PURCHASING A PROPERTY (Part 3)
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TO conclude the subject of property purchase, once you own your new
premises various conveyancing taxes have to be paid by both the seller
and the purchaser. Please note that the tax amounts can vary for a
newly built property, and I shall be discussing this, and new
cpnstructions in general, at a later date.  In addition, these taxes
are nothing to do with the annual municipal taxes for rubbish removal
(Basura) and rates (IBI), nor do they have any bearing on the annual
non-residents taxes for Patrimonio and Renta.

So, the purchaser of a re-sale property must pay a Property Transfer
Tax, which amounts to 7% of the declared value of the property. The
purchaser has 30 working days from the date of the escritura to pay
this tax. The tax applies whether the buyer is resident or non-resident.
This is the only conveyancing tax liability a purchaser has on a resale
house (but remember they are also responsible for the notary and property
registry fees). The seller has a land value tax (Plus Valia) to pay,
which is calculated by the relevant Ayuntamiento (Town Hall) upon
production of the escritura. Broadly speaking, it is a tax covering the
increase in land value since the property purchase, so you can assume
the longer you have held the property, the higher the tax.

The seller has three months to pay a Plus Valia. Please note that if
this tax is not discharged, the Town Hall will look to the subsequent
owner to honour the debt.  It can take two years for a non-payment of
Plus Valia to come to light, so if you are buying a property, do try to
ensure the sellers have administered this payment.  Last, but certainly
not least, there is the Capital Gains Tax.  The whole subject of CGT is
quite involved, and further complicated by the fact that in 1996 the
calculations for working out this tax were changed. The following is a
guide to the basic principles of CGT, and I recommend you seek the
advice of a fiscal representative or other qualified individual who is
knowledgeable in this area if you are thinking of selling your property,
or require more detailed information.

If a seller is non-resident, an amount of 5% of the value declared in
the escritura is lodged at the Tax Office within 30 days of signing the
escritura. This 5% represents an advance payment of the total Capital
Gains Tax payable. To ensure this tax is paid, it is usually
administered in the name of the purchaser, as if the seller does not
forward the 5%, the Tax Office will demand this amount from the
purchasers. Therefore, it is customary for the purchasers to withhold
5% of the declared value from the sale proceeds. Using variable
coefficients, a calculation is then made as to how long the property
has been owned, the difference in purchase/sale declared value amounts,
and what (if any) improvements have been made to the living area of the
property. Any bills/receipts that are submitted for works in this
respect must be from a company who is IVA (VAT) registered, and should
contain sufficient information for the Tax Office to ascertain the
paperwork is valid, i.e. full company name and address of the company,
and NIF/CIF number. The full tax payable is 35% of any profit made
after the above deductions have been calculated. If this works out to
more than the 5% amount already lodged, a further amount should be paid
to the Tax Office within 4 months. If the tax payable works out to less
than the 5% lodged, a refund may be applied for.

These are currently taking up to two years (and in some cases longer)
to be administered, but the Tax Office will pay interest on outstanding
amounts that have not been refunded after 9 months from the date of
application. NB Nonresidents who purchased their property before 31
December 1986 are exempt from paying any capital gains tax. Sellers who
hold a current Residencia card will have to declare the sale of their
property in the following year's Tax Declaration. If another property
is bought within two years, the costs of this new property can  be
offset against the profit made from selling the original home. If the
new property has the same or a higher Declared value than the one sold,
this could result in a complete exemption from paying any Capital Gains
Tax. However, I emphasise - you must have actually received your
Residencia Card to be regarded as a resident in this respect, and it
will be inspected by the Notary's Office prior to completing the
sales/purchase transaction. Residencies are currently taking well over
a year to be processed and issued. 

In addition, should you already be resident, do check your card is not
likely to expire prior to the conveyance - you can proceed with the
transaction using the expired card but you must also show the renewal
application form stamped by the Comiseria and attached to the card. Residents
over 65 have recently become exempt from paying any Capital Gains Tax,
as are those_ whose "gains" are less than 3,000 Euros. 

On a final note, please bear in mind the above information is verified
by the relevant authorities as at the time of writing, but it is
possible that percentages or general rulings could change in the future,
so always double check what your tax liabilities will be prior to
committing on a house purchase or sale.