Investing in a Nerja Villa
Buying a Nerja villa is for many people the start of a long-term retirement plan. It can provide accommodation for the winter or holidays and provide an excellent investment in terms of growth of capital as well as a decent rental income in the interim time. It is estimated that 750,000 English own a property in Southern Spain and half of those have family members who reside in Spain on a permanent basis.
When buying a villa in Spain there are costs that would not occur In the U.K and there are costs in the U.K that do not occur here. As a very rough guide if you add ten percent on to the purchase price, then that figure should cover your tax liabilities and legal costs. How you negotiate to pay and what you negotiate to pay will differ in each instance, but you should get change from the ten percent (it may not be more than the cost of a meal out to celebrate, but there should be change!) What you legally can pay and what you end up paying can be two very different things which is another reason why you should not scrimp on legal advice.
The Plusvalía is the land tax and it is one off payment payable on all forms of transfer of ownership, as you need to acquire the title deeds in your name. Normally the seller should pay as it is a tax on his profit but the legal requirement falls onto the purchaser. Do not take it for granted that the seller will pay make sure that the payer is determined as part of the contract. Equally, the seller can make the buyer pay by inserting it into the contract, and the buyer does not pay to have a translation. Despite the fact the seller should pay they can perfectly legally put that responsibility onto the seller by inserting it into the contract. It accumulates over a twenty-year period so it can be a very substantial figure. The value of the tax is calculated on the annual anniversary of sale if the previous sale was within the previous 12 months, however, no Land Tax is applicable because the property is deemed to have the value it has at the time of purchase.
Land Tax is also payable upon the death of one of the spouses even though the property was in joint names. It is due because another title deed is drawn up in the surviving partners name, which is another reason why great thought has to be given to the fiscal implications of the ownership of the property. Although it is a one off payment, one family can pay upon purchase, a transfer to a surviving partner, and then again, on the transfer to the child or children, and each time that is subsequently changes.
Having said that Nerja villas are a fantastic investment as it is a sought after area and the price of property will increase in value and it should outstrip any tax liability. More and more couples are purchasing a second property in Spain to provide a future retirement home and an investment income when you let out the property. There are two ways to rent out your property in Nerja Spain on short term or long-term rents or a combination of both. Many foreign property owners rent the property out over the winter to one or two people for a longer period. This gives them a lower than average rent in winter but a guaranteed tenant, whilst at the same time they can charge the commensurate high rates in the summer.
Once you have bought a villa in Nerja it is advisable to draw up a will, it is unpleasant to think about death but it is even more distressing for your heirs when you die intestate in Spain. When a foreign property owner dies intestate Spanish laws of succession apply and these state that two thirds of the estate must be bequeathed to your wife and children. However, Spanish inheritance laws do not apply if you have made a legal will in your own country, the inheritance rules of the country of birth must apply. Conveniently, the legal system requires a copy of the Spanish
will to be deposited at the registry of wills, where it will always be found at the point of death.
The levels of purchase tax differs in Spain from a new and second property it is always advisable to check the full liability situation with a lawyer or an abogado, as it is not unknown for the seller to pass on to the buyer a lot of the responsibility of taxes which are more normally paid by the seller.
By Bill Hanning
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