OTHER EXPENSES

Other costs that you should bear in mind when considering a property purchase in Spain are as follows:

• legal fees for making a will in Spain
• charges related to putting utility contracts in your name
• charges related to setting up direct debits for payment of utility bills
• connection charges for water and electricity
• insurance of your property and its contents
• fiscal advice and representation
• representation in negotiations with your prospective Residents’ Association (Comunidad de Propietarios)

DIFFERENCES BETWEEN THE CONTRACT PRICE & THE AMOUNT ACTUALLY PAID

Finally, attention should be drawn to an unfortunate practice that has been all too common in Spain. This consists of not declaring the full amount that the buyer is paying in the Sales Contract, so that the value that appears on the title deed (Escritura Pública) is well below the figure that the seller has actually received. This benefits the seller because it reduces his liability for Capital Gains Tax (Impuesto sobre el Patrimonio) . Since the Property Transfer Tax (ITP) is also based on the figure that is declared on the title deed, the buyer makes a small saving too. However, as a buyer you should seriously consider the implications of such an agreement because, in the long run, it can backfire on you by considerably increasing your own liability to Capital Gains Tax when it comes to selling the property again.

You should also be aware that the Spanish Inland Revenue (Hacienda) will make an assessment of the amount declared on the title deed and compare it to their own valuation of the property. If they notice a discrepancy of more than 20% between the price quoted on the title deed and their valuation the local Tax Office will send a demand to the seller claiming the difference plus interest and imposing surcharges.