Experience shows that property is a sound investment. A well-constructed property portfolio provides not only excellent capital returns over the long term, but also tax efficient income in retirement. Spanish Algarve Properties are able to provide specialist advice on investment property in the Algarve and Costa de la Luz.
If you would like to receive detailed information please contact us by email or telephone and ask for an Investors Pack. This includes an in depth analysis of investment property in the Algarve and investment property in the Costa de la Luz.
Many of our clients buy property overseas for their own use, retirement, investment or a combination of all three. The most important thing to remember when viewing property solely for an investment is to remove the emotion from the purchase and think only of the facts:
What kind of people is the area attracting? Is the area attractive to holidaymakers?
The central government has responsible plans for the Spanish and Portuguese Algarve. With strict rules in place to prevent over-development, the area already attracts the more discerning kind of tourist. A large number of international hotel chains have made significant investments already, demonstrating their commitment and confidence in the areas true potential.
What about the oversupply of property on the Mediterranean Costa's?
Strict planning rules limit development. This control restricts the supply and means that new investment property in the Costa de la Luz and Algarve is sympathetically added to the area. As a result, there is less competition for holiday lets and resale properties from an investment perspective.
What are the realistic indicators for growth in the area and the rental demand for both holiday and residential property?
The Algarve has always attracted plenty of northern European tourists and investors and in the media you will find much dedicated to the exciting new opportunities that this area has to offer. It has been an all year round tourist destination for many years and the growth here is continuing at a measured and sustainable pace.
Through our rental and property management company in Ayamonte - Spanish Algarve Services, we cater for all our investment clients needs and are achieving between 15-25 weeks rental a year depending on how our clients want to let their investment property in the Costa de la Luz or investment property in the Algarve.
How well connected is the area to the main local and international rental markets?
The local market for investment property in the Costa de la Luz and in the Algarve has been very strong for many years and several amazing cities are only a short drive from the coast. This includes Seville in Spain and Beja in Portugal. Many of the local people spend a great deal of time visiting the Algarve.
The Portuguese are quickly taking advantage of the favourable price differences between property in the Algarve and property in Costa de la Luz. In addition, northern Europe is extremely well connected through Faro and Seville international airports. You can leave northern Europe on Friday morning and be on the Algarve well before mid-day!
Do the low budget airlines fly there? How often?
Through Faro and Seville airports the international markets will never be far removed from the Spanish and Portuguese Algarve. With all the major airlines, budget or otherwise flying daily services, the competition for business keeps flight prices down and ensures solid communications links for the future.
What about the developers?
Spanish Algarve Properties have a strict vetting process for all developers that we work with. This includes an extensive checklist to ensure that everything is in place for peace of mind such as bank guarantees, planning permissions and building licenses.
Spanish Tax implications?
If you are looking at selling your investment property in the Algarve or Costa de la Luz, you will need to consider the current capital gains situation in Spain. Capital gains tax (CGT) for non-residents is 18%, but residents under 65 are partially exempt if they have lived in their principal home for at least 3 years and plan to buy another home in Spain within 3 years, in which case they are taxed only on the amount that was not re-invested.
- On 10 March 2006, the Spanish government passed the Personal Income Tax bill, which partially modifies the following tax laws: Corporation Tax, Non-Resident Income Tax and Wealth Tax.
- One of the most significant changes that will affect Non-Resident Income Tax in 2007 will be the significant reduction from 35% to 18% of the tax rate applicable to property transfers. It is also important to point out that the "Withholding Tax" will be reduced from the current 5% to 3%.
- In addition, the Personal Income Tax Bill establishes that Capital Gains arising from the transfer of their home in Spain by persons aged over 65 shall be exempt from the tax. However it should be noted that this is applicable exclusively to residents in Spain and is not extended to include non-residents.
- Income tax on rental income will be 24% (previously 25%).
- Non-residents have to make a tax return each year and pay a tax on - 'Rental Income' and 'Wealth Tax' based on the value of their wealth in Spain. Usually £2-300 per year. INI or Council Tax is about £200 per year.
Portuguese Tax Implications
- In accordance with EC tax law, Portugal has recently introduced measures to clamp down on the use of offshore tax havens. The abolition of the tax on bequests to resident direct family members, along with reductions in capital gains and corporation tax make Portugal one of the most inheritance tax-friendly countries in Europe.
- You are considered to be resident in Portugal if you spend more than a total of 183 days in Portugal per calendar year (cumulative, not consecutive), or if a "habitual residence" is available to you on December 31st of the relevant tax/calendar year and it appears that you intend to keep it and occupy it as your habitual residence. A person resident in Portugal is liable to Portuguese tax on worldwide income and gains. A person not resident in Portugal is liable to income tax on Portuguese source income, and to capital gains in respect of assets in Portugal.
- Portuguese income tax is levied on a sliding scale from 12% for the first 4,266 euros; with various incremental increases up to 40% for anything over 53,322 euros.
- Property tax varies from 0.7% to 2% of the fiscal value of the property, and is levied annually by the local authority.
- Inheritance tax was abolished in 2004. With the abolition of these taxes a Stamp duty with a flat rate will apply, there will be exemptions available for transfers to spouses, descendants and ascendants.
- Any questions that you have about taxation should be discussed with your lawyer who will be able to recommend a tax expert.