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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.
Insurance
in Spain - Home and Household property Insurance in Spain Information
below is provided in good faith, but as conditions are always changing, professional
advice should be sort before arranging insurance.The information should not be
relied on for accuracy. Building
and contents insurance (continente y contenido) . Contents insurance (contenido)
Insurance
Policy options you should check include the following: -
Accidental damage
cover and "All Risks" outside the home
-
Increased limits for liability cover
-
Liability cover for dangerous dogs, cover for non-dangerous dogs is normally automatically
included
-
Property Owners Liability (landlords) for rented accommodation q Standard comprehensive
policies with public liability insurance (also known as liability to third parties)
Household
insurance (seguro del hogar) in Spain generally includes the building, its contents
and third party liability. Insurers do not have to be based in Spain and as such
an Insurance company broker based in the UK with a policy written in English can
be beneficial. Click
Here for further information. Some of the Spanish based companies also
offer the policies written in English. Insurance policies often appear confusing
in any language, so unless you are fluent in Spanish it might well be beneficial
using a provider based in the UK. Contents
Insurance (Contenido) Home
insurance policies in Spain are generally on a "new for old" basis (this means
that in the event of a claim insurers will settle the claim based on the value
of a similar but new item to the one lost or damaged). It is therefore important
that the contents sum insured reflects the replacement value. In
the UK bathroom and kitchen fitments are usually covered under the buildings section
of a policy. In Spain this is not always the case and the value often has to be
included under the contents sum insured. This is worthwhile checking out when
you take out your insurance cover. Building's
Insurance (Continente) As
in most countries, the building sum insured should represent the rebuilding value
for the property and not the market value. Rebuilding costs have risen dramatically
in Spain over recent years; it is important that the rebuilding sum insured is
realistic or any claim may be reduced for underinsurance. As a rough guide the
rebuilding sum insured should be about €1,500 per square metre of a constructed
property. (This approximate amount being quoted in 2009, but you should not rely
on this figure) Another
consideration when arranging your insurance, is that quite often with an insurance
company based in Britain, your insurance value e.g. cost of rebuilding or contents
would be in £ sterling. In the last few years when the £ has got weaker and the
€ euro stronger it has meant that you might not be adequately insured. Inflation
is accommodated by index linking which covers standard inflationary increases.
This is reviewed automatically annually by insurers. Market forces can cause variations
locally and the insured should request advice if unsure that the sum insured is
adequate. Generally, standard policies do not have any excess although a reduction
in the premium can be obtained if an excess is taken. If you are using a UK provider,
you might find there are excesses and again check this out before purchasing. If
the owner has a mortgage on the property, the lender will usually insist on building
insurance with a clause on the policy noting their interest. Holiday
Homes The
owner of a self catering holiday property that is rented out as holiday accommodation
must make sure that the insurers are aware it is let for holidays. You should
check that there is adequate public liability cover as a landlord. Liability limits
of Spanish insurers tend to be fairly low, although some Spanish insurers do offer
higher limits and this should be checked with the adviser or insurer. If
the property is a holiday home insurers must be advised of the periods of non-occupancy.
If for example you need to keep the electricity on during periods of non occupancy
for heating, alarms, garden irrigation etc, you should let the insurance provider
know. People
who live in a domaine, should be aware that their community policy may not provide
cover in the event of damage to the buildings. Advice on this point should be
sought from an insurance adviser. Making
a property insurance Claim Claims
must be reported to the insurers or insurance adviser as soon as possible. Policies
usually have a time limit for claims of seven days (check on the policy). Contact
the adviser or insurance provider by telephone, fax, letter or email. Although
it is written in the policy that claims must be reported within seven days, if
there are circumstances, which prevent the client from doing this, then insurers
will normally take this into account when dealing with the claim. In
the case of a robbery, malicious damage or arson a police report (denuncia) must
be obtained and sent to the insurer with the claim. 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 / 12-09 Looking
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