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ENGLISH SPEAKING LAWYERS IN MALAGA (ANDALUCIA / COSTA DEL SOL) SPECIALIZED IN PROPERTY LAW & CONVEYANCING

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ENERGY CERTIFICATE AND IBI PROPERTY TAX REDUCTION

energy performance certificate, IBI, propertyIn September, the Government of Spain, through a legislative amendment, opened the door for city governments to be able to offer a discount (reduction) in Property Taxes (IBI) from 1 January 2016.

This legislative amendment introduces the possibility of offering a reduction of 20%, 16%, 12%, 8% or 4% of the IBI of a property if its energy performance certificate shows a rating of A, B, C, D, or E, respectively.

Now that the central government has allowed for this modification of the IBI, it will now be up to each city government to decide whether they want to apply this discount.

This is so because Property Taxes are of a local nature. City governments are responsible for their management, as long as collection of this tax is carried out pursuant to the Law on Local Treasuries, which is the one amended by the central government to allow for this IBI discount.

That said, if you own a home in Spain and you want to know whether you can save on property taxes, I advise you to do the following:

  • Ask your city government whether it plans to apply this IBI discount from 1 January 2016. If the answer is NO, this settles the matter.
  • If your city government says YES to the previous question, look at the energy performance certificate of your home to find out its rating.

If you have purchased a home in Spain within the last 2 years, be aware that this certificate will be part of your deed of sale.

If you do not have an energy performance certificate, you may be interested in ordering one, so you can know the energy rating of your home and find out whether you can get an IBI discount to pay less every year.

Regarding the energy performance certificate, most properties “fail”, i.e. they have a very low rating. Without a doubt, it can be said that homes in Spain are not energy efficient.

If the rating in the energy performance certificate of your home is very low, do not panic since, unfortunately, this is normal. According to the information published by the idealista website at the beginning of this year, 95% of homes fail in energy efficiency.

In my opinion, this measure, introduced by the central government, is positive, as it is always good to “reward” homes that are better insulated and require lower energy use to be habitable. When they use less energy, they pollute less.

From a seller's point of view, this certificate is seen as yet another expense and another bureaucratic hindrance to sell a property. But, if the certificate is completed well, it provides very valuable information to buyers, as they will know the energy efficiency of the home before buying it and will be able to make improvements in this sense.

Regarding the energy performance certificate, it should be said that it must be available when a home is on sale or up for rental (leases longer than 4 months) so that, from a buyer's point of view, one can know the energy efficiency of a home from the moment one becomes interested in it.

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

TAX EXEMPTION WHEN BUYING A PROPERTY BEFORE 31/12/2012

Tax exemption capital gain tax sale

Tax exemption capital gain tax sale

Regarding the current financial situation, which is reflected in the drop of property sales in Spain every three months, the Spanish Government has passed a new tax exemption. This exemption tries to promote the sale of properties and may become very interesting for both individuals and bodies corporate considering buying a real estate property in Spain in the short term, whether they purchase commercial premises, homes, offices, garages, plots, storage rooms, etc.

On the 12th of May 2012, the Central Government passed the Spanish Royal Decree-Law 18/2012 of 11th of May on the restructuring and sale of the property assets of the financial sector. This regulation included in its First, Second and Third Final Provisions the tax exemption for bodies corporate and individuals, whether resident or non-resident in Spain. This reform law allows all those buying a property from the 12th of May 2012 till the 31st of December 2012 to pay taxes only on the 50% of the capital gains when selling the property subsequently, whether in 1, 5, 10…etc years, while the remaining 50% is free of charges.

This exemption may save an important amount of money, because if a property is currently sold in Spain, capital gains are taxed at 21% for non-residents (19% from 2014), at 27% for resident taxpayers in Spain (21% from 2014) and at 30% for bodies corporate.

Here we present an example: imagine you are thinking about buying a property in Spain considering the current market opportunities; the price for this property may be EUR 200,000; the following eventual scenarios may occur according to the date of purchase when selling this property, for example, in 2017 for a sale price of EUR 270,000:

1) Non-resident taxpayers: EUR 70,000 of capital gains at 19% makes a total payment of EUR 13,000; if the purchase is performed before the 31/12/2012, the total payment would be EUR 6,650.

2) Resident taxpayers: EUR 70,000 of capital gains at 21% makes a total payment of EUR 14,700. If the purchase is performed before the 31/12/2012, the total payment would be EUR 7,350.

3) Corporate: EUR 70,000 of capital gains at 30% makes a total payment of EUR 21,000. If the purchase is performed before the 31/12/2012, the total payment would be EUR 10,500.

Obviously, this tax saving is not definitive in order to decide whether to buy a property or not in Spain, as it is not possible to know whether prices may go down much more nor the gains resulting from the eventual property sale. However, this fact may be a helpful factor to take a decision for those considering buying a property, especially for those non-speculative potential buyers whose main purpose is to enjoy this property for many years; thus, the longer they own the property, the greater the capital gains may be when selling it. Look at the figures and draw your own conclusions.

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

LEGAL COUNSELING: “IF YOU BUY CHEAPLY, YOU PAY DEARLY”

Legal investigation by professional

Legal investigation by professional

Some months ago, a foreign prospect client, who we have come to know as “Mr. X”, came in our offices. He requested some information regarding sale procedures, legal work and our professional fees.

After the first free appointment, in all honesty he commented to us that he had contacted a professional offering a 40% cheaper fee than ours. However, he would be interested in contracting our services provided that we could offer him a discount.

At that moment, we considered which option to adopt; naturally, we wanted to win this client, but we also knew that the rural property, which he wanted to buy, required a quite complex searching process.

At the end, Mr. X was offered a “courtesy” discount in our fees, which was not close to the low price offered by the former professional. Finally, Mr. X decided to contract the other professional’s cheaper services.

Regarding the current market and low circulation of clients, some solicitors offer great discounts to stand out from competitors and then win a client. Then, considering the aforesaid, why our legal firm did not offer a higher discount to win Mr. X as a client?

The answer is obvious; because such low fees proposed by Mr. X could not pay for the time of commitment for the searching process to buy the above mentioned property in a rural land and then providing full legal certainty to the client.

Within our professional environment of legal services, you may and shall be flexible and capable for adapting to win a client, considering the current situation of financial difficulties and increase of competitors in our sector. However, you should NEVER compete with lower fees, because if the fees for your services are reduced so much, then the quality of your services becomes also poorer.

Furthermore, if we are realistic, no professional may work with the same intensity neither commit the same time when their fees are so low, because production costs and ideal profits would require much more cases which may not be properly and professionally handled, and as a result, a poorer quality counseling service may be provided.

Later on, we knew that Mr. X hired an agent’s services for the legal counseling instead of a solicitor’s. We do not know how his case finished or whether he received a good counseling service. Similarly, if I do not feel physically well or fell pain, I would contact a doctor for a diagnosis and the prescription of a solution, instead of contacting a person who is not a doctor and claims to know a lot about medicine. As a qualified general practitioner, the doctor is better trained and has a legal responsibility. As a result, the patient-client receives more security and reliability, although he or she may pay more for these services.

In all honesty, an agent will never provide the same legal service as a solicitor will, because a solicitor has been exclusively trained by and for law. Solicitors’ training is eminently juridical; this full time commitment and the responsibility of the practice of law—because of the rules and the professional ethics code and good practice; shall always result in a higher quality legal counseling and greater commitment to the client. But I do not go against agents, as I personally know some of them and I am aware of their worth. However, they are not solicitors.

In short, although we were really looking forward to winning Mr. X as a client, we could not afford to reduce our fees so much in order to avoid a poorer quality service. The fact of highlighting our professionalism and tailor-made customer service in our law firm implies a commitment of time and this commitment implies some costs that the client should pay.

 

 

Author: Gustavo Calero Monereo, C&D Solicitors (lawyers)
Torrox-Costa (Malaga/Costa del Sol/Andalucia)

 

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