Here you will current news and articles of interest about the real estate sector

When purchasing a home, the associated expenses must be considered.The main expenses are detailed below.

1. Taxes:

- Value Added Tax (VAT).
This is due on new construction and the first transfer. It is generally taxed at 10% and 4% on social housing.

- Property Transfer Tax (ITP).
This is due on second or subsequent transfers.It varies by Autonomous Community. In Catalonia a progressive rate is applied based on the value of the property: 10% up to the first €600,000 €, 11% on the excess up to the next €300,000 €, 12% on the excess up to the next €600,000 € and 13% on the remaining excess.
The rate is reduced to 7% for social housing and to 5% when the buyer meets certain requirements.

- Stamp Duty (IAJD).
There are two fees: one fixed and one variable.
The fixed fee refers to the stamped paper on which notarial documents must be issued and amounts to €0.30 per sheet and €0.15 per page.
The variable fee depends on the Autonomous Community.In Catalonia it is 1.5% of the property's value.
For new-build properties sales both the fixed and variable fees must be paid, while for second-hand properties sales only the fixed fee must be paid.

- Municipal capital gains tax (Tax on the increase in the value of urban land).
According to regulations, this tax must be paid by the seller, although it is possible to agree otherwise.

2. Notary Fees:

The purchase and sale must be formalized by public deed before a notary. Notary fees are regulated by law and vary depending on the price of the property. They typically range between 0.2% and 0.5% of the purchase price.

3. Property Registry Fees:

Once the deed is executed, it must be registered in the Property Registry, whose main function is to guarantee legal security and provide greater protection to the owner. Fees are also regulated by law and vary depending on the price of the property. They amount to between 0.10% and 0.25% of the purchase price.

4. Mortgage costs (if financing is available):

- Property appraisal:
This will be carried out by a company approved by the Bank of Spain and usually costs between €300 and €500.

- Mortgage arrangement fee:
This is a charge that banks apply at the outset to cover administrative, assessment and management costs. It usually ranges between 0.5% and 1% of the loan value.

- Home and/or life insurance:
By law it is only compulsory to take out home insurance with coverage for damage caused by fire, flooding or natural disasters. However, banks recommend taking out other types of insurance, such as life insurance.

Municipal capital gains tax (officially known as the Tax on the Increase in Value of Urban Land) is a tax levied by the City Council when an urban property is transferred (whether through sale, inheritance or donation).

With the latest regulatory reform implemented following the 2021 Constitutional Court ruling, two methods were established to determine the taxable base for the aforementioned tax, allowing the taxpayer to choose the most beneficial one.

The methods are as follows:

- Objective method (based on coefficients).

Applied by the Administration by default.

The tax base is the result of multiplying the cadastral value of the land in the year of the property transfer by the coefficient assigned according to the number of years elapsed since acquisition until transfer.

Formula:

Taxable base = Cadastral value of land × Coefficient assigned to the period of      generation of the value increase.

Taxable amount = Taxable base × Tax rate

- Real method (direct estimate).

It is applied when the taxpayer expressly requests it because it is favorable.

The real profit obtained is taken as the taxable base. To do this the difference between the transfer value and the acquisition value is calculated and the percentage representing the land's cadastral value in relation to the total cadastral value of the property in the year of transfer is applied to this amount.

Formula:

Total gain = Transfer value - Acquisition value

Land value ratio = Cadastral value of land / Total cadastral value

Taxable base = Total gain × Land value ratio

Taxable amount = Taxable base × Tax rate

The deadline for paying the capital gains tax is thirty business days from the date of transfer, except in the case of inheritances where the deadline is six months from the date of death, extendable to one year if requested in writing during the first six months.

In accordance with the provisions of "Law 12/2023, of May 24, on the right to housing" a new reference index has been implemented for updating the rental price in housing lease contracts, which will be applicable from 2025.

The purpose of this new index is to prevent disproportionate increases in rental prices.

This index is known as the Residential Rental Reference Index (IRAV) and will apply only to contracts signed after the Housing Law came into force, that is since May 26, 2023.

The IRAV is defined as the minimum value among three indicators:
- The annual rate of change of the Consumer Price Index.
- The annual rate of change of the core Consumer Price Index (CPI excluding fresh food and energy).
- The adjusted average annual rates of change of the CPI and the core CPI, measured as the difference between the annual growth rates of both the Consumer Price Index and the core Consumer Price Index for each month and a benchmark representing expected medium-term inflation, adjusted with a moderating coefficient.

The IRAV is published monthly on the INE website. It is normally updated mid-month, reflecting the previous month's data.

Lease contracts signed before May 26, 2023, will continue to be updated according to the CPI or the reference index established in the contract.

It should be noted that the landlord must notify the tenant in writing the rent increase during the month prior to its application.

A delay in applying the revision shall not imply its waiver or expiry, although under no circumstances may it be applied retroactively.

For property transfers in Catalonia the taxable base for Property Transfer Tax purposes shall be the highest of the following values: reference value, declared value or agreed price/consideration.

If in accordance with the above, a taxpayer must value a property at the reference value but declares a lower value, the Tax Agency of Catalonia (ATC) will initiate the corresponding procedure to regularize the taxpayer's tax situation.

The taxpayer will receive a proposed supplementary assessment, against which, if he consider the reference value applied to be detrimental to his interests, he may present any objections and evidence he deem appropriate. The objections submitted will be forwarded to the General Directorate of Cadastre so that it may issue a report ratifying or correcting the reference value. Consequently, the arguments will be accepted in whole or in part, or they will be rejected and, where appropriate, a settlement will be issued.

If a settlement is issued, the taxpayer may challenge the reference value by filing an appeal against the settlement. The ATC will resolve the appeal with a mandatory, prior and binding report from the General Directorate of Cadastre, which will ratify or correct the reference value after considering the allegations and evidence provided.

When a property has no reference value or cannot be certified by the General Directorate of Cadastre the highest of the following magnitudes will be taken as the taxable base for the purposes of Property Transfer Tax: declared value, agreed price/consideration or market value.

The filing of an appeal against the liquidation only suspends the execution of the contested act at the request of the interested party if it guarantees the amount of that act, the interest on late payment resulting from the suspension and the surcharges that would be due in case of enforcement of the guarantee.

Market value is understood to be the most probable price for which an asset could be sold free of encumbrances between independent parties.

If the property does not have a reference value assigned to it on the date of the taxable event, the Tax Agency of Catalonia may verify its value. The property's value will be verified when the taxpayer declares a value below the criteria contained in the Instructions for verifying real estate values, published annually on the ATC website. Conversely, the declared value will not be verified when all the conditions established in these instructions are met (cadastral value multiplied by the corresponding coefficient).

If the verified value obtained is higher than the declared value, the taxpayer will receive a proposed supplementary assessment, against which he may submit any allegations and evidence he deem relevant. If the ATC confirms the supplementary assessment, the taxpayer may also choose, within period for lodging the appeal, to file a contradictory expert appraisal. The filing of a contradictory expert appraisal suspends the execution of the assessment.