THERE are two possible outcomes once you have developed a new property: keep it – as your permanent residence, holiday home or to rent out – or sell it.
Either way, you will be liable for a variety of levies, although these vary significantly, depending on the property and municipality.
In addition to fees for professionals like architects and builders, you’ll have to hand over some significant sums to your local town hall for licenses; to the Land and Property Registries and to notaries for registration fees. And, should you sell, you will be paying ‘plusvalía municipal’ (local tax on the increase in the value of the land), as well as money to your local Council, and capital gains tax to the Spanish Tax Agency (‘Agencia Tributaria’, better known as the ‘Hacienda’).
To ensure we crossed all the ‘i’s and dotted all the ‘t’s, we asked Adolfo Martos Gross, a partner at the Costa del Sol firm, GAM Abogados, for more information:
Let’s take a new-build villa in Marbella as an example, where, using round numbers, the plot costs €500,000 and construction €1,000,000.
Before laying the first brick, you need to apply for a building permit at your local town hall. Assuming the project meets relevant regulations, in Marbella the license fee is 4% of projected build costs – in this case €20,000-28,000.
These are based on amounts approved by the Architects Association of Málaga and are generally 30-50% lower than the real construction cost.
But every town hall sets its own tax rates, so the percentage can vary.
Once the property is completed, you have to apply for a ‘licence of initial occupation’, again at the town hall before you can connect to utilities and legally move in.
In Marbella, this is levied at 0.308% of the build costs, Adolfo says, and normally based on the same projections provided for the building permit.
As a result, set aside another €1,500-2,000, also variable.
Thereafter, you need to visit a notary to draw up the deeds of the new property – you’ll be required to pay 1.5% of the real build cost in stamp duty.
That, Adolfo notes, adds up to €15,000, plus another €2,000 for the Land Registry and notary’s fees.
Up to this point, the costs are the same whether you decide to keep the property or sell it – around €37,500-47,000.
If you opt to sell a new villa you will be liable to pay ‘plusvalía municipal’.
If the period of ownership is under five years, the rate in Marbella is 2.5% and the catastral value is usually less than half market value.
So, for our €1.5 m villa it would come to €15,750.
If you profit from the sale, you will also be liable for capital gains tax, levied at different rates depending on your status (resident or non-resident, individual or company).
Given Hacienda’s zealousness, Adolfo suggests you consult a specialist about declaring gains.
Typically, all other costs – for example, for Land and Property Registries and the notary – are paid by the buyer.
However if the property is mortgaged, the seller is liable for the costs of cancelling an existing mortgage, if the buyer does not take it over.
BUT, mortgage cancellations are tax exempt and Adolfo recommends developers negotiate with banks to pay no cancellation fee or, in the worst case, no more than 0.5%.
If there was a €300,000 mortgage pending, cancellation costs shouldn’t exceed €500 for the Land Registry and €800 for the notary’s fee.
Finally, as the developer of a new-build property in Spain, you also have to take out a 10-year structural damage insurance policy, which would cost in the region of €4,000 for our million euro villa.
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