Author: Gustavo Calero Monereo

DAFO UPDATE: OBLIGATIONS, INSIDE REFORMS, MORTGAGES & RTA/VTAR RENTAL LICENSES

Written by Gustavo Calero Monereo on 1 November, 2018. Posted in AFO, Andalucia, Andalusian, assimilated out of ordination, banks, building permit, conveyancing, english speaking solicitor, illegal building, legal advice, mortgages, Sin categoría.

New information on the DAFO certificate: in June 2017, we posted an extensive article on the legal situation and the legalisation of homes in non-urban land in Andalusia –DAFO / AFO–, outlining our opinion about positive and negative aspects of this legal precept. Almost a year and a half after this article, we would like to use this post to provide new information to owners and buyers of homes on non-urban land.

This information, which we believe may be useful, does not represent a fundamental change from what has already been stated, as there have been no legislative changes to the DAFO during this year and a half. This information, however, is based on our experience with different Councils in the province of Malaga and the approach they have been using for DAFO, as well as the questions we have seen among our clients.

Are Councils required to issue a DAFO/AFO?

Nowadays, we have found that a growing number of Councils, whenever there is any notification relating to a rural home, automatically open a file and start proceedings to start the DAFO process. This could be for example for the notification of:

Sale of a home
RTA (VTAR / Vivienda Rural) rental registration
Opening License Casa Rural / B&B
Registration of a property in the Land Registry
Applying for an urban certificate (for example for a purchase)
Change of account holder of the water supply

In other words, a growing number of Councils have been taking advantage of any information or request related to a property located on non-urban land to demand owners to start the DAFO process and legalise the rural homes built in the municipality. That said, if you wish to rent your property seasonally and you intend to register your home in the RTA -Andalusian Tourism Registry-, or you would like to register a pool or storage in the Property Registry, we recommend that you first analyse whether your home could obtain a DAFO.

As we have explained on many occasions, the DAFO is a procedure created to regularise homes on non-urban land that have been built illegally –most of them–, over which legal liability can no longer be claimed due to the passage of time. When the Council issues the first notification, it does not really require the owner directly to start the DAFO process. This first notification is about “telling” the owner to submit evidence whether the home complies with the legal requirements to be eligible for DAFO. This means that, if it does not comply with these, it is very likely that this is because there is some illegal situation in the building. This issue may still be subject to penalties from the Council and, in this case, the Council must open a sanctioning procedure against this unlawful situation, with the legal consequences you can imagine.

It is for these reasons that it is very important that, before you do anything or apply for anything at the Council that may entail the opening of a file against the property, you confirm that the home is eligible for DAFO and whether there is any building or work that may give rise to penalty proceedings. In this case, it is best to do nothing until enough time has passed. This in normal countryside is 6 years. Likewise, if you are thinking of buying a rural property, you must know that, when the Public Deed of Sale is executed and submitted to the Property Registry, the Council will receive a notification of this transfer and may later require you to legalise the home through a DAFO process.

Can I carry out internal refurbishments and renewal works through DAFO?

In accordance with Decree 2/2012, which governs DAFO, in this type of buildings “… only repair and preservation works required by the strict maintenance of the safety, habitability and sanitation of the building may be authorised”. Having said this, it is obvious that the works that may be carried out in properties of this type are limited and must be very clearly justified, always thinking about preservation and maintenance and never on improvements or additions, as renewal works as such are not possible. Since all rules are subject to interpretation, it is possible for some Councils to authorise certain types of refurbishment works that others do not. For this reason it is best to inquire at the Council to see if you could get planning permission before the work begins.

However, having said this, the desired internal refurbishments must always be justified from a point of view of habitability and necessity in terms of health and safety in the building, such as:

the opening of windows,
replacement of the roof,
replacement of floors,
substitution of sanitation equipment,
extension of the surface of a room that may be considered too small (without increasing building surface), etc.

The important thing is to evidence the need to carry out such works. Most likely, for the council to issue planning permission, it will be necessary to have completed or applied for the DAFO. Along with the technical project from an architect for the DAFO, the need to carry out such works should be justified due to the safety, habitability or sanitation of the home, applying for the corresponding licence. It will be very difficult to obtain permission without having completed the DAFO process.

If the home you intend to purchase already has a DAFO certificate, it is possible to apply for planning permission for the refurbishment works mentioned above but it is necessary to take into account the date the DAFO was obtained. It would not be very logical to apply for permission to refurbish a home for which the DAFO was approved only a few months prior, as the DAFO is supposed to certify that the home was in perfect conditions of habitability, without problems in terms of its safety or sanitation. Needless to say, if there has actually been some sort of unforeseen breakdown or accident in the property, permission may be requested for such repairs.

Can properties with a DAFO/AFO be mortgaged?

This question arises because a Spanish Royal Decree from 2009, regulating the mortgage market, contains an article that specifies that properties not meeting the legal requirements may not be mortgaged. Despite the existence of this rule, we must state that rural properties or homes on non-urban land have been, are and will continue to be able to obtain mortgages. There may be some banking institutions that do not provide mortgages for rural properties but there are many that do, which is logical as, in most cases, these properties are consolidated and are not subject to penalties, for which reason there is legal certainty over these.

We have submitted a query/test to one of the largest appraisers on the national market for mortgage valuations. In our query, we sent the land registry information – nota simple – of a rustic property with a DAFO certificate registered in the Property Registry and the response from the appraiser was unequivocal: homes with a DAFO are being appraised on the mortgage market. It should be taken into account that the appraisal value of a property for mortgages issues on non-urban land –a rural property– may be 20% to 40% lower than the purchase price, as the mortgage is given over the valuation price of the property. Nevertheless, a mortgage can be secured for these.

Can I have a RTA / VTAR rental licence for my rural property?

It is possible to rent and register a home on non-urban land in the Andalusian Tourism Registry -RTA- for short-term rentals (less than 2 months). This home would usually be registered as a tourist home for rural accommodation -VTAR-. As clarification, it should be said that it is possible to register rural accommodation or B&B as a country lodge or “casa rural” but this is designed for owners who are engaging in economic activities and operating such rental as a business, with at least one of them being required to register before the Treasury, pay VAT and register for Social Security.
The registration of a rural property in the RTA is subject to two approaches, depending on whether we talk to the Regional Government of Andalusia or the Council.

a. Regional Government of Andalusia

A few days ago, we had a talk with an inspector of the Regional Government in Malaga, who is in charge of inspecting homes of this type. Among other things, he told us that the Licence for First Occupation –Licencia de Primera Ocupación or LPO– is necessary to register homes on non-urban land in the RTA. As some people know, very few rural homes have an LPO. However, it is possible to obtain “legalisation” through the DAFO. The Inspectorate of Malaga have told us that a DAFO certificate would not be deemed to replace the Licence for Initial Occupation. In my legal opinion, I think that the Inspectorate are wrong and I clearly deem it arguable that, in the absence of a Licence for First Occupation, if a property has a DAFO certificate, this document should be accepted. Among other things, the DAFO certificate is the council recognition of the habitability of the property on non-urban land. In fact, Councils interpret this as a licence for the occupation of the property.

b. Councils

The Regional Government of Andalusia will notify the Town Hall when a home is registered in the RTA and this will lead some Councils to automatically call upon the owner to legalise the home through DAFO. It is also possible that a Council form will need to be completed before the home can be rented. Ultimately, at the municipal level, it is necessary to notify that you intend to rent your home and, if you lack an LPO, you will probably have to obtain a DAFO so that you can get this document, which recognises the habitability and occupation of the dwelling.

What should I do if I want to buy a rural home?

You can select the one you like best, without fears or concerns. Take the time you need and, once you have made a choice, you can start the buying process and negotiation. At the start of the process, do not hesitate to hire a lawyer specialising on this matter, who is familiar with this aspect of the law. As we have stated on many occasions, the cost of a lawyer is very small in comparison to all the money you will spend to buy a property in Spain. Saving money by failing to hire a lawyer during the process to buy your home in Spain may be one of the biggest mistakes you ever make. I know you may think what I want to do is to sell you my services –and this is true, this is why I work. But if you think about it carefully, you will understand the importance of having sound legal advice while buying a property in a country different from yours.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

Expenses from the renovation and improvement of a property can reduce the tax

RENOVATING YOUR HOME? DO IT RIGHT AND PAY LESS TAX WHEN YOU SELL

Written by Gustavo Calero Monereo on 9 July, 2018. Posted in Andalusian, Capital Gains, conveyancing, costa del sol, english speaking solicitor, lawyer, New building declaration, non developable land.

Renovating house in Andalusia: tips & save on Capital Gain Tax

One of the first things many people do when buying a property is renovate it.

The expenses from the renovation and improvement of a property can reduce the tax on capital gains in the event that it is evidenced in the future sale of the existing or new build property. It is important to clarify that repair or preservation costs for the property are not deductible. Deductions only apply to renovations or improvements that increase the value of the property compared to before they were made.

The cost of improvements would be added to the price paid in the sale, resulting in lower capital gains tax due to the difference between the price to transfer the property and the purchase price, which means less tax would be paid to the Tax Agency. This will be so provided that such renovation and improvement works can be evidenced so that the Tax Agency can accept them. Below, you will find what I consider to be the most important aspects to be able to prove the works carried out for tax purposes.

TECHNICAL PROJECT

Having an architect draft a project and oversee the execution of the works is not a minor issue. If the works to be carried out are of a certain scale, it is always best to have a professional perform follow-up and control since he or she would be liable if something goes wrong. Likewise, having carried out the works with a technical project and a final works certificate can be used to evidence the improvements made in be property before the Tax Agency.

BUILDING PERMIT

If you are going to renovate a property, it is always necessary to get a building permit for both major and minor works. It is true that this is often not requested to save money, for instance when renovating the inside of a home or a room, as there are less chance you will be found out.

Having a building permit will help you on three important aspects:

To evidence the lawfulness of the works –provided that it complies with the permit granted–. Likewise, it is important for you to know that, if there is an accident at the building site, not having a permit may entail consequences of criminal liability for the owner.
When it comes to works where the distribution of the property will change, the constructed area will be enlarged or a new home will be built, the building permit –among other documents, such as the final works certificate and the permit for initial occupation– will be necessary to register this new construction in the Property Register.
When selling a home with profit, the building permit will serve to prove to the Tax Agency that improvements were made so as to request that these are taken into account as part of the purchase price of the home.

Having a building permit is more important in terms of urban-planning and criminal law than in terms of taxes.

CONSTRUCTION CONTRACT

It is very important to sign a contract for the works to be carried out with the builder. The construction contract will mainly evidence which is the construction company that performs the works, the type of works to be carried out, their estimated cost and the location where they will take place.

INVOICES AND PROOF OF PAYMENT

Without a doubt, in terms of taxation, this is the most important requirement for the Treasury to recognise this improvement or renovation.

We often find homeowners who have spent a lot of money on improving their properties but who have no invoices issued by the builder or proof of payment for these works. It is essential to prove to the Tax Agency that these amounts have been paid by bank transfer or personal cheques made out to the construction company. If you have no way to prove these payments, it will be impossible for you to include these improvements in the purchase price of the property. You must always request an invoice and keep proof of payment.

The costs of the improvements will be added to the purchase price because of which you will pay less Capital Gain tax. The Capital Gain tax of this moment is 19% over the profit between the purchase and sales price minus the deductions.

WORKS WITHOUT A PERMIT THAT CANNOT BE LEGALIZED

It is possible that, for the works you intend to carry out in your home, it is not possible to obtain a building permit, for instance in works to enlarge a home in non-urban land –rural land–, increasing the surface area beyond the development potential –such as when enclosing a balcony– or building to a height higher than that allowed. The first thing you should take into account is that, as the owner, you will assume the legal liability that may arise if legal proceedings are brought in connection with these works without a permit.

If you will be carrying out such works, it is important for you to sign a construction contract with the builder, for you to obtain an invoice for each payment and for payments to be made by bank transfer or cheque. Even if you do not have a permit, it would be possible for these improvements to be taken into account when selling the property.

The Tax Agency cannot reject improvement works for not having a building permit –inspecting urban planning law is outside their jurisdiction–, for which reason it is important for you to be able to evidence the works that were effectively carried out, what their cost was and submit payment documents.

In these cases, it would not be a bad idea to have a technician draw up some type of report –not a project– explaining how the property was before and the works that have been performed, providing photographs and documentation from the owner. This is an additional document that can be used to prove improvement works.

NEW CONSTRUCTION DEED

The New Construction Deed is a document signed before a Notary Public to register a building in the Property Register in Spain. Even when the construction does not have a building permit, it is possible for it to access the Property Register in Spain –which does not mean it is legal– provided that a series of requirements are met.

If you have built a pool, garage, storeroom, etc. in Andalusia without a licence, it is possible for you to get an architect to issue a certificate of age six years after completion, to evidence the new construction and its age. This certificate can be used to sign a Deed of Declaration of New Construction before a Notary Public and register the construction in the Property Register. In some cases, it would not be possible to register it in the Register, such as when the land is especially protected.

VALUE OF THE CONSTRUCTION DECLARED IN THE DEED

The value of New Construction assigned in the Deed cannot in itself be used to prove to the Treasury how much was spent on the property at the moment of selling.

For instance, if you declare, in the Deed, that you have spent 50,000 euros on the pool and garage you built, unless you have proof of payment and invoices from the construction company, the Treasury will reject this expense. This is so because what you do before the notary is nothing more than a statement, which means that the Notary does not check if you really spent that amount or if it was more or less –and isn’t required to do so–.

In my opinion, if you are going to do a Declaration of New Construction for works without a licence, you should include a copy of the invoices and/or proof of payment to the constructor in the Deed, as this would evidence the value you declared and make it easier for the Treasury to accept it when selling the property.

Lastly, if you are thinking about doing any work on your property, I wish you all the luck in the world and, most of all, lots of patience; I almost ran out of it myself when I renovated mine…

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

RTA, andalusian, taxes, occupation licence

RTA FOR HOLIDAY RENTALS IN MALAGA: FINES, TAXES, FIRST OCCUPATION LICENCE AND RURAL PROPERTIES

Written by Gustavo Calero Monereo on 21 May, 2018. Posted in Andalusian, costa del sol, english speaking solicitor, form 210, Occupation licence, Property Tax, RTA, taxes for non residents Spain, Tourism Registry of Andalusia.

It’s been two years since the entry into force of Decree 28/2016 regulating RTA FOR HOLIDAY RENTALS for properties in Andalusia.Half of all holiday rental properties in Andalusia registered before the Tourism Registry of Andalusia are located in the province of Malaga, according to the information published by Diario Sur in February 2018. This means that, in Malaga, there are over 18,000 tourist apartments registered.

It is important to remember that property rentals are subject to taxation as they must comply with the holiday rental laws in Spain.

RTA FOR HOLIDAY RENTALS: inspections and penalties

The same newspaper has published that, in Malaga alone, there have been 1,354 inspections and 250 properties have been fined.

One of the most important requirements to be met by these properties is that they must have an initial-occupation licence as well as cooling and heating equipment. Once an RTA / VTAR number has been obtained, the property owner is required by Spain’s holiday rental laws to include the registration number in advertising as well as in the promotional page on AirBNB or similar platforms offering these properties as holiday rentals.

Initial-occupation licence requirement

If the property does not have an initial-occupation licence, it should not be registered before them. I use the word “should” because the registration form is an affidavit, for which reason the property owners submitting it declare, under their responsibility, that the property meets all the legal requirements and the Andalusia Council will register the property automatically, without performing any prior inspections. However, if an inspection later finds that the legal requirements are not met, the owners will be fined.

There are many properties without an initial-occupation licence, due to different reasons, such as the age of such buildings, problems with the housing development, etc. This has driven some municipal councils to implement a specific procedure to obtain an initial-occupation licence solely to register the property before the Tourism Registry of Andalusia. Some of these councils are Málaga, Mijas and Benalmádena.

Nerja Council

The situation of holiday rentals in Nerja deserves a special mention. Nerja Council has paralysed the granting of initial-occupation licences since the entry into force of the Tourism Decree.

A month and a half ago, the council also established a procedure to grant such initial-occupation licences only for the purposes of registering properties before the Registry of the Andalusia Council (RTA). The website of the municipal council now includes the form necessary to file this application.

Over one year ago, our firm requested a copy of the initial-occupation licences of different properties in Nerja and, two weeks ago, we started receiving responses from Nerja Council.

Fortunately, the situation of these holiday rentals in Nerja seems to be in the process of being brought in line. This is definitely good news for all interested property owners as well as potential property buyers who will have the ability to obtain the initial-occupation licence necessary for registration.

Properties located in towns with fewer than 20,000 inhabitants

Another significant change that took place recently in the regulations set down by the Andalusia Council is that affecting holiday rentals located in towns with fewer than 20,000 inhabitants. These are towns such as Torrox, Viñuela, Alcaucin, Frigiliana, Competa, as well as most towns in La Axarquía.

Properties in these municipalities are not eligible for the 2016 Decree due to the properties being located in towns with fewer than 20,000 inhabitants. However, since February of this year, it is possible for them to be eligible for the 2016 Decree as they will no longer be considered rural properties, which, until now, was the only way to register these properties as holiday rentals.

RTA list of holiday rentals registered in Malaga

Due to the boom in holiday rentals in certain cities, such as Malaga, the Council has published a list of the registered holiday rentals.

This tool seeks to inform tourists about accommodation possibilities in the city and is also a tool to control the tourism boom affecting the city.

It should be noted that Malaga city is currently experiencing a significant boom in tourism, especially around the historic city centre. This has led to the emergence of plenty of tourist accommodation options, which has resulted in price rises for long-term lettings due to the low property supply as owners opt to offer the properties to tourists instead.

Over the last year, the historic centre has lost residents to holidaymakers. The Malaga Council is already debating the measures that should be taken to limit or regulate holiday rentals and make residential and tourist use compatible, so that residents are not lost and it is possible for people in the community to access rental homes, taking into account the average income in Malaga.

You can see the case of Palma de Mallorca, a city that recently approved a norm prohibiting holiday rentals.

Tax payable on the profits obtained

It is important to remember that property rentals are subject to taxation, for which reason owners –whether resident or not (IRNR)– must declare the profits obtained from such rentals.

Non-resident owners must declare such profits through form 210, which is submitted quarterly. Fortunately, since January of this year, the procedure has been simplified to make it possible to declare, in form 210, all the earnings obtained from renting the existing or new build property as a holiday rental over the quarter, even if they come from different occupants. This modification has been introduced with the intention of making it easier for property owners to comply with the holiday rental laws in Spain.

If the non-resident property owner owns several properties, a separate form 210 must be submitted quarterly for each one, and 19% of the total earnings obtained will be paid as tax, with the ability to deduct certain expenses according to the period of rental during that quarter.

It is interesting to note that, if you are tax resident in Spain, holiday rentals are taxed at a higher rate than rentals of usual residences –residential rentals–. This is the case because the Tax Agency allows these residential rentals used as the tenant’s usual residence to apply a reduction of 60% over the positive net return obtained from the rental. However, this deduction is not allowed for holiday rentals offered by tax residents.

Currently, there are still many property owners who do not declare rent but, if the Tax Agency devoted some attention to this matter, it could start inspection proceedings ex officio, by simply visiting a few websites and comparing them to the list of properties registered in the Tourism Registry of Andalusia.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

ARE YOU THINKING OF BUYING A HOME IN SPAIN?

Written by Gustavo Calero Monereo on 27 March, 2018. Posted in Andalusian, english speaking solicitor.

When thinking about purchasing a property in a different country, there are many doubts and uncertainties that may arise.

We’ll try to give you the basic information you must take into account as well as a few tips.

WHAT ARE THE EXPENSES WHEN BUYING A HOME IN SPAIN?

The legal costs of a sale are usually around 10-12% of the purchase price for a secondhand home or 13-14% for a new home.

The highest cost is the tax on the purchase of properties: The property-transfer tax for secondhand homes –8% in Andalusia– or VAT at 10% plus document duties at 1.5% when purchasing a new home. Other costs to be taken into account are notarial fees and the Property Register.

The fees of the property agency are usually paid by the seller and included in the purchase price.

I ALREADY FOUND THE PROPERTY I WANT TO BUY. WHAT NOW?

Once you have selected a property, the agency will ask you to pay a deposit, usually around 5,000 euros, to remove the property from the market and provide enough time to sign a private sales contract where the seller will be paid 10% of the purchase price.

This holding document is usually a simple document that must include: the details of the sellers and buyers, the purchase price, the payment terms, the date of signing the private contract and the deed of sale.

For more information about the entire purchase process, click here or have a look at this video:

HIRING A LAWYER

If you’re thinking about spending a significant part of your savings on buying a home, it seems logical to hire a lawyer to advise you and make the sales process less stressful.

Beware of people who advise against hiring a lawyer to save costs or those who seek to provide legal advice and are not lawyers. If what you’re looking for is a lawyer, you can ask for a certificate accrediting his recognition and/or a professional liability insurance policy.

You should take into account that the average cost of a lawyer is around 1% of the purchase price plus VAT. Is it really worth saving 1% considering all the money you’ll be spending?

The lawyer you find should be independent and be very familiar with property law, being able to demonstrate some experience in this sector is always important. It may be helpful to review the public information available on the lawyer’s website as well as customers’ reviews.

WHICH DOCUMENTS SHOULD I HAVE IN MY POSSESSION?

The most important ones are:

“Nota Simple”, this is a short information of the property from the Property Register
Copy of the IBI or property tax for the home
Utility bills

If they also provide a copy of the licence or deed of the property, even better.

REGISTRATION IN THE PROPERTY REGISTER AND CADASTRE

The short information from the register – nota simple- and the cadastral reference appearing on the property tax bill can be used to verify that the property is duly registered in the property register and the cadastre, as well as that the persons selling it are its owners.

STRUCTURAL SURVEY?

It doesn’t seem unreasonable to have an architect visit the property and carry out certain checks, such as measuring the built area –this way you’ll know that the register and cadastre are accurate– and you’ll also get a professional opinion about the state of repair of the property.

Obviously, the architect will only be able to see defects that are apparent but at least you’ll be able to rule out certain flaws within the property.

URBAN PLANNING INFORMATION

If you’re going to buy a home on urban land, it is important that you ask the council if it has a licence for construction and first occupation licence. The licence of first occupation is requested from the council once construction work on the home is completed.

It is important to keep in mind that older homes –built before 1977– did not have a first occupation licence as this did not exist. It is also true that some recently built properties do not have that licence either for different reasons. Even though, in theory, the property cannot be occupied and used without that licence, this is actually possible and this is not necessarily an obstacle to buying the property.

Verify that the development where the home is located is free of debts towards the council and has been completed, in order to avoid paying additional costs in the future.

COUNTRYSIDE HOMES

If you’re going to buy a home on rural land, in this case the urban-planning situation is very different from the one explained for properties on urban land. The most important thing is to get information about when construction ended, whether the land has any type of special protection or if the council has started proceedings to re-establish lawfulness. In Andalusia, a regularization process has been created.

CHECK FOR POTENTIAL DEBTS WHEN BUYING A HOME IN SPAIN

With the information from the Property Register, the one received from the Council and the community of owners, you can see whether there is a debt on the property that could affect you as its new owner. This refers to debts such as a mortgage, liens, property taxes, community fees, etc.

If there are any debts, the best thing to do is to have the seller pay them before signing the Deed of Sale or withhold the amount of the debt from the seller so that you can pay it yourself.

DEED OF SALE AND YOU’RE THE NEW OWNER

For you to become the new owner of the property, you’ll have to sign a Public Deed of Sale before a Notary and pay the seller the rest of the price agreed, receiving the keys to the property.

Once you sign the deed, you need to start the process to record the home in your name in the register and cadastre, as well as pay all taxes.

After this, we hope you enjoy your new home.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

NON-MARRIED LONGEST LIVING PAYS HIGH INHERITANCE TAX

Written by Gustavo Calero Monereo on 29 January, 2018. Posted in Andalusian, costa del sol, english speaking solicitor, heir, Inheritance Tax, lawyer, legal advice, malaga, nerja, Sin categoría, solicitor, wills.

THE CURRENT SITUATION OF INHERITANCE TAX

On 1 January 2018, a new reform of Inheritance Tax entered into force in Andalusia, the main change of which was to raise the tax-exempt amount to one million euros. This new reform changes the reform introduced a year ago, which we explained in our post of November 2016.

Which heirs would be exempt from Inheritance Tax?

Heirs that meet each one of the following requirements would be exempt:

For the heir to be included in groups I and II as established in the regulation governing this tax, the heir needs to be the spouse, child, grandchild or parent of the deceased
For the value of the estate to be inherited per heir does not exceed one million euros
For the pre-existing assets of the heir to be less than one million euros
For the heir to be a citizen of a Member State of the European Union or, if they are citizen from outside the European Union, both the deceased and the heir must reside in Andalusia

What happens with other family members who inherit?

All other heirs, such as siblings, nephews, nieces, uncles, aunts and cousins of the deceased are included in groups III and IV of the Inheritance Tax and will continue to pay the same amounts.

In other words, these heirs will pay inheritance tax from the first euro they inherit except for heirs in group III, who are able to deduct an amount of 7,993.46 euros. This means, for example, that if John leaves his nephew his Nerja property valued at 240,000 euros as inheritance, his nephew will have to pay about 63,000 euros in Inheritance Tax.

What happens if you inherit from your best friend?

You would be included in group IV of this regulation. This means that if John, instead of leaving the 240,000-euro property to his nephew leaves it to his best friend, he or she will have to pay about 80,000 euros in Inheritance Tax.

How are property values calculated for Inheritance Tax for non-married longest living?

Every year, the Regional Government of Andalusia publishes a regulation that establishes certain coefficients to update the values of urban properties located in Andalusia. These coefficients are applied to the cadastral value of the property; this you can find in your Property Tax receipts. The result of applying these coefficients to the cadastral value is what we call the minimum taxable value.

The regulation explained above deals with the minimum taxable value of urban property but, in the case of rural property, this isn´t applicable. Therefore it is necessary to obtain a valuation from the technicians of the Regional Government of Andalusia to calculate the minimum taxable value. However, the Regional Government of Andalusia in the province of Malaga uses the coefficients published every year by the College of Architects of Malaga to calculate the value of rural properties.

Regarding the means used by the administration to calculate the minimum taxable value of properties in Andalusia –as well as other Autonomous Communities–, there is much controversy in general and there is the possibility to challenge those values in the event that the person liable to pay the tax deems them excessive or not adjusted to reality. This topic is complex enough to be covered in a whole new article.

NON-MARRIED LONGEST LIVING OR UNREGISTERED COUPLES IN ANDALUSIA

Who are we talking about?

In the event that a couple is not married –either in their country of origin or in Spain–, if one of them dies and leaves the other member of the couple as an heir, for the purposes of Inheritance Tax this person would be considered to be in group IV. In other words, in this case the partner is considered to be just a friend putting the person in the group with the highest rate of Inheritance Tax.

What happens to common-law partners registerd in Andalucia?

In Andalusia, couples registered in the Registry of Common-Law Partners of Andalusia are equivalent to married couples for the purposes of Inheritance Tax, for which reason they would benefit from the deductions for spouses explained above.

What happens to common-law partners registered in another Member State of the European Union?

In this case, the Regional Government of Andalusia does not recognise such registration for the purpose of Inheritance Tax, for which reason those couples would pay tax as though they had received inheritance from a friend, leaving them in the group taxed at the highest rate.

If John leaves his partner Mark 50% of the property they both purchased in Almuñecar in 2005 and if the fiscal value of that 50% is 120,000 euros, Mark, the heir, would have to pay about 30,000 euros in Inheritance Tax for inheriting 50% of that property.

If John and Mark had been married or registered in the registry of common-law partners of Andalusia, Mark would not pay a single euro for inheriting 50% of the property from John.

What should be done in this case?

If you have property in Spain with your partner and you would like him or her to inherit your part and you are unmarried, we advise that you get married (either in Spain or in your country of origin) so that you can benefit from Inheritance Tax reductions. Those who don´t want to get married, can register themselves in the Registry of Common-Law Partners of Andalusia (Registro de Pareja de Hecho) and then the status would be equivalent to that of a married couple.

Property owners who are not citizens of a Member State of the European Union

In this case, heirs may not benefit from reductions for spouses, children, grandchildren and parents of the deceased, so they would pay Inheritance Tax in the event that they inherit. They can only avoid this if both the deceased and the heir are resident in Andalusia.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

THE PURCHASE OF HOMES AND DAFO/SAFO CERTIFICATES IN ANDALUSIA

Written by Gustavo Calero Monereo on 8 June, 2017. Posted in AFO, Andalusian, asimilado fuera de ordenación, costa del sol, illegal building, lawyer, nerja.

Lately, in the purchase of rural homes, one of the most important points discussed between buyers and sellers is the procedure “Asimilado Fuera de Ordenación”, –DAFO or SAFO–. What it is, what its consequences are, who does it, who assumes the cost, etc.

Basic rules to buy in the countryside in Andalusia

Before talking about this procedure, and based on my experience with clients looking for a home in the countryside, it is necessary to mention that, in non-development land in Andalusia –rural land–, it is not possible:

To build homes, unless the intention is to engage in agricultural or livestock-farming activities in a professional capacity on the parcel.
Existing buildings may not be expanded and/or remodelled, both inside and outside. People have to purchase what is already built and no changes are legally allowed.
It is permitted to build with the intention to operate rural accommodation or a bed & breakfast, but it is necessary to carry out a preliminary operational project – called in Proyecto de Actuación -, that the Government of Andalusia must approve. This procedure can take over 6 months and it is difficult to obtain a positive response from the Regional Government.

It is necessary to take into account that most homes currently sold in the Andalusian countryside are illegal or irregular, i.e. if the authorities had done their work, they should not have allowed construction and, therefore, they should not exist.

The case is that, for most buildings, it is not possible to start any penalty procedures against buildings built without a licence or with an illegal licence on non-development land due to the time elapsed.

This means that legal responsibility is time-barred since over six years have elapsed since the end of construction. When we refer to non-development land with any special protection, the period of six years does not apply.

What buildings can and cannot be constructed in the countryside

In non-development land, a construction licence cannot be granted to remodel or rebuild. For instance, in the event of a fire when the home would be completely destroyed, it´s not allowed be rebuilt.

It is possible to grant a licence for small repairs or modifications necessary for the habitability and safety of the home, such as, for instance, replacing part of the roof or a wall that has been damaged or has collapsed.

Why was DAFO/SAFO created?

Because of the above, the Government of Andalusia approved regulations in 2012 with the idea to regularise, not legalise, thousands of homes built on non-development land –rural land–, in breach of urban-planning regulations. Since 2012, City Councils have started to create internal regulations to govern this procedure.

Speaking colloquially, with the resolution of Assimilated out of Ordination – Asimilado Fuera de Ordenación -, the goal is to have a record with a specific date of what has been built on that property –both inside and outside each building–, how many years have elapsed since construction and to certify that the home can continue to exist without penalties in the future, even though it will not be possible to expand it and/or remodel it or to build new structures.

This is not a legalisation because the home is left outside urban regulations –as it was built illegally– but it is a regularisation as the City Council itself certifies this legal situation and confirms in writing that it will not be possible for this home to be subject to a penalty due to the time elapsed.

The legal situation of a home in non-development land does not change after receiving the resolution of DAFO/SAFO from City Hall, i.e. the home will continue to be illegal as it was built on land where construction is not allowed but, since the time limit established by law to issue a penalty for this infringement has elapsed, this procedure against the owner cannot be started due to this situation. With or without a DAFO certificate, the legal situation remains the same.

DAFO/SAFO Procedure

In this procedure, it is necessary to have a project by an architect, to pay a fee on the value of the building on the date it was built, which may range from 2.5% to 4.5% depending on the City Council where the property is located, and the City Council will also verify the water and electricity supply as well as the need for a septic tank so that the home can comply with regulations.

It will actually be the architect paid by the owner who will inform, in his or her project, everything necessary for the home to be eligible for a DAFO certificate. Once the project has been submitted, the architect from the City Council will visit the property to inspect it and verify whether it complies with the requirements for a DAFO certificate.

Once this procedure is completed, which may take between 4 and 6 months, the City Council will issue a resolution certifying Assimilated out of Ordination – Asimilado Fuera de Ordenación -, from Regulation for that home and all structures built on the plot.

Is DAFO mandatory for the sale of a home?

To buy or sell a property, holding a DAFO/SAFO certificate is not a legal requirement. That being said: is obtaining a DAFO/SAFO certificate for a property good or bad?

In favour of the DAFO certificate, we can mention that buyers will have the certainty that what has been built already cannot be subject to a penalty and/or demolished because it is accredited in writing that legal responsibility is time-barred, with the certificate from the City Council granting the DAFO certificate. Likewise, it will provide certainty that the City Council will not require you to obtain a DAFO/SAFO certificate for the home in the future, as the procedure was already completed at the time of purchase.

It should be taken into account that, currently, nearly no City Council offers any information in writing regarding a property built on non-development land unless it holds a DAFO certificate or processes it.

This means that, if you go to get something in writing, they tell you that you certainly can but you first need to process the DAFO certificate for your home. This means that, if you do not want to obtain a DAFO certificate for any reason, it will be very difficult for buyers or their lawyers to obtain information in writing about the property.

The downside of having the DAFO is that, if there are any structures or remodelling –inside or outside– completed within the last six years or if the land on which the property is located is subject to any type of protection (and it can´t be proven that the buildings are old enough), applying for this procedure can only cause problems to the owner as the City Council will be required to initiate penalty procedures.

Likewise, if the new owner is thinking about remodelling after buying the home –ignoring the advice of a good lawyer–, the City Council will already be perfectly aware of what had been built before and it will be easier for them to prove that the structure has been remodelled or some variation has taken place.

It is also necessary to take into account that it may be possible for a property to obtain a DAFO certificate in 2016 and remodelling or expansion of that home to take place in 2017. What I mean with this is that complete certainty in this sense can never be achieved.

Current status of the DAFO certificate

It is true that the processing of this certificate is starting to become common at City Councils because they have also realised that it´s tax payment is an important source of income.

Many City Councils have an unwritten rule to start an application automatically when they receive or someone requests any type of information and/or documentation about a property on rural land, so we can say the owner would be obliged to make the DAFO.

In the situation mentioned above, many buyers want to prevent having to pay for the cost of the procedure themselves, which has resulted in an increasing number of buyers requiring the seller to process it and pay for it.

It is also true that, in some sale transactions where a DAFO certificate is not desired, a reduction in the sale price is usually agreed with the seller and the new owner will decide whether to apply for it in the future.

Is possible to get a mortgage in a property with DAFO?

Another issue that some clients ask about, is whether it is possible to grant a mortgage for a property with a DAFO certificate.

On this matter, the reality of the property market goes beyond the legal limitations in force since 2009 as, even though it is not theoretically possible to grant a mortgage for buildings or structures exempt from regulations, the reality is that there are banking entities that do grant mortgages for properties out of ordination or assimilated out of ordination, i.e. rural properties.

In my opinion, if there is money to be made, banks will not stop granting mortgages for properties of this type -with or without DAFO- regardless of what the Decree of 2009 says. Obviously, mortgages approved for these properties usually offer a lower loan amount and not all banks offer mortgages on rural land.

Buying and selling homes in rural land

When buying and selling homes in non-development land, for them to be able to be included in the property market, with or without a DAFO certificate, there are no limitations or restrictions. This means that most of these properties are registered in the Property Registry and in the Cadastre and have already been sold or bought on different occasions even though few yet hold a DAFO certificate.

Currently, there continues to be an important portfolio of potential buyers interested in properties in the countryside.

The important thing, when someone is looking to buy a property on rural land, is for buyers to know what they are buying, be aware of the legal limitations of properties on rural land, and receive specific legal information about the property, with or without a DAFO certificate. This will enable them to make a decision with full awareness of the legal status of the property.

A lawyer to buy a property?

Lastly, it’s not that we’re trying to promote our services –well, maybe a little–, but in the purchase of a home, especially for homes like these, having a lawyer is never a bad idea as his or her fee will cost very little in comparison to the purchase price and can save you from many headaches or costly problems in the future.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

RECLAMATION PLUSVALIA TAX FROM SALE PROPERTY AT A LOSS

Written by Gustavo Calero Monereo on 21 February, 2017. Posted in Andalusian, Capital Gains, costa del sol, english speaking solicitor, judgment, nerja, plusvalia.

A few weeks ago, a seller was bitterly complaining to me about what they had paid for capital gains tax on the sale of their home in Capistrano, Nerja to a Swedish couple, even though no profit had actually been made.

I then remembered an article we published in June 2014 on this matter, where we spread the news about new case law defending the position of taxpayers who had sold a property at a loss and, furthermore, were forced by the city council to pay capital gains tax, even though no profit had been made from the sale of that property.

Many sales take place at a loss and there are many more to come as, in general, current prices are still below those in effect a few years ago.

In the two and a half years since the publication of that article, the position of taxpayers to be able to claim back what they had paid in municipal capital gains tax for the sale of their homes without having made any profit has improved and the government will probably be forced to amend the Law in order to prevent councils from continuing to demand payment in these situations.

First of all, if they want to cancel the capital gains tax bill received from the council, they must know that they need to pay it first and then file a claim, and they will then have no option but to resort to the courts to claim a refund.

However, according to a judgment of the Higher Court of Justice of the Community of Valencia in late 2016, it is not necessary to obtain an expert appraisal to prove the value of the property, as it is understood that the amounts shown in the purchase and sale deeds clearly determine the actual value of the property and, therefore, show whether a profit was made.

So far, taxpayers wishing to file a claim through the courts needed an appraisal to prove that the actual value of the property transfer was lower than the purchase price. However, through this judgment, the amount shown in the purchase and sale deeds can be enough to accredit the values of the property when, through examining the deeds, one can easily see that there has been no increase in the value of the land.

The strongest argument in favour of taxpayers is that the Constitutional Court, in its recent judgment of 16^th February, established that making citizens pay taxes for non-existing enrichment in the sale of their homes contradicts the principle of financial capacity set down in art. 31.1 of the Spanish Constitution. The Constitutional Court clarified that capital gains taxes are legal but it is unconstitutional to pay this tax when no actual gains have been made in the sale of the property.

The Constitutional Court also clarified that legislators will be the ones who will have to amend the legal framework of this tax in order to prevent taxation in these situations where no capital gains are made from the sale of a property.

Until the Law is amended, we assume that councils will continue to demand payment of capital gains taxes even when properties are sold at a loss but, after the pronouncement of the Constitutional Court and with the arguments set down in the other judgments mentioned, taxpayers will be able to claim back what they have unduly paid to the council in these circumstances. However, it is true that, for smaller amounts of capital gains tax, it may not be interesting to file a claim, taking into account the costs involved in hiring a solicitor and a barrister.

Many cities in this area: Nerja, Frigiliana, Torrox, Vélez Málaga, etc., issue bills for capital gains tax once the sale is recorded in a Public Deed, for which reason, in order to obtain a cancellation of this bill from the council, it would be necessary to challenge it before the deadline established by law.

If the claim is not filed before the deadline and, therefore, the administrative action becomes unappealable, it will become more difficult to file a successful claim.

Author: Gustavo Calero Monereo, lawyer at C&D Solicitors Torrox (Málaga, Andalusia)

SPANISH INCOME TAX RETURN FOR NON TAX RESIDENTS (IRNR)

Written by Gustavo Calero Monereo on 17 November, 2016. Posted in annual tax, costa del sol, form 210, Income tax for non residents, IRNR 2016, NON RESIDENT, Non residents income tax, non tax resident, taxes for non residents Spain.

Time for payment your income tax for non residents in Spain (IRNR)

If you are a non-resident in Spain and own a property there, you are liable to Spanish Income Tax for Non-Residents payment (Spanish IRNR). This issue was already considered in former article on our website.

You would have to pay this year the IRNR income tax for non-residents of 2015. This means if you owned, bought, sold or inherited a Spanish property in 2015 and you are NOT a fiscal resident in Spain, then you are obliged to pay your yearly IRNR income tax for non-residents this year (Impuestos sobre la Renta de No Residentes). As a service to our customers C&D offers to take care of this tax application and its payment through direct debit before the end of this year.

When a property is owned by a married couple or several persons, each of them becomes an independent taxpayer, so that they should file tax returns separately according to the ownership interest they have on this property.

This tax duty needs to be done before the 31^st of December 2016. If you want to pay through direct debit, though, it needs to be submitted before the 22^nd of December 2016. The tax liability will be calculated with the tax information of your property following the cadastre registry, usually the tax payment it isn’t going to be so much. If you miss this obligation you could be fined by the Tax Authorities.

Tax form 210 is used to pay this tax and it can be downloaded from the official web of the Spanish Tax Authority (A.E.A.T.). It is worthy mentioning that it is not easy to understand them.

Our office is currently dealing with the IRNR season 2015. The deadline to file this tax return expires on the 31st of December of this year. Although if you want to place the payment as a direct debit in your bank account the form must be filled before the 22nd of December.

If you want to hire our services for this tax duty, we will be pleased to help you.

Author: Francisco Delgado Montilla, lawyer at C&D Solicitors Torrox (Malaga / Andalucia)

ARVSSKATT I ANDALUSIEN: FÖRÄNDRINGAR I SIKTE

INHERITANCE TAX IN ANDALUSIA: CHANGES AHEAD

Written by Gustavo Calero Monereo on 12 November, 2016. Posted in costa del sol, english speaking solicitor, estate, heir, Inheritance Tax, malaga, nerja, wills.

On 1 August, the Regional Government of Andalusia approved the first of two reforms of inheritance tax in Andalusia. This reform and the upcoming one aim to improve taxation for heirs.

The first reform affected the acquisition of a person’s usual residence by heirs and a series of reductions were approved, ranging from 100% to 95% when the value of the home exceeds €242,000. The reduction in inheritance tax in this sense is very significant.

However, it should be noted that only in estates inherited from parents by children (whether biological or adopted), spouses, relatives in the ascending line and persons related collaterally (siblings, cousins or grandparents) over the age of 65 can an heir in Andalusia opt for the reduction for the acquisition of the usual residence. Likewise, the following requirements must be met:

Having lived with the deceased person in the usual residence during the two years preceding death.
Maintaining ownership of this residence for 3 years.

Furthermore, the Regional Government of Andalusia has announced that it would complete a second reform of Inheritance Tax, which will enter into force on 1 January 2017.

In this case, the minimum exempt from Inheritance Tax in Andalusia will be of €250,000 per heir. I.e. heirs inheriting assets valued at an amount equal to or smaller than €250,000 will not have to pay Inheritance Tax in Andalusia.

As explained in a previous article, this exemption only applies to descendants or adopted children of the deceased person, as well as their relatives in the ascending line or adoptive parents and spouses, provided the pre-existing assets of the heir are equal to or less than €402,678.11.

Lastly, another substantial change should be noted as, for estates with a value of between €250,000 and €350,000, a minimum value of €200,000 is established. I.e. if the inheritance received by a child or widowed spouse is valued at more than €250,000, the first €200,000 would be exempt from inheritance tax and only the remaining amount would be paid, provided that the total value of the estate does not exceed €350,000. If this amount is exceeded, inheritance tax would be payable on the entire value of the estate, without the possibility to apply any exemption.

Lastly, I would like to remind you that the best way to plan your inheritance begins with your will, for which reason it is always best to go to an appropriate professional who can examine your situation and give you personal advice.

Author: Gustavo Calero Monereo, C&D Solicitors, Malaga, Andalusia.

TIME LIMITATION FOR RESPONSIBILITY: ILLEGAL SUBDIVISIONS RUSTIC LAND ANDALUSIA (DAFO)

Written by Gustavo Calero Monereo on 25 September, 2016. Posted in AFO, costa del sol, illegal building, non developable land, rural land, solicitors Nerja, subdivision, undeveloped land.

illegal subdivision rustic land andalucia

On 6 August 2016, the amendment of article 183.3 of the Urban Planning Law of Andalusia (LOUA) came into force.

The main objective of this amendment was to introduce a statute of limitations for subdivisions in non-developable land that contain buildings. Since 2003, the Administration was able initiate the administrative proceedings for the grouping of these plots divided illegally at any time, which entailed an order to demolish anything built illegally on such lands. There was no time limit, i.e. the legal responsibility never expired.

What this amendment has done is introduce a statute of limitations of six years for such subdivisions, provided that they contain buildings over six years old. This statute of limitations introduced for buildings constructed in non-developable land, results in the legal responsibility expiring after six years without the administration initiating proceedings against such subdivision.

It should be made clear that subdividing rural land means the segregation or division of a plot of land into several more plots, usually for the purpose of selling these plots independently and building there. These subdivisions are illegal unless they comply with the smallest unit for crops, which, in dry lands, is usually between 20,000 and 25,000 square metres. The general idea is to limit plots in rural land from being divided to form new independent properties as much as possible.

This is not a minor issue as, both before and after the passage of the LOUA in 2003, thousands of illegal subdivisions of rural land that did not comply with the smallest unit for crops took place in Andalusia. This situation was widespread until 2009, when the economic crisis put an end to frantic speculation in the property market.

The existence of thousands of such subdivisions led to the sale of many properties originating from illegal subdivisions, which were then transferred to other buyers, whom were also transferred the legal “problem” represented by the possibility of the Administration initiating procedures against them.

This was a situation that created a high level of legal uncertainty, as the offence of dividing such land illegally never expired. The sale of these plots led to the appearance of third parties acting in good faith.

In practice, the Administration in general and City Councils in particular did not have –and do not have– any interesting in pursuing proceedings against these subdivisions to re-establish legality in urban planning. In fact, the enforcement of the resolutions of these proceedings, by grouping all segregated plots into a single property in the Land Registry and in the cadastre, with the demolition of anything built illegally on such plots, seems a complicated task, not to say an impossible one.

In addition to this, the fact that there was no statute of limitations caused a situation of comparative tort, as the offence of having built on non-developable land, on a plot that did not come from a subdivision, would expire after six years. However, if the building was located on a plot divided illegally, the building could be “attacked” with no temporal limit as the offence of subdivision did not expire, i.e. despite the building being over six years old.

I think this amendment is sensible, as it equalises the statute of limitations for plots with buildings and that of buildings constructed on non-developable land. This will lead to greater legal certainty, with the ability to determine the legal regime applicable to these properties clearly.

The logical consequence of this amendment is that buildings that are over six years old and that are built on land subdivided illegally will able to apply for the Assimilated-Outside-of-Planning Procedure (DAFO).

This procedure does not entail the legalisation of the building as the situation of illegality is always maintained but it can lead to greater legal certainty, as the City Council will certify the situation of the property on which legal liability has expired, without the possibility of being “attacked” again by the Administration itself, provided that, of course, no new buildings, renovations or improvements are made on said building.

This recognition, in addition to being a relatively significant financial outlay for the owner, will also entail the certification of a series of limitations for buildings on rural land, despite the fact that, with or without DAFO status, these limitations still exist. It will be up to each owner or new buyer to decide whether he or she is interested in requesting that recognition for the property in question, without forgetting that the City Council can require the owner to initiate it ex officio.

Author: Gustavo Calero Monereo, C&D Solicitors, Malaga, Andalusia