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SPAIN Buying real estate Taxation Inheritance and inheritance tax




Buying real estate in Spain Taxes and charges Spanish wills and inheritance tax General information about Vogt Advokatfirma – Law firm S.L. Quality control by Vogt Advokatfirma


1.1 Differences between Norway and Spain

1.2 Quality control when buying real estate in Spain

1.2.1 Introduction

1.2.2 Legal and financial traps when buying real estate in Spain

Registration certificate (Nota Simple) / copy of title deed IBI receipt – property tax Basura receipt – waste disposal charges Joint ownership – rules and receipt for payment of communal charges Copy of electricity and water receipts Plan parcial – development plan Mortgage transfers Payment by promissory note Bank guarantees Inventories Inspecting the property Certificate – completion

1.2.3 Buying off-plan

Introduction Contract requirements Bank guarantees Developer’s obligation to rectify discrepancies and faults


2.1 Sales taxes and charges


New properties • VAT – IVA • Notary costs • Land Registry fees • Solicitor’s fees

2.1.2 Second-hand properties • Transfer tax 3


Financing and financing charges • Currency • Setup fee • Interest (fixed/variable) • Mortgage bond charges • Valuation fee • Land Registry fee • Stamp duty • Insurance

2.2 Ownership taxes – not resident in Spain for tax purposes

a) Income tax b) Tax on capital (abolished 2008) c) Property tax-IBI d) Waste disposal charges – Basura e) Communal charges

2.3 Norwegian taxes on property ownership in Spain 2.4 Sales taxes

2.4.1 2.4.2 2.4.3 2.4.4 2.4.5 2.4.6 2.4.7 2.4.8

Private ownership Capital gains tax Corporate ownership Calculating capital gains Retention Transfer tax Changes in exemptions from capital gains tax What are the tax effects of these changes for persons resident in Norway for tax purposes? Renting out your home in Spain

III. SPANISH WILLS AND INHERITANCE TAX 3.1 Introduction 3.2 How to create a will in Spain 3.3 Why create a will in Spain? 3.4 Inheritance tax 3.5 Calculating Spanish inheritance tax 3.6 Inheritance planning







Preface This brochure is intended to serve as a guide for those considering buying, or who have already bought, real estate in Spain. The brochure contains practical and general advice and does not require any legal knowledge. However, the brochure should not be used in isolation when dealing with the buying process, tax or inheritance issues. We recommend taking professional advice on issues concerning buying, selling, tax and inheritance in Spain. The brochure has been updated to reflect changes in legislation as at 01.01.2011.



I. BUYING REAL ESTATE IN SPAIN 1.1 Differences between Norway and Spain The process of buying in Spain differs considerably from that in Norway.

The Spanish buying process differs significantly from that in Norway. Firstly, there are no government-authorised estate agents in Spain. Nor is authorisation required to act as an estate agent. Estate agents do not provide financial guarantees, and many of them are not insured for the financial commitments that may be undertaken. There are no formal viewings like we are used to in Norway. Properties are advertised online by all or many Spanish estate agents. It is therefore important to ascertain that the estate agent you are dealing with actually has the property on its books and is authorised to sign on behalf of the vendor. Secondly, the actual contract also differs from that used in Norway. An initial reservation contract is usually signed whereby the buyer pays a deposit (between ₏3,000 and ₏6,000) to take the property off the market. The next step is to draw up and sign a purchase contract (Contrato de Compraventa). The transaction only becomes final once the title deeds (Escritura Publica) are registered with the notary. Thirdly, all contracts are in Spanish and are normally regulated by Spanish law. Get a solicitor to help you with this process – ideally one who speaks both your language and Spanish and a company who employs both Spanish and Norwegian solicitors. Where to buy?

Decide where you want to buy.


The first thing to decide is which country? And then, where in the country? Even when you have chosen a region, you still have to make decisions about which resort/city along with issues such as proximity to the sea, services, transport, schools etc. Your budget will of course limit your freedom of choice. Once you have found a property that meets your criteria, you need to obtain the necessary information to allow you to ascertain the legal and financial status of the property. This is what we refer to, in short and somewhat inaccurately, as quality control.

1.2 Quality

control when buying real estate in Spain

1.2.1 Introduction First we should like to stress that few Norwegians are in a position to assess the risks and potential problems linked to buying real estate in Spain. Investing in real estate often involves large sums of money, and you have to deal with a different legal system and laws and rules that are considerably different from those in Norway. Few people are also fluent in Spanish.

The quality control process.

The quality control process varies depending on whether you are buying offplan, a new apartment/house or a second-hand property. Registration certificate (Nota Simple) / copy of title deed A Nota Simple is a registration certificate from the Land Registry. The certificate contains information about: 1. Who owns the property, including ownership stakes if there are multiple owners 2. A description of the property and details about its boundaries 3. Encumbrances on the property and their size. However, please note that not all encumbrances are listed on the Nota Simple, e.g. encumbrances such as unpaid property tax and communal charges, cf. below Other ownership limitations, such as any rights of use to the property, servitudes etc...

What is a Nota Simple?

A registration certificate should be obtained even before signing the reservation contract. That way you will know with certainty that the vendor holds the registered title. Please note that the solicitor carrying out the quality control will not inspect the property. The physical state and actual size of the property are therefore not inspected. We recommend that you instruct a surveyor to inspect the property. The surveyor will produce a report describing the condition of the property. This will also provide the buyer with the estimated floor space of the property. As mentioned, the solicitor will not look at the size of the house/apartment. He will only compare the previously registered title deeds with the details provided on the registration certificate (from the Land Registry).


The Nota Simple should be recent and no older than 10 days. A registration certificate is not a guarantee that further encumbrances have not been placed on the property after the certificate was issued. A new certificate should therefore be obtained just before the final transfer. The certificate obtained by the notary in connection with the transfer of the property is valid for 10 days. The Land Registry issuing the certificate is obliged to inform the notary if there are any changes to the status of the property in this period. The Nota Simple contains simplified information, and a copy of the title deeds should therefore be obtained and thoroughly examined. IBI receipt – property tax Always keep the receipts for any charges paid.

IBI (Impuestos sobre Bienes Inmuebles) is the Spanish term for property tax. When buying real estate in Spain it is recommended that the vendor is asked to produce a receipt for paid property tax. Property tax is levied on the actual property and will follow the property in the event of a sale. This encumbrance will normally not be described on the registration certificate. The IBI receipt contains a due date, and overdue interest is charged in the event of non-payment. Basura receipt – waste disposal charges The vendor should also produce a copy of the receipt for payment of municipal waste disposal charges (Basura). Unpaid waste disposal charges are an encumbrance that follows the property, and overdue interest is payable in the event of non-payment. Joint ownership – rules and receipt for payment of communal charges A joint ownership organisation will have been established if the property is part of an urbanisation. The joint ownership organisation will have rules that regulate communal issues within the urbanisation. The rules may include clauses that limit your freedom if you are planning to rebuild your terrace, put up awnings, keep animals etc.

Obtain the minutes of the general meeting.


An urbanisation will normally hold a general meeting once every year. The general meeting debates and adopts the accounts and budget, and it raises issues that are important to the owners. Minutes from a general meeting can therefore provide a good indication of which problems may be expected in the future when buying a property. Spanish law does not require minutes to be published in any language other than Spanish. Spanish law also stipulates how individual owners in a joint ownership should vote and how many votes are required in each case.

When purchasing real estate the vendor should produce confirmation from the administration of the joint ownership organisation stating the vendor has no communal costs outstanding. Unpaid communal charges follow the property. This encumbrance will normally not be revealed by the registration certificate until the joint ownership organisation has taken distraint action against the property, which will only happen if the vendor has not paid the communal charges for a long time. The administrator should also be asked to give a statement to the effect that no major repairs, refurbishments or expansions are being planned that would leave the buyer with higher than expected communal costs. Copy of electricity and water receipts If you wish to continue an existing water and electricity contract, you should investigate whether the vendor has paid these bills up until the date the title deeds are signed. Plan parcial – development plan The development plan for the area should be examined. It will reveal any planned roads, preservation areas, new areas of development etc. When buying a property under construction you should check that the developer has planning permission (licencia de obra). If the development is within a “green zone” (an area that should not be developed), you should check whether dispensation from the development plan has been granted.

Check that everything is going to plan with your building project.

A bank guarantee should be issued for part payments during construction. It is common for developers not to produce a bank guarantee until requested to do so by the buyer or the buyer’s solicitor. It is also important to obtain a so-called licencia de primera ocupacion – completion certificate – before moving in. This certificate is necessary in order to enter into permanent water and electricity contracts, for example (cf. This is just a basic checklist of the information you should obtain in order to quality-assure a real estate purchase. However, the quality control must be tailored to each individual purchase. If the owner of the property is a Spanish company, the quality control process will be more extensive. For example, quality control will then include due diligence checks of the company’s financial and legal status. If the owner is a Spanish company owned by a foreign enterprise, you should be very wary of taking over the parent company without conducting a thorough preliminary investigation. 9

1.2.2 Legal and financial traps when buying real estate in Spain Mortgage transfers Various financing options and vendor’s guarantee.

In the case of new-builds the vendor will normally take out a mortgage loan to finance the construction project (building loan). The buyer will often be offered to take over the loan secured against the property (subrogation). The benefit of doing this is that the subrogation costs are often lower than the set-up fee when taking out a mortgage in Spain. If the buyer wishes to take over the mortgage, this will normally be stipulated in the purchase contract. Before signing the purchase contract you should obtain the terms of the mortgage along with details of the loan currency and then make a final decision as to whether or not you want to take over the mortgage. You can get an unpleasant surprise if you first decide to take over the mortgage but then change your mind at a later date. You will then have to meet the cost of cancelling the loan. You can also enquire about the possibility of taking over the mortgage secured against the property when buying second-hand property. Payment by promissory note If the purchase sum is payable in instalments during the construction period, it is sometimes agreed that promissory notes (pagare) should be issued. A promissory note is a document issued in a specific format whereby the issuer is obliged to pay a set amount at a specific time to the person who identifies himself as the true holder of the promissory note. The note is signed, and you should set up a bank account in Spain for debiting the promissory note on set dates. If you were to forget to transfer money to your Spanish account, and the promissory note is sent to the bank without your having sufficient funds in the account, it will be rejected (protested), even if the shortfall is a little as ₏1. Bank charges for protesting promissory notes are around 6% of the value of the note. Such a predicament can easily be avoided by negotiating a different method of payment, such as an ordinary bank transfer to the vendor’s account and then setting up payments as a standing order from a Norwegian bank. Bank guarantees


Under Spanish law it is mandatory for the vendor to produce a bank guarantee for any monies paid during the construction period. The law does not stipulate who should meet the cost of issuing the bank guarantee, however. The objective of the law dictates that the vendor shall meet the cost, but it does happen that developers sometimes try to make the buyer cover the cost by including it in the contract. The cost of issuing a bank guarantee varies from bank to bank but is

around 1–1.25% of the guaranteed amount. You should therefore ascertain that the vendor will pay the cost of issuing a bank guarantee and include this in the purchase contract (cf. Inventories

When buying an apartment in the second-hand market it is often agreed that fixtures, fittings etc. be included in the sale. If so, a detailed inventory should be drawn up. Photographs can also be a useful form of documentation. The inventory should be signed by both vendor and buyer and should be included as an appendix when signing the purchase contract. That way you prevent the vendor from taking with him any of the fixtures and fittings and claiming that they were personal property.

Draw up an inventory. Inspecting the property When buying a new apartment the buyer is given a 1-year warranty for hidden faults in the apartment and a period of up to 10 years for construction faults (cf. When buying a second-hand apartment it may be worth hiring a surveyor to inspect the property. This will cost around € 500–750 (cf. d). Certificate – completion A purchase contract will often stipulate that the buyer can take possession of the property once the apartment has been completed. But at which point can an apartment be deemed to have been completed? Many contracts define completion as the point at which the vendor submits an application for a completion certificate – a licencia de 1° occupacion. A completion certificate is required in order to connect water and electricity, for example. The filing of a certificate application by the vendor does mean that a licence has been granted, however. It will usually take at least one month (often up to 6 months) from the application is submitted until the certificate is issued. The result is that the new owner will have no water or electricity in this period. This problem is often solved by the developer’s making electricity and water available from the building site. We still recommend that the certificate be produced before the title deeds are signed. Only once the certificate has been produced can the property be deemed to have been completed from a legal point of view. One peculiar, but not unusual, practice is for the developer to obtain a certificate by way of passivity on the part of the municipality. Under Spanish law the municipality has 3 months to give a positive or negative response. If no response is forthcoming, relevant Spanish law stipulates that the application shall then be deemed to have been granted. However, you should not automatically assume this to be the case, as the municipality may in certain circumstances investigate a particular case if the developer is guilty of serious misconduct (e.g. if planning permission has been obtained based on corruption and where permission should not have been granted, e.g. in connection with the development of communal gardens).

Ensure that the apartment has a completion licence.


1.2.3 Buying off-plan The developer’s obligations towards the buyer are regulated by law. For example, there are requirements for the content of the contract and for the issuing of guarantees for any monies paid during the construction period. Once ownership of the property has been transferred there are also rules on the developer’s obligation to rectify any faults and discrepancies with the property. Contract requirements Firstly, there is a general legal requirement that the contract must be clear and concise. It must also be balanced, and the terms and conditions must be “reasonable”. Examples of unreasonable terms and conditions in a contract: Include your demands in the purchase contract.

When buying real estate off-plan the buyer is often offered to take over the existing mortgage on the property. The mortgage often accounts for 70% of the total purchase sum. Buyers are not obliged to take over the mortgage, but some contracts stipulate that the buyer must pay cancellation fees for the mortgage if he does not agree to take it over. This clause is frequently abused, as it is in principle the developer’s duty to pay cancellation fees for his own mortgage. These costs are often around 0.5–1% of the mortgage. Land registry fees and notary costs of up to some €1,000 are also payable.

Contract terms and conditions stipulating that the buyer must pay any costs that under the law should be met by the vendor – such as the cost of dividing up the apartments (Division Horisontal) – are deemed to be “unreasonable” according to Spanish law.

We have often seen contracts specifying that the buyer is obliged to take possession of the apartment once the developer has obtained a so-called Acta fin de obra – a certificate issued on completion of the building. According to Spanish law, the property only becomes habitable once the developer has obtained a Licencia de 1ª ocupacion as described above. Legally, the property does not become habitable until this certificate has been produced.

Under Spanish law the contract must contain the following: What the contract should contain.


a) Information about the contract parties. The contract should contain the buyer’s name and address. Similarly, it should specify who the developer is. If the developer is a company, it must state where the company is registered, which type of company it is, its organisation number

/ CIF number and its address. The contract must also contain a detailed description of who is authorised to sign on behalf of the company. If it refers to a power of attorney from the developer, Spanish law requires this to be a notary power of attorney. The contract should contain a description of where and in the presence of which notary the power of attorney was signed. Buyers often decide to change the name on the contract during the construction period. For example: a buyer has signed in her own name but then decides that she wants her Norwegian/Spanish company, or her children, to be the legal owner of the property. If this buyer has been farsighted enough, the contract would contain a provision stating that the contract can be transferred to a third party without requiring the permission of the vendor. If the contract does not stipulate such an entitlement, the buyer must rely on the vendor’s goodwill. Vendors will occasionally refuse such a transfer without giving any reason whatsoever. Nor does Spanish law require the vendor to give a good reason for such a refusal. If it is a case of a genuine sale before completion, the vendor will often demand a certain percentage of the profit that is generated by the buyer. In other cases it may be stipulated that any profit is to be shared equally between the buyer and vendor. A transfer of the purchase contract during the construction period may render the vendor liable for capital gains tax on any profit, and the transfer itself may be subject to transfer charges or VAT. b) Description of the property The contract should include a detailed description of the property, and it should state where the property is registered. It should also contain plans of the apartment, showing room divisions etc. If the apartment is in an urbanisation (joint ownership), plans should be attached showing the location of the apartment within the urbanisation. The plans should be signed by both the buyer and the vendor. Communal areas should also be defined, as should the developer’s obligations in terms of building swimming pools, tennis courts, club houses etc. if these are described in the prospectus. c) Price and delivery date The contract must contain information about the price and completion date. The completion date should correspond to the date on which the developer receives the so-called licencia de 1ª ocupacion – a completion certificate required to enter into water and electricity contracts (cf. 13

d) Building specifications The contract should also include a list describing materials, colours and standards in detail. For example, the list should specify whether there should be marble floors, which type of marble should be used etc. It should also specify what will be included in terms of white goods, air conditioning, alarms etc. Bank guarantees Safeguard the money you pay in.

Spanish law requires a bank guarantee or insurance guarantee to be produced for any monies paid in during the construction period. This is a mandatory legal requirement, which means that the developer has a duty to issue an insurance/ bank guarantee for any monies paid in during the construction period. An agreement between the parties stating the no bank guarantee will be issued is not valid under Spanish law. The law also prescribes a duty on the part of the buyer to return the bank guarantee(s) when signing the title deeds and taking possession of the property. Spanish law also stipulates that monies paid in during the construction period shall be placed in a separate account and used only for construction. The bank guarantee shall also guarantee the amount paid in + 4% interest per annum. The purchase contract should expressly refer to the bank guarantee, and it should specify that the developer guarantees the return of the monies paid in + 4% interest per annum if the developer has not completed the property within the agreed time frame. The purchase contract should also specify that the vendor shall meet the cost of obtaining a bank guarantee. It is also important to obtain a licencia de primera ocupacion (completion certificate) before moving in. This certificate is necessary in order to enter into permanent water and electricity contracts, for example (cf. For practical reasons it is common for the buyer to receive the bank guarantee around 14 days after the money has been paid in. Developer’s obligation to rectify discrepancies and faults

Buyer’s rights in the event of faults and discrepancies with the property.


When building new homes the developer is obliged to rectify any faults and discrepancies with the property. In Spain there are generally speaking three different deadlines for requesting rectification. The various deadlines depend on the nature of the discrepancy. Firstly, the buyer is entitled to demand that the developer rectify any faults and discrepancies with the property provided he makes such a demand within one year of taking possession of the property. This mostly relates to visible faults and discrepancies.

The buyer may also demand that the developer rectify hidden faults by making a claim to that effect within three years of taking possession of the property. For construction faults and discrepancies there is also a 10-year deadline for making a claim for rectification. If you buy real estate where the previous owner purchased the property from a developer 6 months ago, the previous owner’s rights vis-à-vis the developer will be transferred to you. This means that you must make any demand for rectification of visible faults and discrepancies within 6 months etc. We should also like to add that if the developer fails to meet his statutory obligations, the case must be brought before a Spanish court of law. It should not come as a surprise to anyone that the Spanish legal process is very time-consuming. We are sorry to say that we have seen several examples of developers simply speculating in buyers’ not going to court, instead agreeing to rectify the discrepancy at their own expense.


II TAXES AND CHARGES 2.1 Sales taxes and charges 2.1.1 New properties • What charges am I liable for on top of the purchase price?

Value added tax – IVA

IVA (value added tax) is payable when buying property off-plan. IVA on the purchase of newly constructed properties is charged at a rate of 8% ­– this also includes garages and storage rooms. If a garage or storage rooms is purchased separately, IVA will make up 18% of the purchase sum. The latter IVA rate also applies when buying land. 1% stamp duty on the purchase price is also payable. IVA is calculated on the basis of the title deed value of the property. •

Notary costs

Notary costs of around €800 are also payable. Notary costs vary depending on the complexity of the title deeds and on the number of notarial pages used when producing the title deeds. •

Land Registry fees

The title deeds must be registered in the Land Registry. The registration costs are normally in the region of €700. Solicitor’s fees •

Solicitor’s fee

The solicitor’s fee when buying property is normally between 1% and 1.5% of the purchase price, albeit minimum €2,500. Estate agent fees have fallen in recent years and are now usually around 5%. 2.1.2 Second-hand properties •

Transfer tax

A transfer tax of 7% of the title deed value up to €400,000 is payable when purchasing second-hand property. The transfer tax rises to 8% if the value is above €400,000. E.g. if a property costs €450,000 you will be liable for 7% tax on the first €400,000 and 8% on the remaining €50,000.


Notary costs, solicitor’s fees and Land Registry fees are also payable as mentioned above. Stamp duty of 1% is not payable when purchasing second-hand property.

2.1.3 Financing and financing costs • Currency In order to eliminate exchange rate risks, you should consider taking out a mortgage in the currency in which you receive your salary. Whether to take out a mortgage in Spain or in Norway should be considered on a case-by-case basis. We will provide an overview of costs that are often incurred when taking out mortgages in Spain.

Information on financing.

Non-residents will normally be granted a mortgage for up to 70% of the value of the property. The financial crisis has led Spanish banks in particular to be more restrictive when issuing mortgages. You should study the terms and conditions of the mortgage carefully. A fee is payable when you take out a mortgage (cf. below), when you change the terms and conditions, and when you cancel the mortgage. Please note that all of the terms and conditions can be negotiated, and it is often possible to slightly reduce the fee that you pay, but it is important that you negotiate more favourable terms before the mortgage is granted. The mortgage is set up with the notary, usually at the same time as when you sign the title deeds for the property. Overview – the cost of taking out a mortgage in Spain • Setup fee Varies from bank to bank but is normally between 1% and 2% of the mortgage.

What are the additional costs of taking out a mortgage?

• Interest (fixed/variable) If you think interests rates are likely to rise, you should fix the interest for as long as possible. If you believe the opposite to be a more likely scenario, you should agree a 3-month variable rate. • Mortgage bonds - depends on the complexity of the title deeds and on the number of notarial pages that are used but is in the region of €600. • Valuation fee Approx. €350–500. • Land Registry fee Normally €500–600 • Stamp duty Stamp duty is payable on 1% of the total liability of the mortgage, i.e. the total sum of capital, ordinary interest, overdue interest and collection costs. Stamp duty is calculated on the basis of the total liability, which is around 150% of the amount borrowed. • Insurance By borrowing, it is a requirement that the property is insured.


2.2 Ownership taxes – not resident in Spain for tax purposes a) Impuestos sobre la renta de no residentes – income tax for non-residents Income tax for non-residents.

A non-resident must pay income tax on any earnings generated in Spain, including from renting out property. The income in this respect is the actual rent that you have received or a percentage of the rental value (comparable to Norwegian taxation rules on the imputation of rental income from holiday homes). Income tax for non-residents who have not rented out their property is calculated in the same way as imputed rental income in Norway. The taxable gain is 2% of the Spanish rateable value of your property, the so-called valor catastral. Beyond that, a flat tax rate of 24% is applied. Let’s imagine that the Spanish rateable value of your property is €50,000. The taxable amount is 2% of €50,000, which is €1,000. Income tax is 24% of €1,000, which is €240 (0.5% of the rateable value, in other words). If the Spanish rateable value has been revised after 01.01.1994, the taxable amount is 1.1% of the Spanish rateable value.

Tax on capital.

b) Impuestos sobre el patrimonio – tax on capital Tax on capital was abolished in Spain with effect from the 2008 finan cial year, and this type of taxation is no longer applicable. c) Property tax – IBI – impuesto sobre bienes inmuebles

Property taxes and charges.

IBI is an annual municipal tax payable by both residents and non-residents in Spain. A bill will be sent to your registered Spanish address once a year, usually by September every year in Marbella and by June in Mijas. The amount of property tax you have to pay will vary depending on where the property is. d) Basura / municipal waste disposal charge The municipal waste disposal charge is payable by both residents and non-residents in Spain. The bill will arrive by mail twice a year and is for around €70–90. e) Communal charges


Communal charges vary depending on which services are provided as part of the joint ownership (gardener, security guards etc.). The communal charges are set on the basis of a budget adopted by the annual general meeting. These charges are not distributed equally to each apartment (or house) but according to the

number of square metres you own (including terraces and your notional share of the building’s communal areas).

2.3 Norwegian taxes on property ownership in Spain According to Article 6 of the tax treaty between Norway and Spain, Spain may collect tax on income from real estate in Spain owned by a person resident in Norway. The same applies to profits from the use of real estate in Spain. However, Spain’s right to tax such income and capital under the double taxation treaty does not limit Norway’s right to tax the same income and capital. Income from and capital held in real estate in Spain are also taxed in Norway (even though Spain no longer collects tax on capital). However, when calculating your tax in Norway, deductions should be made from your Norwegian tax for tax already paid in Spain, based on the so-called credit method.

Do I have to pay tax in Norway for owning a house in Spain?

You must give details of any real estate in Spain on your Norwegian tax return. A request for tax credits should be made and you should attach your Spanish tax return How is the Norwegian rateable value of real estate in Spain determined? According to a statement by the Norwegian Ministry of Finance, the setting of the Norwegian rateable value of real estate abroad should be based on “approximately the same ratio between the assumed market value and rateable value as for similar property located in the Norwegian municipality where the taxpayer is resident”. This can be illustrated by the following example: you buy an apartment in Spain for NOK 2 million, and the rateable value of real estate in your municipality in Norway is 20% of the market value. Your Norwegian tax return stipulates that you should give the value of the apartment as NOK 400,000. However, a number of our clients have given the Spanish valor catastral as the basis for Norwegian tax on capital, and this has been accepted.


2.4 Sales taxes 2.4.1 Private ownership Capital gains tax Taxes and charges when selling the property

Before the tax reform that came into effect on 1 January 2007, vendors were taxed differently with regard to capital gains tax depending on whether or not they were resident in Spain for tax purposes. This division has now been eliminated, and all vendors are now treated equally. Tax on capital gains is now 19% of the total gain. 2.4.2 Corporate ownership If the property is owned by a Spanish or foreign company, the capital gain is taxed as revenue for the company, currently at a rate of around 25% (20–25% or 30%) for gains not exceeding €120,202. Capital gains exceeding this amount are taxed at around 25–30 %. The above only applies if the company conducts business in Spain. Norwegian companies not conducting business in Spain are charged at a rate of 19%. 2.4.3 Calculating capital gains

Capital gains tax for nonresidents.

The capital gain is the difference between the entry value (title deed value upon purchase) and exit value (title deed value upon sale). The entry value is the official purchase sum with the addition of a given tax index rise for each year that the property has been in the vendor’s ownership. The entry value will also increase with any investments made (less depreciation) and with any direct purchase and sales costs. 2.4.4 Retention A few inequalities still remain between residents and non-residents. If a buyer conducts a transaction with a vendor who is non-resident, the buyer must withhold 3% of the purchase sum which must then be transferred by the buyer to the tax authorities as an on account payment for capital gains tax. If this on account amount exceeds the amount of capital gains tax due, the buyer must request a refund of the balance. The processing time for such requests is between 6 months and 1 year. Plusvalia


Plusvalia is a tax on the increase in value of the land on which the house/apartments is built and becomes payable each time there is a change in ownership. The extent of the Plusvalia depends on the length of ownership and the size of the plot. Under Spanish law, the vendor is generally speaking liable for paying Plusvalia, but the law does allow for vendors and buyers to make their own arrangements in this respect.

Private ownership – resident in Spain for tax purposes • A resident who sells his main home and invests the money in a new home (within 2 years) is exempt from capital gains tax when selling. Under Spanish law, a villa is considered your “main home” if you have lived in it for the last 3 years. • Residents aged 66 and over are exempt from capital gains tax when selling their main home. The person must have lived in the home for 3 years before selling, but persons aged 66 and over are not required to invest the proceeds from a sale in a new home.

Reinvesting in new property.

2.4.5 Transfer tax Homes owned by a company If the home is owned by Spanish company, a so-called S.L. (sociedad limitada), you will only acquire the shares in the company. When acquiring shares the buyer can generally speaking avoid the 7% transfer tax by meeting the following criteria: • The company only owns the property in question and does not engage in any other financial activity. • The shares in the company are acquired by two or more shareholders, none of them closely related, and no shareholder acquires more than 50%. • The shareholder structure must have existed for at least one year since the home was purchased. When a company sells off real estate it will be liable for capital gains tax of around 25% as described above. 2.4.6 Changes in exemptions from capital gains tax Until 1 January 2007 the law granted exemptions from capital gains tax to both residents and non-residents who had purchased their property before 31 December 1986. Those who had acquired property before 2006 were also given a partial reduction in capital gains tax. According to the draft bill, this exemption and the scope for reducing capital gains tax will be abolished, but a range of transitional rules have been outlined in order to limit the tax effects. 2.4.7 What are the tax effects of these changes for persons resident in Nor way for tax purposes?

Capital gains on the sale of real estate abroad are in principle taxable in Norway under Norwegian taxation rules. Losses on the sale of real estate abroad are only deductible in Norway in cases where any capital gain would have been taxable in Norway. Real estate abroad includes own homes and holiday homes. Timeshare apartments may also be considered real estate for tax purposes.


According to Article 6 of the tax treaty between Norway and Spain, Spain may impose tax on income from real estate in Spain owned by a person resident in Norway. This also applies to profits from the disposal of real estate in Spain, cf. Articles 13 and 22 of the tax treaty. However, under the tax treaty you may request tax credits for tax paid in Spain when paying Norwegian tax on the profit. In other words, you should not be double-taxed. Norwegian tax legislation does contain a few exceptions from the general rule of 28% tax on profits from the sale of real estate. The legislation stipulates the following criteria in order for any profit to be tax-free: 1. Firstly, the exemption only applies to the sale of holiday homes. Holiday homes are real estate with buildings used for leisure purposes, such as cottages or country homes. 2. Secondly, the owner must have used the property as his own holiday home for at least five of the last eight years (residency period). 3. Thirdly, the property must have been sold or a sale must have been agreed more than five years after it was purchased and more than five years after it was put into use or, according to the completion certificate, after it was completed. Only residency periods during the owner’s period of ownership will be taken into account. Example Selling a holiday home in Spain In Spain

The taxable profit is calculated according to Spanish rules and is taxed in Spain.

In Norway:

Tax liabilities are calculated according to Norwegian rules. If you have owned and used the holiday home for long enough to meet the criteria for a tax-free profit when selling, the profit will be exempt from tax in Norway. In this case you may not request tax credits in Norway for the Spanish tax paid on the profit. If the profit is taxable, the profit is calculated according to Norwegian rules and is taxed in Norway. In this case you may request tax credits for tax paid in Spain from the Norwegian tax on the profit

As the taxable profit is calculated according to both Spanish and Norwegian rules, the taxable amounts in Spain and Norway will differ. 22

2.4.8 Renting out your home in Spain Many Norwegians who buy homes in Spain plan to finance their purchase by renting out their property for shorter or longer periods. In order to limit potential problems, home owners should be aware of their rights and obligations as landlords. One basic precautionary measure is to ensure that any tenancy agreement is put in writing, even though the law also allows for verbal agreements. In this article we will look at what a landlord should be aware of when drawing up a tenancy agreement. The property must be registered with the municipality in your name, but you do not personally have to register as being resident there (empadronado). Spain has several laws on property rental. In addition to national tenancy laws, there are various laws on property rental in some of the autonomous regions. We will be looking at the urban tenancy act of 24 November 1994 (Ley de arrendamiento urbano – hereafter referred to as the Tenancy Act). We consistently use the term apartment, but the Tenancy Act covers all types of accommodation (with specific exceptions – cf. next paragraph, for example). The Tenancy Act contains certain mandatory provisions, which means that they cannot be set aside by an agreement between the parties. The law distinguishes between the renting out of holiday homes and more permanent tenancies. A home is classed as a holiday home if the rental period is specified in days or weeks, the property is fully furnished, and the tenant keeps his permanent home elsewhere. In practice, a tenancy longer than 11 months is classed as a long-term tenancy, but disputes do arise. Luxury homes, i.e. homes larger than 300 m2 or where the annual rental income is more than 5.5 x the salario minimo interprofesional (the minimum wage set by the state every year), are exempt from the Spanish law.

Contents of the tenancy agreement 1. Duration of the tenancy Tenants in a permanent tenancy enjoy protection against termination of the tenancy. The contract should contain a clause describing that the tenant has a permanent residence in Norway, for example, and that the agreement covers a tenancy, not a permanent residence. The agreement should also be limited to 11 months. If the tenancy is defined as permanent, Spanish law allows the tenant to automatically extend the tenancy by up to 5 years – even if the tenancy agreement stipulates a shorter tenancy. The landlord should be particularly cautious if a 6-month contract is initially signed and then renewed after 6 months for a further 6 months. This is an eventuality that landlords have to consider, even if the tenancy agreement stipulates that the tenancy should only be of a short-term nature. One consideration in this respect is whether the person is using the property as his permanent residence. Before the end of the 5-year period the owner must terminate the tenancy agreement in writing no later than 23

30 days before the end of the tenancy, or the tenant will be entitled to remain in the property for one year at a time for another 3 years. When extending a tenancy, the rent may only be increased by the owner’s giving written notice to that effect and only in line with the official price index published every year by the government. 2. Rent and deposit: The rent may be agreed by the parties as they wish. It should of course be agreed that a deposit be paid for a minimum of 1 month. 3. Inventory The landlord should draw up a detailed inventory of furniture and fittings. The inventory should be included as an appendix to the tenancy agreement and signed by both the tenant and the landlord. Otherwise there is a risk that the tenant takes with him some of the inventory, claiming it to be his property or that the alleged items do not exist. 4. Inspecting the property Before signing a tenancy agreement the tenant and the landlord should inspect the apartment. A survey report should be included in the tenancy agreement, e.g. in the form of a clause stating that the tenant has taken possession of the property in the condition described in the survey report. At the end of the tenancy the tenant and landlord should again inspect the apartment. The deposit should be returned only once the landlord has checked that everything is in order. If the tenancy is of a more long-term nature, the landlord should include the right to a mid-tenancy inspection in the tenancy agreement. 5. Payment of costs during the tenancy For short-term tenancies it is common for the landlord to pay for water, electricity, communal costs and other costs relating to the tenancy. For permanent tenancies, the cost of water and electricity should be charged to the tenant. Communal charges and property tax are normally paid by the landlord, although other arrangements can be made. 6. Terminating the tenancy Unless otherwise agreed, the tenant is obliged to pay for the remaining months if he terminates the tenancy before the end of the contract. 7. Selling the apartment If the landlord wishes to sell the apartment, the tenant has the right of first refusal. The tenant may then purchase the apartment subject to the same terms as those offered to other interested parties. In any case the apartment may not be sold without also transferring the regulated tenancy.


8. Right to conduct viewings It is often practical to include a clause on the landlord’s right to show the apartment to potential buyers in the event of a future sale.

Please note that no matter how well you try to protect yourself in your tenancy agreement, you will be relying on the Spanish courts if something were to go wrong. In this respect we should stress that Spanish legislation offers a great deal of protection to the tenant, and evicting a tenant is a very long-winded process. We should also like to add that rental income is taxable and should be included in your Spanish tax return.


There are three sets of rules that you ought to be familiar with in relation to wills and inheritance. a) Formal rules – these are the rules on making a will, e.g. that it must be in writing etc. b) Substantive rules – rules that regulate the way in which inheritance is divided, e.g. Norwegian rules on inheritance and succession c) Inheritance tax rules – the rules stipulating how much inheritance tax the heir has to pay 3.1 Many people put off thinking about how to divide up their inheritance. This often leads to unexpected and unnecessary problems for the heirs, particularly if the deceased leaves behind assets in a different country. Few heirs know how to approach a Spanish inheritance case. Inheritance is sadly also often the root of unnecessary family disputes. Good planning can prevent conflicts and safeguard the deceased’s wishes. Starting the planning early can also reduce inheritance tax in many cases.

3.2 How to create a will in Spain

Creating a Spanish will involves certain formal requirements. They depend on which type of will you want to make. The most practical type of will – and the one we will look at here – is a so-called open will.

Key points’ concerning Spanish wills.

An open will must be signed in the presence of a notary. The notary’s task is primarily to verify that the testator is in fact who he says he is, that the will has been created of the testator’s own free will, and that the testator is “of sound mind and memory”. The testator must attend in person to sign the will and may not appoint a proxy to sign the will on his behalf, for example. If the testator expresses his last will and testament in a language that the notary does not understand, Spanish law requires the testator to appoint a translator. In a Spanish will created by a foreign national, the testator’s last will and testament must be expressed in both Spanish and one other language, e.g. English (in the same document). The notary keeps the original will and notifies the central Spanish will registry in Madrid (Registro Central de Ultima Voluntad). The testator will receive a certified copy.


Under Norwegian inheritance law, a valid Spanish will is also valid in Norway. It is important not to create a Norwegian will that contradicts the content of any will created in Spain. Norwegian nationals who own real estate in Spain should therefore limit the Spanish will to cover assets that are left behind in Spain. When creating a Spanish will it is wise to think carefully about the wording. For example, if the Spanish will specifically refers to the address Urb. Santa Maria, Apt. no. 1, please note that you must create a new will when purchasing a new property. It may therefore be practical if the will regulates the testator’s assets in Spain at the time of his death.

3.3 Why create a will in Spain? Spanish law permits Norwegian nationals to manage their assets in Spain via a Norwegian will. From a legal perspective it is therefore not necessary to make a will in Spain. However, a Spanish will does make the distribution of the estate in Spain considerably easier, quicker and – in financial terms – cheaper. The Norwegian will must also be translated and legalised. A number of facts must also be verified, including the validity of the will and the testator’s legal ability to create a will, while all documents must be translated, certified and legalised. In practice, the distribution of the estate under a Spanish will takes on average 2 months, while it will take much longer if only a Norwegian will has been made. The deceased’s bank account will be frozen until distribution has taken place. This is the case regardless of whether the person has a Norwegian or Spanish will.

3.4 Inheritance tax Spanish inheritance tax.


The amount of inheritance tax due is the same regardless of whether or not a will has been created. The main rule under the Norwegian Act relating to inheritance duty and duty on certain gifts (Section 1, first paragraph, first clause) is that inheritance tax is payable to the Norwegian state if the deceased was resident in Norway or was a Norwegian national at the time of death. On the other hand, Spanish inheritance tax rules state that inheritance tax on real estate is always payable to the Spanish state. In this case Norwegian inheritance tax rules allow for an exemption from inheritance tax in Norway if it can be documented that inheritance tax has been paid in Spain. It should be stressed that the double taxation treaty between Norway and Spain does not apply to inheritance tax. This means that the respective Spanish and Norwegian domestic regulations determine which country you should pay inheritance tax to along with the appropriate rate.

3.5 Calculating Spanish inheritance tax Spanish inheritance tax is somewhat higher than in Norway and, just like in Norway, it follows a progressive scale. They key factor is the size of the inheritance. Factors such as the heir’s relation to the deceased, age, whether the inherited property is the heir’s principal home or family business are also taken into account when calculating inheritance tax. For inheritance passed on to close family members the tax-free allowance according to the tax rates of 2003 has been set at €15,956.87 per heir. For real estate the main rule is that inheritance tax should be calculated on the basis of the market value. In our experience the tax authorities will accept the rateable value (valor catastral) multiplied by the local coefficient, e.g. Marbella 4.5. This means that the tax authorities currently exercise a degree of discretion, but a golden rule is that the market value will never be lower than the title deed value of the property. On the other hand, it is not necessary to set the market value higher than the valor fiscal of the property. Roughly translated, the valor fiscal is the rateable value of the property, and it is set by the municipality in which the property is located. If you set the¬ market value too low, you may find that the tax office intervenes and sets a new, higher market value. Motor cars: Every year the Spanish tax office publishes a table with the values of motor vehicles. Bank account: The balance at the time of death shall be used. Tax-free allowance: As mentioned above, the amount of inheritance tax payable depends on the heir’s relation to the deceased and on the heir’s age. Here is an overview: Group 1: For heirs younger than 21 years of age, the tax-free allowance per heir is €15,956.87. Heirs younger than 21 are also granted an additional tax-free allowance of a further €3,990.72 for each year under 21 years, with a total maximum allowance of €47,858.59.

Different groups of heirs.

Group 2: For heirs who are aged 21 or over and for spouses and parents the tax-free allowance is €15,956.87. Group 3: For what Spanish inheritance law defines as second and third degree heirs (siblings, nephews and uncles) the tax-free allowance per heir is €7,993,46.


Group 4: There is no tax-free allowance for fourth degree relatives and persons with any family relation to the deceased. Below you will find a simplified inheritance tax table. Using the table, here is a practical example of how to calculate inheritance tax: Imagine that the deceased owned an apartment worth €96,000. First we need to add 3% for furniture and fittings, taking the taxable amount to €98,889. If the heirs are the deceased’s children, deduct €15,956 for each child. According to the Spanish inheritance tax tables, you will in this case be liable for inheritance tax of around 11.6%. The above-mentioned additional 3% should be calculated from the total net value of the deceased’s estate, i.e. not just from the value of the house but also from other assets. Inheritance tax must be paid no later than 6 months after the distribution of the estate. Spanish inheritance tax is calculated according to the following table:


Basic amount in euros (Base Liquidable) Percent

































According to the table, inheritance tax starts at 7.65% on amounts up to €7,993.46. The table is simplified in the sense that the percentage rate increases gradually as the amount nears €7,993.46. The highest rate according to this table is 34%, but the percentage rate may be even higher depending on the heir’s existing assets and family relation. 3.6 Inheritance planning As mentioned above, Spanish inheritance tax is higher than in Norway. The high inheritance tax can be reduced by planning your inheritance. Inheritance planning means making financial decisions while you are still very much alive. Inheritance tax can in fact be reduced by as much as 95%, but only if you meet certain criteria. When buying real estate in Spain it can sometimes be sensible to consider various ownership structures in order to reduce inheritance tax. Transaction costs when buying real estate in Spain are around 10% of the title deed value. It can therefore be an expensive experience if, after signing the title deeds, you wish to change the ownership structure for inheritance reasons.

Inheritance planning is important.

We should also add that Spain comprises regions that are largely autonomous (comunidades autonomas). Inheritance tax varies within the different regions. We should also like to point out that some regions have rules that deviate from the provisions described in this article. Moderate valuation Inheritance tax on real estate is calculated on the basis of the property’s market value. Inheritance tax can therefore be reduced by way of a moderate valuation, but if the value is deemed to be far too low, the Spanish authorities may increase it. A moderate title deed value will also mean higher capital gains tax if you sell, because the apartment’s entry value is often set to be the same as the title deed value.

Valuating property.

On the other hand, if the property is to be sold immediately after being transferred, it would be sensible to aim to achieve the highest possible inheritance tax basis. This is because capital gains tax is higher than inheritance tax. Capital gains tax for non-residents is 19%, as mentioned previously. The capital gain is calculated on the difference between the value at the time the property was inherited and the value it is sold for. Based on a reduction in capital gains tax, it is obviously something that must be considered on a case-to-case basis. The property’s net value is used for calculating tax. A mortgage on the property will also reduce the taxable amount. It may therefore be sensible to consider taking out a mortgage on the property. One particular problem is when the market value of the inherited property falls significantly. The Spanish tax authorities use the valor catastral as a starting


point, and to identify the basis for calculating tax they multiply this with the local coefficient. This coefficient varies from town to town. For example, in Mijas it is 1.70 and in Marbella 4.50. The result is often that the basis for tax calculation is higher than the market value. In several cases we have pleaded that this is clearly unreasonable and probably unlawful, but without being heard. This practice is unlawful in our opinion, but we assume that the tax authorities will not change their practices until a final legal ruling is made in relation to this issue. One particular problem is when the market value of the inherited property falls significantly. The Spanish tax authorities use the valor catastral as a starting point, and to identify the basis for calculating tax they multiply this with the local coefficient. This coefficient varies from town to town. For example, in Mijas it is 1.70 and in Marbella 4.50. The result is often that the basis for tax calculation is higher than the market value. In several cases we have pleaded that this is clearly unreasonable and probably unlawful, but without being heard. This practice is unlawful in our opinion, but we assume that the tax authorities will not change their practices until a final legal ruling is made in relation to this issue. Should your children be registered as the owners of the property instead of you? Ownership issues

Many people are very clear about who will inherit them, and in some cases it may be an advantage to register your children as the owners of the property. The benefit of this approach is that there will be no taxes or charges payable in Spain when you pass away. However, be aware that the transaction can be seen as a gift and thus subject to inheritance tax. You can avoid this by drawing up loan agreements between parents and children. Although this may initially seem like a good way to reduce future inheritance tax, you need to be certain that your own interests are being looked after. The person named in the title deeds is the official owner of the property with the rights and obligations that this entails. The person may sell the property, take out loans or rent it out, for example. However, you can circumvent this by securing a right of use to the property, which is then registered in the office copy of the property in the Land Registry. A right of use refers to the right to use the property, and you may decide exactly how long this right of use should last. You should also be aware that if the child is a minor, i.e. under the age of 18, the Norwegian public guardian office will become involved. For example, you will need the consent of the public guardian office if the property is to be sold. Another scenario is that you may wish to become resident in Spain in the long term, while your child is less interested in putting down roots in Spain. Residents in Spain enjoy certain tax benefits compared with non-residents. Capital gains tax on property sales for non-residents is 19%, for example, while residents pay the same 19% rate but with additional allowances. If you are


planning to become resident in Spain for tax purposes, it may be useful if you stand as the registered the owner of the property. It may also happen that the person registered as the owner passes away before you. If that were to happen, you must pay inheritance tax since you are the heir! If the official owner of the property has not created a will, the property will be handed down to the person who is the legal heir. You can safeguard yourself against such a scenario by making the official owner create a will in which you, alternatively your grandchildren, are named as the sole heir to the property. However, in such a situation you must consider whether the deceased has sufficient assets so that the distribution of the will is not in breach of the compulsory inheritance rights of the children or the minimum inheritance rights of the spouse. Undistributed estates – right of use The concept of undistributed estates does not exist in Spain. If, under Norwegian inheritance law, the surviving spouse is in possession of an undistributed estate that includes an apartment in Spain, distribution will most probably take place by registering the surviving spouse as the sole owner of the property. If the spouses were joint owners, the surviving spouse will normally be liable for inheritance tax on half of the net value of the property. After the death of the surviving spouse the children will again be liable for inheritance tax on 100% of the property’s market value. In other words, inheritance tax is paid twice. One way to avoid this situation is to grant the surviving spouse right of use to the first deceased spouse’s share of the property, while the actual right of ownership is transferred to the children. The surviving spouse must pay inheritance tax on the right of use, but the tax is lower than when transferring the right of ownership to the surviving spouse. The person will then be granted a 50% right of ownership and a 50% right of use. In this case the children may not sell the property without the consent of the surviving spouse.

The concept of undistributed estates does not exist in Spain.

Final observations Inheritance planning requires careful individual planning, taking into account the current family situation. Planning can be difficult as nobody can foresee what will happen in the future. Finally we should like to point out that a number of proposals have been put forward to reduce inheritance tax in Spain. One proposal involves eliminating inheritance tax if the heir is the child of the deceased and if the child is younger than 21 years of age. However, the debate has been going on for some years, and it is not clear when the proposal will be turned into law, if at all.



IV. General information about Vogt Advokatfirma – Lawfirm S.L • Vogt Advokatfirma – Law firm S.L. is one of few law firms in Spain em ploying both Spanish and Norwegian solicitors, allowing it to approach legal matters from both a Spanish and a Norwegian point of view. •

The firm provides legal assistance in the fields of real estate, tax, inherit ance, emigration and immigration to Spain, corporate law, maritime law and general issues concerning business law – Spanish, Norwegian and international.

• The firm has been established in Spain since 1999, and the senior partner has more than 30 years’ experience serving Norwegian clients abroad (private individuals, public authorities, institutions and businesses). • You can find more information about the company at Vogt’s website: • If you require references, please contact solicitor Einar Askvig, the senior partner at Vogt Advokatfirma – Law firm S.L. Our staff; Einar Askvig, solicitor and senior partner: ....................... Juan Pablo de Luna, solicitor: Vibeke Tyskerud, senior paralegal assistant:.................. Christine Sollie Jensen, senior paralegal Luisa Martin, accountant/ Silvia Padilla Belinchon, legal secretary: Salvador Romero Castillo, trainee:



V. Quality control by Vogt Advokatfirma 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

Drawing up powers of attorney. Negotiation reservation contracts. Obtaining and reviewing building specifications. Checking that the developer has obtained the necessary permits. Checking that there are no encumbrances on the property at the time of transfer. Negotiate purchase contract (compraventa) with the developer’s solicitor. Checking that the developer provides an adequate bank/insurance guarantee. Assisting with financing. Tax advice (Norway and Spain). Advising on optimal tax structure – should you own the property personally or via a company? Obtaining NIE number (Spanish tax identification number). Inheritance issues (should the children be registered as owners?). Drawing up title deeds in consultation with the vendor’s solicitor and notary. Representing the buyer when signing the title deeds. Payment checks. Arranging water and electricity connections. Payment of taxes and charges in relation to the transfer of the property.



Vogt Advokatfirma-Lawfirm S.L

Avda. Ricardo Soriano 65 路 2-3 29601 Marbella 路 Spania Tlf.: +34 952 77 67 07 路 Faks: +34 952 77 05 01 E-mail: 路

Vogt Advokatfirma-Lawfirm S.L

Avda. Ricardo Soriano 65 路 2-3 29601 Marbella 路 Spania Tlf.: +34 952 77 67 07 路 Faks: +34 952 77 05 01 E-mail: 路


Buying realestate Taxation Inheritance and inheritance tax