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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
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