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What to do about house?

What to do about house?

Old Dec 15th 2010, 11:35 am
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Post Re: What to do about house?

Originally Posted by thestens
Thank you all for your replies. We are not Spanish residents and my mum does not live in the house. As you suggest, we need to see a Spanish lawyer. We don't want to get into a situation where we have to give money to the Spanish gov straight away if it is gifted as we aren't planning on selling the house at present. We just want to avoid difficulties if my mum is still the owner but unable to visit any more as everything is her name - bank, water, electric, etc.
Just to add to the complications, I have just found out that she hasn't paid any local taxes since 2001 - what do we do about that????
I would have her sell you the property LEGALLY for 20Euro, documents and all that jazz. That way it is NOT classed as a GIFT.
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Old Dec 15th 2010, 12:17 pm
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Default Re: What to do about house?

Originally Posted by bealerDSB
I would have her sell you the property LEGALLY for 20Euro, documents and all that jazz. That way it is NOT classed as a GIFT.
DSB.
That is called tax fraud! A person is not allowed to sell their assets cheaply to their relatives in order to avoid tax
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Old Dec 15th 2010, 12:36 pm
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Default Re: What to do about house?

Originally Posted by cricketman
That is called tax fraud! A person is not allowed to sell their assets cheaply to their relatives in order to avoid tax
At what % level is "cheaply" classed as then ?
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Old Dec 15th 2010, 12:46 pm
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Default Re: What to do about house?

Originally Posted by bealerDSB
At what % level is "cheaply" classed as then ?
DSB.
They'll take it as a certain % of within the official value. But that'll never be 20 euros
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Old Dec 15th 2010, 5:02 pm
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Default Re: What to do about house?

Originally Posted by bealerDSB
At what % level is "cheaply" classed as then ?
DSB.
There is actually a rule that is used by the tax people based on a percentage of the cadestral value.


As an example, I bought a property and the previous owners wanted a certain amount in 'black'. I had no issues with that but when we came to do the deal, it was pointed out that this left the 'purchase price' below the magically value arrived at by this rule and would then be investigated by the tax office as possible fraud.
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Old Dec 15th 2010, 5:20 pm
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Default Re: What to do about house?

Originally Posted by bealerDSB
At what % level is "cheaply" classed as then ?
DSB.
This is an interesting question as two of my kids have been helping us out financially recently, and also putting 'sweat equity' into our build. One of the ways I was considering repaying them was by giving them, or selling them, in effect, a certain percentage of the house value as it is at the moment. Does anyone have any experience of this. Is it possible?
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Old Dec 15th 2010, 6:16 pm
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Smile Re: What to do about house?

Originally Posted by angiescarr
This is an interesting question as two of my kids have been helping us out financially recently, and also putting 'sweat equity' into our build. One of the ways I was considering repaying them was by giving them, or selling them, in effect, a certain percentage of the house value as it is at the moment. Does anyone have any experience of this. Is it possible?
This is best done from the outset we bought the plot in all our names so the the 3 children have a 1/5 share in the house doing this later will involve extra notary fees together with the add on taxes and land registry costs. Also you may find that there is tax to pay on the "gift" or sweat equity transfer.
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Old Dec 15th 2010, 6:23 pm
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Smile Re: What to do about house?

Originally Posted by snikpoh
There is actually a rule that is used by the tax people based on a percentage of the cadestral value.


As an example, I bought a property and the previous owners wanted a certain amount in 'black'. I had no issues with that but when we came to do the deal, it was pointed out that this left the 'purchase price' below the magically value arrived at by this rule and would then be investigated by the tax office as possible fraud.
This is an interesting point of view by the tax man, up to date they do not seem to accept that values have fallen and you could be looking at negative equity and if you manage to sell you could be charged capital gains on a loss. This is Spain a fourth world country!
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Old Dec 15th 2010, 6:30 pm
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Default Re: What to do about house?

Originally Posted by John & Kath
This is best done from the outset we bought the plot in all our names so the the 3 children have a 1/5 share in the house doing this later will involve extra notary fees together with the add on taxes and land registry costs. Also you may find that there is tax to pay on the "gift" or sweat equity transfer.
Absolutely!

You can do all sorts of contortions about ownership if you do it at the time of purchase - if you do it later it raises all sorts of tax problems.

The only change of ownership that I am aware of that is "free" is where the property is in joint names and you wish to transfer it into a single name. This can be very relevant if one partner has a terminal disease.

With regard to "official" property values, they are based on the Catastral value multiplied by a factor that varies from one town to another - typically it is two to four times the Catastral value.

These factors are available online - here is an example for Andalucia _

http://www.juntadeandalucia.es/econo...en20-12-07.pdf
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Old Dec 15th 2010, 6:40 pm
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Default Re: What to do about house?

Originally Posted by Fred James
Absolutely!

You can do all sorts of contortions about ownership if you do it at the time of purchase - if you do it later it raises all sorts of tax problems.

The only change of ownership that I am aware of that is "free" is where the property is in joint names and you wish to transfer it into a single name. This can be very relevant if one partner has a terminal disease.

With regard to "official" property values, they are based on the Catastral value multiplied by a factor that varies from one town to another - typically it is two to four times the Catastral value.

These factors are available online - here is an example for Andalucia _

http://www.juntadeandalucia.es/econo...en20-12-07.pdf

Quite right - I too wonder when they will catch up with the fact that prices have fallen dramatically! They are still charging based on the 'old' values and not the current, realistic ones.

On the point about 'free' transfer. A friend of mine had a half share in their main residence with her husband. When he died his half had to be transferred to her. They were both Spanish residents domiciled here for over 12 years - they STILL had to pay Spanish succession tax plus all the necessary costs. All-in-all I think they paid 12k euros.
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Old Dec 15th 2010, 6:49 pm
  #26  
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Default Re: What to do about house?

Originally Posted by thestens
Any idea how much the taxes are each year??
Rather depends upon the value of house etc.

The taxes will likely be a mixture of:

IBI (Council Tax)
Imputed lettings income tax (an income tax on the letting income, even if she did not let the property)
Wealth Tax -a tax on the value of the property and any other assets held in Spain (money in bank account etc).(FYI, this tax is now zero rated, but for many of your years of non-payment it wasn't)
Fines - there will likely be fines for not paying.

The IBI will be down to your local council, the other two "income" taxes will be down to the Cadastral and Escritura values of the house. You must Obtain these values to be able to calculate the tax liability.

For now, assuming a sub 100Keuro property, I would budget at an IBI of 200 euro per year and lettings/wealth of 400euro pa. Of course if the Cadastral/Escritura is only 50Keuro the lettings/wealth will only be around 200pa.

You need to find out when her last tax payment was, what it was she paid (IBI, wealth etc) and the property values.

I am sure others will be able to tighten-up on my rough numbers above, but you could easily find yourself needing to pay 500 euro pa plus fines.
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Old Dec 15th 2010, 6:57 pm
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Default Re: What to do about house?

Originally Posted by snikpoh
On the point about 'free' transfer. A friend of mine had a half share in their main residence with her husband. When he died his half had to be transferred to her. They were both Spanish residents domiciled here for over 12 years - they STILL had to pay Spanish succession tax plus all the necessary costs. All-in-all I think they paid 12k euros.
Yes that's correct - but if you do the transfer before the death is does not involve a tax.
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Old Dec 15th 2010, 7:04 pm
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Default Re: What to do about house?

Crikey!! 500 euros a year!! Its only a tiny house - cost about £20 000 in about 1988, worth maybe 90 000 euros max now - if we could sell it!!! We have all the old receipts for local tax up to 2001 in the house in Spain - can't remember the exact annual amount but nowhere near 500 euros a year! The tax stopped being paid when my stepfather, who dealt with it became terminally ill and then died. My mum didn't tell me about the tax until a few months ago - until recently I have had little to do with her financial affairs.
Looks like we need to go to the town hall and confess on our next trip out there!!
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Old Dec 15th 2010, 7:16 pm
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Default Re: What to do about house?

Originally Posted by thestens
Crikey!! 500 euros a year!! Its only a tiny house - cost about £20 000 in about 1988, worth maybe 90 000 euros max now - if we could sell it!!! We have all the old receipts for local tax up to 2001 in the house in Spain - can't remember the exact annual amount but nowhere near 500 euros a year! The tax stopped being paid when my stepfather, who dealt with it became terminally ill and then died. My mum didn't tell me about the tax until a few months ago - until recently I have had little to do with her financial affairs.
Looks like we need to go to the town hall and confess on our next trip out there!!
At 20K then the letting and wealth taxes come down significantly - the Catastral and Escritura values do not represent current market value and could easily be 20k-30K.

If we assume 30K then we have around 130 euro pa for these two, plus whatever the IBI (Council tax) is - my IBI for a similarly-valued property is 120 euro pa - gives you a total of 250euro pa. Plus the fines!

Town hall for IBI, tax office for the other taxes. I would consider getting a gestor to do this for you - they may be better at pleading the case on the fines and playing catch-up for 10 years-worth may prove to be a paperwork headache, especially if your Spanish isn't pretty good.
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Old Dec 15th 2010, 7:38 pm
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Default Re: What to do about house?

Originally Posted by thestens
Crikey!! 500 euros a year!! Its only a tiny house - cost about £20 000 in about 1988, worth maybe 90 000 euros max now - if we could sell it!!! We have all the old receipts for local tax up to 2001 in the house in Spain - can't remember the exact annual amount but nowhere near 500 euros a year! The tax stopped being paid when my stepfather, who dealt with it became terminally ill and then died. My mum didn't tell me about the tax until a few months ago - until recently I have had little to do with her financial affairs.
Looks like we need to go to the town hall and confess on our next trip out there!!
It may sound a lot, but if you compare it to property taxes from other countries it comes out cheaper

e.g. in the US, you often have to pay 1-3% of your property value in taxes each year, or in the UK, where you have to pay half the council tax even if you dont live there.
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