House swap taxes in Spain & UK

[Sunseekers]

Hello, does anyone have any advice or experience with regards to the tax implications and the process involved in doing a house swap ? We know some people who would like to exchange our spanish villa for their home in the UK and would be interested in knowing a little more about the viability of the whole idea.
Many Thanks

[OldTimer]

I looked into a similar arrangement a short while ago now, but for various reasons it never came to fruition. What I do know is that everything is carried out as though you were selling your home in Spain and buying a new one in the UK with the proceeds. There is no difference in the stamp duty applicable in eitehr country. The only financial benefit available to you is that you can both agree to reduce the respective values of both your properties. Be careful not to reduce them too much, or this will incur the curiousity of the authorities.

[Gulliver]

The Mrs and I looked into doing this aswell. In short there is no way round the tax, so you are going to need cash - especially at the spanish end, basically it's an agreement to buy each others property. The only way to not pay less tax is if you swap two properties that are both in Spain as then it is much simpler to under declare the value. This is what we are trying to do at the moment.

[BigPete]

From my (admittedly limited) understanding, the benefits to you would not really be in terms of tax savings, but in terms of A) Finding a buyer without the need for an Estate Agents, or paying them a commission B) Not having the uncertainty of having a property on the market at a time when the market is so flat C) Each party having a property that the other is happy to swap with D) The process can then be further simpified IF you are both swapping on a like-for-like basis (IE with no cash changing hands) - as all you really need to do then is agree the respective values of your properties.

[Mekon]

The other thing to consider here is that the tax man in Spain can charge you taxes on the value of the property, as opposed what you actually paid for it, and can claim these taxes back up to 4 years after you sold / exchanged your house. Just because you 'sold' your house for €0 it doesn't mean that you will be taxed on this amount.
Interetsing article here >> http://www.tumbit.com/how-to-guides/art ... taxes.html

[Sunseekers]

The other thing to consider here is that the tax man in Spain can charge you taxes on the value of the property, as opposed what you actually paid for it, and can claim these taxes back up to 4 years after you sold / exchanged your house. Just because you 'sold' your house for €0 it doesn't mean that you will be taxed on this amount.
Interetsing article here >> http://www.tumbit.com/how-to-guides/articles/189-complementary-taxes.html

So it looks like there is really no such thing as a 'bargain Spanish property' ?

[FuenteAlamo]

So it looks like there is really no such thing as a 'bargain Spanish property' ?

I think there are bargains to be had even when paying an agents fees and full taxes.

I've seen two situations in the last 3 months where a couple bought a nearly new, very attractive 3 bed 2 bath detached villa with pool on a 550m2 plot for 100.000€ + costs of 10,000€ in La Marina, and another where the buyers got a 2 bed 2 bath very modern apartment in a nice complex with comm pool and nice gardens for 42,500€ + costs 47,000€.

In the case of the house, it was originally purchased for 235,000€ and the apartment 115,000€.

Current market value of each is 140,000€ for the house and about 60,000€ for the apartment, meaning they would have no real problem finding buyers and moving on at a profit.

You have to check out the property portals and visit individual agents offices, letting them know you are a hard bargain hunter. Prove to them you have the funds and they'll try very hard to take your money. One of them will produce a property that would suit you and all you have to do is make a single, low offer which you need to state is not increasable.

If you really do want a bargain property you will find one doing the above. Like everything in life, you have to do the groundwork and put in the time. Bargains don't come to you, you have to hunt them down.

[BigPete]

If you really do want a bargain property you will find one doing the above. Like everything in life, you have to do the groundwork and put in the time. Bargains don't come to you, you have to hunt them down.

Well put FuenteAlamo. I think that the bottom line is that a 'Bargain' is only a 'True Bargain' if you are aware of all the angles and implications in advance, as opposed to making a snap decision about anything.

[NowayJose]

I've seen two situations in the last 3 months where a couple bought a nearly new, very attractive 3 bed 2 bath detached villa with pool on a 550m2 plot for 100.000€ + costs of 10,000€ in La Marina, and another where the buyers got a 2 bed 2 bath very modern apartment in a nice complex with comm pool and nice gardens for 42,500€ + costs 47,000€.

In the case of the house, it was originally purchased for 235,000€ and the apartment 115,000€.

Current market value of each is 140,000€ for the house and about 60,000€ for the apartment, meaning they would have no real problem finding buyers and moving on at a profit.
.

It would be interesting to compare the value that the tax authorities placed on the property (IBI) as opposed to what was actually paid for them.

[FuenteAlamo]

It would be interesting to compare the value that the tax authorities placed on the property (IBI) as opposed to what was actually paid for them.

That's a good point to make NowayJose. We have all heard about buyers being clobbered for the extra property purchase tax because the Valor Catastral is now out of date compared to the crashing market values.

The Catastral has only shown a shift of about 18% drop in values since 2008, which as everyone knows, is more like a 55% drop. It's a moot point, as, if the catastral values were to accurately reflect true market values, then the banks holding huge amounts of property due to repossessions would have to strike another 30% or so off their balance sheets, rendering them even more bankrupt than they are now.

So the only safe way to ensure the new owners of a property are not hit with a reassesment for taxes is to get the catastral to approve the actual transaction value at the notary, this can be done by getting a letter from the catastral, for both the vendor and the buyer to keep, which explains why the catastral has approved the price declared. This is possible if the buyer's agent can supply a window card with the advertised price near to the declared price, and, or a newspaper advertisement dated within a few months or so showing the advertised price at the time. I also think they do accept verified internet screen captures by Juzgados.

If in doubt then ask your lawyer and agent to get guarantees of this before you make any offers, otherwise your offers will have to reflect the possible extra tax payable down the line.

It could be possible that both buyers and sellers put half towards extra taxes into a provision of funds account at the lawyers to last for 5 years, after which, if not required, can be payed back to the parties concerned.