range from
5,000 to 250,000 pesetas (eg, driving without a licence)
- Non-residents can be fined on the spot and
their car impounded if not paid.
- Seat belts in front must be worn, and if
fitted, the rear seats too.
- Breathalysers are used.
- Horns are forbidden at night; flash lights
instead.
- Three point turns and reversing into side
streets is forbidden in towns.
- Mobile telephones and audio headphones are
illegal if used when driving.
4.e. LICENCE PENALTY SYSTEM
Spain's bid to cut rising accident figures has led to the alcohol
limit being cut from 0.8 milligrammes per litre of blood to
0.5 and prompted a review of traffic laws. Although similar
to systems used in the other EU member states and the USA, motorists
in Spain will now start off with a quota of credit points which
will be deducted according to the offence.
On reaching zero, the bearer will be stripped of the licence
for a period of three months and forced to take another test
before a replacement is issued. The banned driver will have
to pay as if taking the test for the first time.
Traffic Department records show, had the legislation been introduced
in 1997, it would have affected around 15,000 motorists who
have been repeatedly fined in the past two years. Minor offences
will be punishable by fines of up to 15,000 pesetas, rising
to 50,000 pesetas in serious cases, which may wipe out the points'
credit in one strike. Fines of up to 250,000 pesetas are set
for very serious offences.
The main infractions leading to points deduction are speeding,
road racing, reckless driving, failure of or refusing a breathalyser,
and driving under the influence of drugs or medication which
affect the driver's psychophysical capability.
Serious offences also include exceeding driving hours specified
for road transport, refusing assistance to accident victims,
failing to respect another vehicle's right of way, carrying
out forbidden U-turns, ignoring one-way traffic signs, and hazardous
parking. Even forgetting to switch lights on at night or in
tunnels will now see points struck off, as will the more obvious
dazzling of other motorists while driving on high beam.
A particular shock awaiting many motorists is that traffic
authorities will consider the owner has committed a serious
offence if the vehicle is stopped and found to be unroadworthy.
Expat motorists resident in Spain and using driving licences
issued in other EU member states are also liable to the points
system when driving in Spain, and disqualification is reciprocal
through the European Community. Those who have not registered
their EU licences with the Traffic Department have already technically
committed an offence under Spanish traffic legislation.
5. WORKING IN SPAIN
Introduction
EU citizens can now settle and work in Spain without restriction.
A tarjeta comunitaria, the "community card", is a
work of residence document which is required. The fees for obtaining
this range between 25,000 pesetas and 50,000 pesetas. Any family
member of the EU worker (even non-EU nationals who are family
members) can also work and reside in Spain. The non-EU spouse
has full rights to residence and employment in Spain, as do
the children.
If you are working for a company, you will need a cuenta ajena.
If you are self-employed, you will need a cuenta propia, sometimes
also known as an autonomo.
Cuenta Ajena
Once you have obtained employment, you present your work contract
and Social Security registration to the Spanish Police and to
the Madrid Central Government Sub Delegate Office for the Province
where you intend to reside, as well as to the Delegado De Trabajo
which is the Provincial Director of the Labour Ministry. They
should then issue the tarjeta comunitaria. You may have to have
an interview with the National Police Official at your local
police station.
The first work permit will be for six months and renewals will
then be for five years. Your new employer will make the arrangements
for registration payment into the Spanish Social Security scheme.
It is illegal to work in Spain without being registered for
Social Security.
Cuenta Propia
This is the work permit for the self-employed. Unfortunately,
there is considerable red tape not only for the foreigner, but
also for the Spanish.
Non-EU Work Permits
It is much more difficult for a non-EU person to obtain a job
in Spain. There are seven different classifications of visas.
An applicant who intends to take up employment will have to
show a proper work contract along with proof that the position
has been advertised with the Spanish employment institute and
that no adequate Spanish candidate has been found for the job.
If you wish to go to Spain and be self-employed as a non-EU
applicant, you will have to demonstrate that you have about
US$120,000 to invest in the Spanish business and that you will
provide work for Spanish nationals. You may be required to hire
Spanish employees before the visa is granted.
Applying For The Work Permit
If you are an EU citizen you enter Spain as a tourist and then
go to the INEM (The National Institute of Employment) and register
as a job seeker. Once you have found a job, you go to the nearest
police station which has a departamento de extranjeros, taking
your job contract, passport, medical certificate issued by an
authorised examination centre, and four photos. Along with the
tarjeta comunitaria you will be issued a NIE (Número
De Identificacion De Extranjeros). This is your Spanish tax
identification number.
Spanish Social Security
Social Security payments and benefits depend on your age, the
time of payment, dependence and other factors.
If you are self employed you are required to pay into the Social
Security system at a rate of about 31,000 pesetas a month.
The minimum time to qualify for a minimum 50% retirement pension
is 15 years but you need to pay 35 years to get a full pension.
You receive 14 payments in your salary, not 12. You get an
extra month each Christmas and in the summer.
You will be entitled to medical benefits through the Spanish
National Health Scheme.
Living in Spain - The Essential First Steps
6. A GUIDE TO BUYING RESIDENTIAL PROPERTIES
IN SPAIN
Part 1: Basic Legal Documents
Beware of Liabilities
The Spanish system is quite different to the UK, and you should
be alert to the differences. For example, you can find yourself
liable to any unpaid mortgages, and the seller's creditors can
exercise their right to take the property even after you have
paid for it. It is essential that Land Registry (Registro de
Propiedad) is searched before the purchase. It will confirm
the description of the property and its boundaries, as well
as reveal any mortgages.
The Escritura
The main title document is the Escritura de Compraventa. This
will state if there are any special conditions, and enable your
lawyer to check that good title can be given to you.
Use a Lawyer
You should use a lawyer (and not the same one who is acting
for the seller). The lawyer will check the title and take care
that there are no arrears of electricity, community fees, taxes,
and so on. For a new property, the lawyer will also check at
the town hall, that the developer has obtained proper planning
permission.
The Notary
The Escritura de Compraventa must be certified by a notario.
The notario is a public official who has no real equivalent
in the English system. Duties are similar to that of an English
solicitor, but the notario is solely concerned that the legal
requirements have been met in full. The notario has no responsibility
to either party, but is responsible for checking that certain
government regulations have been satisfied.
Private Agreements
According to article 1279 of the Spanish Civil Code, private
agreements create a legally binding contractual relationship
whereby either party can require the other to appear before
a notario to sign the Escritura. However, private agreements
do not prevent the vendor selling to another buyer or mortgaging
the property. Nor do they prevent the vendor's creditors making
a prior claim on the property. A holder of an Escritura has
better title than the holder of an earlier private contract.
However, it is still more secure to have it registered with
the Land Registry. We therefore recommend you obtain the Escritura
and have it registered as soon as possible.
Search at Land Registry
A search on the property must be made twice: once at the beginning
of your enquiries, and again when registering the property.
If a property is sold as being free of debt, when it is not,
a criminal case of fraud can be brought. However, this will
achieve little in practice if the fraudster has left the country.
Registration
Your title to the property becomes final when details are entered
in the Land Registry. As said above, this should be done as
soon as possible after the Escritura is signed. Though it is
unusual for the purchaser or their lawyer to take the Escritura
straight from the notario to the Registro de Propiedad, this
is to be recommended.
The Registro de Propiedad returns your Escritura to you containing
its official stamp and inscription reference. So now, even if
you lose your Escritura you have title on the property should
you wish to sell.
Title Deed
The Escritura should be translated from Spanish and properly
checked. This may seem an unnecessary expense, but is very useful.
Failure to do this has been a problem for many British buyers.
The Registro de Propiedad converts the Escritura de Compraventa
into an Escritura Pública (title deed). Only when you
have this piece of paper are you the true owner of the property.
Private Contract
If you are buying a property under construction, or where you
are paying by instalment, you may have to sign a private contract
(contrato privado). Some developers in Spain produce contracts
which are heavily biased against the purchaser.
Spanish law does not require a preliminary written agreement
but it is advisable and it may well save a lot of trouble later.
It should specify that any deposit is returnable in the event
of default by the vendor. It can also give the date for the
buyers to move into the property and it also specifies how the
balance of the purchase price is to be paid.
Part 2: Purchase Costs
Part 1 covered the basic legal documents. This section details
the type and size of costs you may face when buying.
Purchase Costs
- Estate Agents
Commissions are between 5% and 15%. These are usually paid
by the seller
- Notary Costs
These are based on a scale set by the local College of Notaries.
The purchaser is liable to pay part of them. Fees are also
payable to the Land Registry for registration of the new
Escritura.
- Tax
- VAT is payable if this is the first purchase from a developer
(15% for a plot of land and 6% for a dwelling, unless in
the Canary Islands where it's 4.5%)
- Transfer tax at 6% is payable (instead of VAT) if it's
a second or subsequent transfer of the property.
The seller is liable to pay another tax which is called impuesto
sobre el incremento de valor de los terrenos de naturaleza urbana,
which is more commonly known as the plusvalía. This is
a tax on urban property only. It is charged once per ownership
on the capital gain the town council deems to have occurred
during the last ownership of the property. The values are revised
regularly to bring them into line with market values. Although
the seller is liable for this tax, its liability is registered
against the property, making the purchaser liable if the seller
defaults. For this reason, the purchaser often agrees to pay
this tax reducing the purchase price accordingly.
The Price - Disclosed and Undisclosed
A common dodge in Spain is to have two "purchase prices":
the actual purchase price and the "declared price",
which is entered on the Escritura. You will know this is happening
if asked for a cheque for the Escritura value, perhaps 60% of
the actual price, and the balance payable either in cash or
in cheques to bearer (al portador).
The idea was to avoid transfer tax and income tax on capital
gains and this was once regarded as normal practice. However,
the tax authorities have tightened up on this in recent years
and many simply restate the consideration at market value if
they believe that the purchase price was deliberately understated.
The arrangement has the disadvantage that, unless your eventual
purchaser makes a similar agreement, your tax bill will be greater
on your eventual sale.
In 1989 laws were passed whereby if the tax office (Hacienda)
decides that the market value is more than 20% higher than the
declared value it will:
- Charge the seller with additional capital
gains tax on the difference; and
- Charge the purchaser with gifts tax on such
difference
In more serious cases of undervaluation, the tax authorities
have the right to seize the property. They must exercise such
an option within two years of the purchase.
Total Costs
The lawyer will be able to tell you how much all the fees and
taxes should be. The figure will usually be in excess of 10%
of the purchase price. Lawyer's fees are typically about 4%
of the purchase price, but may be as little as 50,000 Pesetas
if the case has been a straightforward one.
Loans
Spanish banks may grant loans of up to 80% of the purchase
price, though in practice residents are usually limited to 70%
and non-residents to 50%. With British banks and institutions
it is possible to obtain loans of up to 100%. UK branches of
Spanish banks lend up to 60% repayable over 10 years. Arrangement
fees are usually about 1.5%.
In Spain, mortgage periods tend to be shorter than in the UK.
The bank will usually grant a loan for between three and 20
years to a resident, and between three and 10 years to a non-resident.
The bank's security is by a mortgage (hipoteca). The usual choice
of a repayment mortgage or an endowment mortgage is offered.
No guarantors are required.
Part 3: Ownership and Ongoing Costs
Part 1 covered the basic legal documents, and Part 2 detailed
the typical purchase costs. This section discusses offshore
company ownership and the ongoing costs.
Buying in a Company?
Usually our advice is to buy in your own name. However, there
can be situations where a purchase in a company name may be
preferred. Offshore companies incorporated in tax havens (eg
Gibraltar) can lead to an annual 3% tax charge on the ultimate
owner. If a UK company is used, there's no 3% tax charge. The
advantage of using a UK company is that the Spanish succession
laws and succession taxes can be avoided. If you are to remain
a UK tax resident, using a company will result in an annual
benefit in kind tax charge. Separate advice should be taken
if you believe a company structure might suit you.
Ongoing Costs
Rates and Taxes
The owner of property is liable to pay municipal real estate
taxes or rates known as impuesto sobre bienes inmuebles (IBI).
When purchasing a property it is always wise to request to see
the latest receipts for the IBI before signing a contract as
the new owner may find back taxes and penalties outstanding
for which the new owner will become liable.
Local authorities also charge taxes known as tasas for various
services such as sewerage and beach cleaning.
Both the rates and tasas are payable once or, occasionally,
twice a year depending on the area. Most authorities demand
payment between 15th September and 15th November. Quite often
demands are not sent out, but fines of 20% are imposed if they
are not paid on time. The town hall (ayuntamiento) can register
a charge against the property if the rates remain unpaid.
Utilities
Electricity and water bills must be paid promptly or supplies
may be cut off. If you are disconnected there is always a charge
for reconnection. A recent example was an unpaid water bill
of 6,000 Pesetas and a reconnection fee of 7,000 Pesetas.
There is a standing charge for electricity payable every two
months, even if no electricity is used.
Gas is provided in cylinders (bombonas) as there are no gas
mains, save in the largest cities. Bottled gas is cheap and
commonly used for both cooking and heating. The bombonas are
easily refillable and there is a regular delivery service.
Telephone bills are sent out every two months by Telefónica
which is quick to cut off (and slow to reconnect) telephones
when the bill remains unpaid. Reconnection costs are high.
It is advisable to pay by standing order but check the figures
against your bill.
Community Charges
Most people who buy property in Spain will be members of a
Community of Owners, a sort of tenants' co-operative. Even though
the tenants may be the freehold owners of their properties,
there will usually be common parts: halls, staircases, patios,
swimming pools, gardens, verandas, etc. The law is governed
by the Law of Horizontal Ownership (though it applies to high-rise
flats as well!).
The Law of Horizontal Property lists the responsibilities of
the Community members, which are:
- The property must be maintained in a good
state of repair. If it is a flat and through the owner's
negligence, danger or damage is caused to the other flats,
then the owner can be liable to pay for any damages
- The owner must take care of any main water
pipes, drains, heating pipes and electric wiring which run
through the property
- Community expenses (cuota de participación)
must be paid when they fall due. This is a legal requirement.
If the tenant does not pay then the Community has a legal
right to embargo their property
- When it is necessary for work to be carried
out on the building as a whole, then the tenant must grant
access to their house or flat. Should any damage to their
property be caused then the Community is responsible for
compensating the tenant
- The tenant must abide by the rules of the
Community
- The tenant has the right to vote in any
meeting called and also the right to air any grievances
Each member is allocated shares according to the size of their
property. Each Community has its own set of rules. The rules
will determine what "property"' is for their purposes.
The number of shares determines the size of the member's contribution
to the Community and their number of votes.
7. CONCLUSION
We have outlined the major areas you need to consider when
you are either Living in Spain or just planning your new life
for your retirement years. Of necessity we cannot envisage every
individual circumstance.
