Taxes to be paid
I AM an expatriate who resides permanently in Spain and I have built a house on a plot near Denia, where I live.
I have been informed that I must declare the construction to the land registry and pay a tax of 1.5 per cent of the value of the property.
Can you advise me as to whether this is correct please?
Yes, it is true that after the construction of your house, you should (among other things, such as updating the cadastral records of the property, obtain the occupation license, etc.), update the description at the Land Registry of your home, in order for the construction to be registered.
This update must be undertaken through a public title deed, which is known as a declaration of new work (declaracion de obra), which must be signed before a public notary and must be submitted together with other documentation including the architect’s certificates confirming the finalisation of the works, certificate describing the work done, a license by the Town Hall approving the commencement of the work and other documents.
It is correct that for this type of notarial deed a tax known as DOCUMENTARY LEGAL ACTS (Stamp Duty) is due, which, as you point out, is usually paid at the rate of 1.5 per cent.
But in your case, you can benefit from relief on this tax (within the Valencian Community), by paying 0.1 per cent instead of 1.5 per cent to cover the declaration of the new work, if the property involved will be your habitual residence.
In the Valencian Community, the Law 13/1997, regulates among other matters, the Documented Legal Acts Tax, and says in its article 14.1 that the tax rate will be 0.1 per cent (instead of the usual 1.5 per cent or 2 per cent), in public deeds documenting acquisitions of habitual residence.
The courts have repeatedly pointed out that the construction of what is or will be the habitual residence, should be considered, for these purposes, in accordance with the acquisition of it.
Even the Superior Court of Justice of the Valencian Community, has declared, on a number of occasions, relevant to these cases, that when declaring new work relative to the construction of a property that constitutes the habitual residence, the application of the reduced tax of 0.1 per cent should be levied as if it was an acquisition.
This opinion is supported in the sentence number 1406 dated on the 8/11/2013 of Section 3 of the Contentious Chamber.
In order for this tax benefit to apply, we consider that it is essential to prove that it is indeed the habitual residence and for that to apply, (as stated in article 14 of the Act, indicated above), it should be a habitual residence in accordance with the national regulations concerning income tax, which requires that:
- The property constitutes the habitual residence when the taxpayer is in occupation for a continuous period of at least three years (subject to some exceptions).
- The property must be occupied and lived in both effectively and permanently by the taxpayer, within 12 months following the acquisition or completion of the works.
Therefore, in your case and provided that the above requirements are met, we believe that if it is your habitual residence, you should pay tax for the deed of a new work declaration at the rate of 0.1 per cent and not 1.5 per cent.
If you want the expert advice of a Spanish lawyer, in relation to notarial public deeds, purchase and sale, registration of property, etc. contact us and we will help you.
The information provided in this article is not intended to be legal advice, but merely conveys general information related to legal issues.
Carlos Baos (Colegiado 5756)
Abogado / Lawyer
C/Diana 19, 2º D, 03700 Denia (Alicante) Spain Tel. +34 966-426-185
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