Although it was introduced in September 2006 and came into force in July 2007, the new land law, Ley de Suelo, continues to have a significant effect on the Spanish property business.
Many in the industry have misgivings about the legislation. When Spanish companies recently published their 2007 results, many were forced to mark down the valuations of their portfolios because the new law clamps down on speculation. Land must now be valued as land and can no longer be valued as if it were developed already.
The first Ley de Suelo dates back to 1956, but there have been at least three separate land laws since then. The latest is the brainchild of the incumbent socialist party, the PSOE, which narrowly won a second term at the national elections early last month. Ley 8/2007, the most recent amendment, was passed after much legal, political and public wrangling.
The most important part of 8/2007 for investors are Título II and Título III, which have put the designated land types into two categories – rural and urbanizado (buildable), bringing an end to the debate about how land can be used by developers. Previously, there were three categories, the third being land for development, but that has now come under rural land.
The new legislation provides more protection for tenants – the previous land laws favoured the landowner. The new law also stipulates that 30% of land must be set aside for vivienda protegida, or social housing.
And the new Ley de Suelo proposes a new valuation system to ensure that valuations are not subject to speculation. Under this system, rural land, even if it is in the planning process, cannot be valued as buildable land until it is completely developed.
In tax terms, there has only been one major change in Spain: the introduction of Ley 16 on 4 July 2007, that was enforced on the 1 January this year. Although the law will affect nearly all of the business community, not just the real estate companies, it was introduced to change the accountancy system of companies in Spain. It targets operaciones vinculadas, or, loosely translated, transactions between companies.
“Operaciones vinculadas are a way of valuing a transaction,” says Juan Gallardo, a tax manager at STM Fidecs. “When you have a transaction between you and a member of your family, for example, that is considered an ‘operación vinculada’. That transaction is taxed. In principal, the changes are not huge for 2008 because the tax rate is the same as 2007’s rate.”
The Ley del Mercado Hipotecario was also introduced last year in an effort to reform the Spanish mortgage market.
