[BUYING AND SELLING REAL ESTATE IN SPAIN] 212
9. Special aspects to consider, if the real estate transaction is organized as share deal The transfer of shares is exempt from VAT and transfer tax. Nevertheless, transfer tax/VAT can be incurred on the transfer of shares in companies, when the transfer of the shares is made with the purpose of avoiding the payment of the tax that would have been paid in case of transfer of the real estate. The law considers there are tax avoidance reasons where 50% or more of the assets consist, directly or indirectly, of real estate located in Spain and are not used for business activities, and, as a result of the transfer, the buyer acquires control over the company (i.e., more than a 50% stake in its share capital) or increases its stake once it has obtained control. Transfer tax is payable at a rate ranging between 6% and 11% of the value of the underlying real estate assets at the time of the transfer. Transaction costs include notarial fees, requisition fees, legal and other fees relating to due diligence, and agency fees. In addition, it is very important to conduct a full due diligence of the entity you are willing to acquire in order to detect relevant contingencies and take those into account when negotiating the terms of the transaction, otherwise, the buyer might be exposed to several and relevant liabilities. The in rem right of usufruct grants the beneficiary with the legal right to use someone else's property temporarily and to keep any profit made from it, with the obligation to preserve its form and substance. This right may be temporal or absolute, and it is common in Spain to grant usufructs, especially in inheritance
situations. The existence of this in rem right narrows the owner´s faculties with respect to the property. Understanding the implications of usufruct rights requires familiarity with Spanish law, and missteps could lead to legal disputes or reduced control over the investment. Real estate property can be jointly owned by different natural/legal persons and under different legal figures. 10. Buyer’s Inspections A. The main aspect of the Buyer´s inspections, regardless acquiring commercial or residential real estate property, is to set forth a Due Diligence process. As stated in point I, the basic terms and schedule of the Due Diligence that the Buyer shall carry out usually are already stablished in the Offer to Purchase. In fact, it is a common practice in Spain to condition the viability of the operation to the success of the Due Diligence carried out by the Buyer. So, if the Due Diligence leads to a different status of the property from the one stated by the seller, frustrating the transaction, the seller shall bear the cost of the Due Diligence carried out by the buyer. B. In the post-closing stage of the operation, in the event of
unexpected liabilities that the acquirer shall assume, the Due Diligence clause of the purchase agreement is key. If this liability is a result of missed information that the seller should have provided for the Due Diligence to be complete, the buyer may claim the amount to which the liability consists.
ILN Real Estate Group – Buying and Selling Real Estate Series
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