Having decided to take the plunge and buy a property in Ibiza, there are some important considerations: –
N.I.E - Numero de Identidad de Extranjeros – This is a unique reference number that you will need to have in place in order to be able to buy your property. In theory all
you need to do is present yourself at a Policia Nacional station and complete the forms. I have to say though that there are almost always queues and delays, which can be exasperating. An
alternative to queuing is to give your Spanish Solicitor Power Of Attorney to obtain your N.I.E. This clearly adds costs but may be more convenient than wasting time in a Police Station.
Estate Agents – As in the UK, the agents will expect you to have a fairly good idea of the type of property and the area(s) in which you would like to buy. If you are vague,
you might waste a lot of time viewing unsuitable properties and annoy the agent too. If you are looking at more expensive houses, the agent may ask to see proof of your financial standing. I would
not go so far as to disclose exact funding available, I would instead suggest that you Solicitor or Bank manager confirms that you are serious and have the necessary resources to purchase.
Purchase costs and taxes differ from the UK and are, on the whole, far higher. Sales purchase tax varies from 7% to 10% and is dependent upon the type of property, and area
in which you are buying. Make sure you ask your solicitor for a quote for all costs, including his/ her own, at the very start of the process. Do not assume that costs will be the same pro-rata for
every property you view. Overall purchase costs could, quite easily, hit 11%. Your solicitors costs could increase significantly if, for instance, you buy a property with complex boundary issues,
or a building plot with planning permission which needs to be examined and confirmed.
When a husband and wife buy a property in Spain they do so as tenants in common and not jointly and severally as is normally the case in the UK. Each person therefore individually
owns 50%, which does not automatically revert to the other owner on death. This is a hugely significant issue that needs to be addressed by the creation of a Will in Spain.
Not surprisingly the creation of a Will is something which many foreign buyers overlook– and let's be honest it is not top of the list of things to do when you're doing something exciting like
buying a home in the sun.
When thinking about how to distribute your estate upon death, to avoid potential problems you must have a UK Will which does not include a clause such as "my assets where so ever located" as this
will revoke any Spanish Will. In other words the UK Will should only deal with UK assets.
Difficulties often arise because Spanish laws recognise, for example in the case of a British national, that UK law is applied in order to decide what happens to the assets of the deceased. A UK
Will is accepted as valid in Spain, however UK law states that in the case of fixed assets it is the local Spanish law that decides what happens on death!
Unlike UK law where an individual is free to dispose of his estate as he chooses, Spain has something called "forced heirship" which is in common with most European countries. This means close
blood relatives cannot be denied. This most commonly causes an issue when someone dies who has been married more than once leaving children and step-children in partial ownership of the property
along with the surviving owner. This can lead to protracted and messy arguments about ongoing sale/ use of the property, years of stress and bad blood.
As a concession Spain allows foreigners to dispose of their Spanish assets by a Spanish Will in accordance with the laws of the foreigner's own country. So get a Will prepared by your Spanish
solicitor at the same time as the property purchase and do not forget to give a copy to your UK Solicitor.
A much more common area for debate is the subject of partial cash payments ‘under the table' to reduce purchase taxes. Whilst these may well have been commonplace years ago, in the current
financial climate many Haciendas have focused on this area of tax evasion and now reserve the right to review property purchases for fair value. If a transaction is considered to have been
deliberately undervalued you may well be liable for the difference in purchase taxes, plus interest, and potentially a fine too. Another issue to consider is that if you depress your purchase price
you are effectively creating a bigger capital gains tax headache at the point when you come to sell. The advice clearly therefore is make sure the transaction is entirely above board and executed
at fair market value.
Author Phil Dibbs is the man who walks his talk, having purchased his own property on Ibiza. His company, Hawkmoor Associates Ltd, is available to assist in an advisory capacity on property purchases in Ibiza.
Every effort has been made to ensure the content is accurate but for your own peace of mind we do recommend you seek independent legal advice when purchasing your property
Photo: Tamas Kooning Lansbergen