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Home Ownership

Once you have completed on your purchase there will, of course, be ongoing costs
associated with ownership of your new property. Set out below are details of the ongoing costs you can expect.

Community Fees

Properties located in a development, popularly known as “urbanisations” in Spain, usually share communal facilities such as gardens, and services such as those of a caretaker. Such facilities and services are managed and paid for by the Community of Property Owners (“Comunidad de Proprietarios”). The Community is run in the form of a company, of which all property owners are members, and works in a similar way to that of a property management company of leasehold properties in the UK. The community company decides collectively what rules are to be followed in the urbanisation, such as whether pets are allowed, and at what times the pool can be used. As a property owner you will own a share of the community company, and have a say in community matters. In return you must pay your share of the community expenses. The annual community fees should be in the region of 600 Euros for a small apartment rising to 4000 Euros or more for a large villa on a luxury urbanisation with many services.

The community normally appoints an administrator and president to sort out the day-today business of the community and to call community meetings to discuss any matters in need of consideration. If you are worried about missing the community meetings, it is possible for you to appoint a representative in Spain to attend on your behalf. If you wish for someone to be attend a meeting on your behalf just speak with your representative from Properties International, and we can assist you in this.

Property Owner’s Imputed Income Tax (Impuesto Sobre la Renta)

Many taxes in Spain are calculated by reference to the “rateable value” (valor catastral) of the property, which is assessed by the Tax Office and revised every 10 years. The valor catastral is generally considerably less than the purchase/sale price of the property. Property Owner’s Imputed Income Tax (POIIT) is payable when a property is used for personal use and not rented. It is calculated by imputing 2% of the valor catastral (reduced to 1.1% if the valor catastral has been revised since 1994) as a notional income to you. The rate of tax for non-residents of Spain is 25%. If the property is your only worldwide home, you will be exempt from paying POIIT. Alternatively, if your property is rented your income tax liability in Spain will amount to 25% of your actual rental income.

Wealth Tax (Impuesto Extraordinario Sobre el Patrimonio)

This tax is applied to your total wealth in Spain. If your only asset in Spain is a property, it will be based on the amount contained in the title deeds of the property. For non-residents, the rate varies with the amount of your wealth in Spain, but is very low. For example, if your wealth was 167,129 Euros in Spain, the tax would be 334 Euros, if it was 334,253 Euros the tax would be 836 Euros (2003 rates). If there are 2 or more titleholders to the property your wealth is relative to your share of the property.

IBI & Basura

This is the Spanish equivalent of Council Tax. With new properties it can take up to two
years for the authorities to issue the bills and generally, they are not backdated.
This tax is also calculated by reference to the valor catastral. Typically, an IBI and Basura bill for a 2 bedroom apartment in Mallorca will amount to around 300 Euros per year.

Insurance

As for example in the UK, you will need to consider insuring your Spanish property and its contents. Usually, you will find that the community provide a very basic insurance for the building, although you may wish to top this up if the amount is low. You will also need to arrange cover for your contents and, in addition, public liability insurance particularly if you will be renting your property out. If you take our a mortgage on the property you are buying, your bank will automatically take out an insurance. Please confirm with your bank what that insurance covers to see if you need to take our another or not.

Will and testament

When you own property in Spain , we suggest you draw up a Will to protect your interest and save money on taxes when something happens to any of the owners. We will help you with the preparation of a Will that we can draft in English. We can also arrange for the required execution of the Will in front of a Notary Public in Spain. You will be informed of the Spanish Inheritance tax and its implications.

General Advice

With all of the above ongoing costs and taxes, you can arrange to pay them by direct
debit through your Spanish bank account. As with the utilities, if you do not want the
trouble of arranging to register and set up direct debits with the various bodies, your solicitor/accountant or gestor can do this on your behalf or your representative at Properties International can also assist you.

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