SPAIN Elvira Cuxart Fonolleda Lawyer FERNANDO SCORNIK GERSTEIN Avda. Diagonal, 407, 4º 2ª E-08008 Barcelona SPAIN Tel. +34 93 238 68 50 Fax.+34 93 416 05 87 IAG specialist group commercial property checklist 1.- Definition of Real Estate: It is considered to be a Real Estate Asset, the Land and all the goods that are incorporated to the land and cannot be separated from it without suffering damage. Also it is considered as Real Estate, the Administrative Concessions, the servitudes and other real rights attached to Real Estate Assets. 1.1.- Definition of Ownership: Ownership is the right to use and dispose of an asset without more limitations than those provided by law. The unencumbered full ownership (freehold) represents the maximum rights by which a piece of property can be attached to an individual or corporate owner, and out of this all-embracing situation different segments of the total ownership rights can be vested on third parties by means of the incorporation of other Real Estate Rights. 1.3.- Examples of some frequently used other Real Estate Rights: Right of Use: It is the right to make complete use of a Real Estate Asset belonging to someone else without modifying its qualities for a determinate period of time. Right of Habitation: Right to use a Real Estate Asset to live in it with the beneficiary of the right family only. Easements: It is the right to make partial use of a Real Estate Asset to for example have a way through the property (Right of Way), to bring water supply to a property (Right of Water), to have a view from one s own building through the neighbour property (Right of View) Right of Surface: The right to build a construction on a third party land and use the building for a determinate period of time giving the building back to the owner when this period has been extinguished. Guarantee Rights: a right to ensure the fulfilment of an obligation by means of the granting of a direct power on an asset, in case of a Real Estate Asset, a Mortgage
Right. This right authorises its beneficiary, in case of unfulfilment of the obligation, to ask for the sale of the property in order to be paid by means of the product of the asset. Acquisition Rights: Right of Option and First Refusal Right: Those rights authorise its beneficiary to acquire an asset. First Refusal right obliges to owner to communicate any sales offer and the right of the beneficiary to buy at the same price. The option grants a right of purchase on the property during a determinate period of time for a determinate price. 1.4.- Other rights on Real Estate Property: Leases. There are other rights that can be incorporated on a Property that are not considered real rights (jus in rem) but personal rights. Of these, by far the most common is the lease contract, quite protective for lessees in case of residential leasing, and more open to parties agreement in case of commercial leasing. According to the regulation in force, the tenant is expected to pay, on top of the rent, the quota part of maintenance expenses, the administration expenses, the quota part of janitor, watch keeper or other security services and the proportional part of the building running expenses (lifts, lighting, etc.) plus an indexation clause, normally linked to the consumer price index. This situation has considerably changed owing to market conditions, and one would expect to be offered a reduction (or a waiver) of some monthly dues in a commercial lease, or to obtain some degree of sharing with the landlord in the building running expenses. Besides the mentioned current expenses the tenant is expected to disburse as guarantee two months rent (one month in residential leases) which are deposited by the landlord with an official office, and also pay for the expenses of the contract which by common use are fixed at one further month rent. If we add to this that the rent is usually paid by months in advance, then the total outlay of the tenant at the beginning of a lease relationship amounts to one third of a year rent. Present market situation has somewhat redressed this by the common practice of deferring the collection of rent until some months have lapsed. Assignment of a lease is allowed by Law but generally prevented by contract. Maintenance and repair is a landlord s legal obligation, but Tenant is authorised to carry out urgent repairs. Costs thereon cannot however be deducted from the rent, unless a Court so authorises. Remedies are subject to the same deficiencies as any recourse to Court procedures,
these being comparatively long and cumbersome in Spain. It is therefore not unheard of that a landlord demands a third party guarantee (other than the tenant s two-month deposit) to cover the fulfilment by tenant of contractual obligations. The sale and leaseback as such is not specifically regulated either, nor is the leasing (or financial leasing arrendamiento financiero- as it is sometimes designated to differentiate it from a leasehold situation) contract, which are normally addressed as a straightforward sale and posterior lease (the latter being recordable in the Land Registry Office) or as a lease with an option to purchase after a certain period of time for a nominal (residual) value, also having access to the Land Registry Office. 1.4.- Coownership: Co-ownership is foreseen in the Spanish Civil Code, where a joint ownership in equal of different theoretical shares is exercised by two or more owners, the decisions as to administration thereon being adopted by majority. Each share or participation in a coownership can be separately sold or mortgaged, or the whole property by common consent of all the co-owners. At any time a co-owner can apply for the division of the property held in common or, if not practicable, for its sale and division of the proceeds. It is acceptable however to agree to hold in common one property over a period not exceeding ten years. A particular form of co-ownership is the condominium, situation in which parts of a building can be used privately and other parts are held in common. Another special form of co-ownership is the Right of Use by Turn of Real Estate Ownership that grants its owner the right to use within a specific period of time every year the real estate property. This right has to be incorporated by Public Deed and registered in Real Estate Records. 1.5.- Land Register: Changes in the ownership and charges of a property situation are recorded in the Real Estate Register, generally by means of deeds granted before a Public Notary. Contracts or documents signed exclusively by private parties do not have access to the Real Estate Records, except in very few cases. Plans of all the Spanish land are kept by another service Gerencia Catastral ( Land Survey ) which is a provincial body depending from the Finance and Tax Ministry. The two bodies, Real Estate Registries and Land Survey, have been historically insufficiently coordinated, the Registry suffering historically from a lack of exactitude in description and particularly on the surfaces of the recorded properties.
Also, certain Town Planning Plans have access to the Real Estate Registry. In general, administrative resolutions or agreements by private parties, which affect either the use of the Land or its building capacity, have now a clear access to the Real Estate Records. 2.- Purchase and Sale Contract: 2.1.- General Requisites: It should be pointed out that one of the basic principles of contract Law in Spain is that of freedom of both form and contents, with the only limitations of the provisions of Law, morality or public order, whenever the contract has the tree elements required, objeto (object), causa (cause), consentimiento (consent), which correspond with the agreement, consent (term) and consideration of the common law system. As a consequence there are no sets of rigid or predetermined contracts, and therefore any covenant meeting the three requisites above mentioned would be enforceable in Spain. However, the relative social impact of some property situations has led to substantial bodies of regulations being issued on the same. Apart from that any Purchase and Sale contract should mention identity of buyer and seller, identification of the object of sale and price as minimum requisites. 2.2.- A typical Transaction: Thus, in a typical transaction, it is not unusual to sign a private earnest money contract with a first down-payment (without the intervention of a Notary) until a substantial part of the price is paid at which time the public deed (in front of a Notary) is signed. The purchaser then proceeds to record his acquisition in the Real Estate Register. Mention should be made to the arras concept (earnest money) which in general is used to designate a deposit made by the purchaser towards a future purchase. The deposit is forfeited to the vendor if the purchaser fails to comply with the conditions of the contract at the agreed time (normally the payment of the bulk of the purchase price) and the vendor can rescind the contract if, before the agreed closing procedure is completed, he hands back to the purchaser a sum equal to twice the amount deposited. This should not be confused with the penalty clause for non-compliance in a fully confirmed contract where the payment of the price is in instalments. In this latter case, in spite of a quite extended practice of establishing the forfeiture of all amounts paid to the Vendor, there are well-established Court precedents to the effect
that the penalty clause is only effective up to fifty per cent of the instalments paid. Nevertheless there is nothing to prevent the granting of a Public Deed (in front of a Notary) at the very early stage of a transaction, thus securing the access of the acquired right to the Real Estate Records, and ensuring thereby the full legal protection of the purchase. The so-called preliminary contracts to a purchase and sale (option to purchase, purchase subject to condition precedent or condition subsequent) can be recorded in the Real Estate Records, provided these are granted before a Public Notary. 2.3.- Formal requisites: To seek Land Registry protection it is necessary to grant the Sales Contract in Public Deed before a Public Notary. Public Notary obtains information from Registry and Town Hall direct on Ownership and Charges situation, Municipal Taxes, and from Land Office on the drawings of the property, surface, Both vendor and buyer have to be identified by Notary by their passports or identity cards and if they represent a Company they have to bring original copy of its appointment as representative of such Company. In case of sale of residential premises the permission to live in such building (Cédula de Habitabilidad) has to be brought to the Notary. In case that the property is part of a Co-ownership a Certificate in the sense that the Common Elements expenses have been paid should be contributed. In any case of sale of a real estate property vendor has to bring last land tax receipt. 2.4. Financing: The banking system (and within it, the Savings Banks Cajas de Ahorros -) are the prime sources of finance for real estate acquisition, and the mortgage virtually the sole instrument used. Loans secured by mortgage can be embodied in endorsable bills of exchange (hipoteca cambiaria) or other negotiable securities (cédulas hipotecarias, obligaciones con garantía hipotecaria). The property finance lease is in Spain instrumented by way of purchase by the leasing institution which leases out the property to the final purchaser, with an option to purchase at the end of the period for a nominal cost. Personal loans have generally a higher cost and real estate investors would have
recourse to them only as overdraft facilities, albeit these can also be mortgagecovered. Long-term conditions with building companies allow promoters to obtain additional financing at a relatively low cost. These terms are often softened by the fact that the certificates of work (statements of work performed, duly quantified, and usually countersigned by the promoter s architect, and/or the owner s) are easily discounted by banking institutions. Promoters also seek finance by the sale against drawings (venta sobre plano) which is the object of detailed regulations in Spain (Law 57/1968). 2.5. Guarantees: 2.5.1.- Mortgages: The most relevant point with regard to Mortgages in Spain is that, contrary to the general rule in Contract Law (freedom of form and substance) a mortgage to be valid as such needs be granted in front of a Notary and recorded in the Real Estate Records. Otherwise the document fails to attach the land, and its only use is as evidence of the existence of a personal debt. Consequent with the need to record the mortgage, the contract itself should mention the total amount for which the property responds (therefore an estimate for legal fees and foreclosure expenses must be included, or the property will only cover the principal of the debt). The purpose is to inform any future acquirer what is the maximum financial liability attached to the property and therefore to allow him to calculate his exposure upon the acquisition. In effect, the system in case of foreclosure is that all changes of ownership or attachment subsequent to the mortgage are deleted, and the acquirer of a mortgaged property in a foreclosure proceeding is bound to respect only such titles, attachments or encumbrances as are recorded previously to the entering of the mortgage in the Real Estate Records. Another element of importance to be mentioned in the mortgage deed is the amount for which the property will be offered for sale at public auction. Naturally, the lower the amount, the greater the interest and the potential for bidders in the auction and therefore the quicker the credit is satisfied. In connection with speed, there is no satisfactory mortgage foreclosure substitute for the Court in foreclosure procedures. Royal Decree 290/1992 tried to simplify the rules for an out of Court foreclosure system where Notaries are a key element of the process. The fact is that still a number of situations arise in which the defendant has the right to appeal to the Court keep this
system largely unused. In strict correspondence with the formalities for establishing a mortgage, its discharge must be granted before Notary and recorded in the Real Estate Register. 2.5.2.- Bank Guarantees and Comfort Letters: The system of bank guarantees is extensively used in Spain to cover the non-fulfilment of obligations in Real Estate transactions, for late deliveries and in general to substitute the performance bonds. Insurance companies also provide a system of guarantees, but these are not normally on first demand. Bank guarantees are also frequently used to cover rent payments (usually for one year) in lease agreements. Personal guarantees would only be exceptionally accepted. Comfort letters are not much used in Spain except between non-resident companies when these are a part of their corporate cultures. 2.6. Warranties: A diligent purchaser should carry out a careful due diligence of the Real Estate Records and, whenever possible, obtain a certificate issued by the Registrar. Satisfaction as of valid title duly recorded on the Vendor side, besides the granting of Notarial deed of sale is a normal condition for closing a Real Estate transaction. A vendor would normally seek protection by not granting the sales deed before a Notary until a substantial part of the price is paid, and the remaining amounts secured in some way. The usual form of security for the outstanding price is the condición resolutoria explícita which effect is to record in the Real Estate Records the right of the vendor to cancel the sale if the outstanding price is not paid. The payment of the outstanding price is evidenced either by a statement of the Vendor before a Public Notary or, when the deferred price is represented by bills of exchange, by producing evidence of payment thereon (usually by the purchaser exhibiting the original bills in his possession). This procedure however increases the tax cost of the transaction, as the deferred part of the price is charged with a 1% tax for its constitution and 1% for its cancellation, together with its constitution and cancellation Notary and Land Registry Office fees. A purchaser should seek protection mainly by examination of the Real Estate Records and from the Town Hall authorities, which are also bound to provide information about Town Planning regulations applicable and building potential of properties within their Municipal boundaries. The Law however provides the purchaser with the right to obtain either a reduction in price of the rescission of the contract for undisclosed defects, plus
damages in the case of misrepresentations by the vendor, within the general frame of the Civil Code Sections dealing with purchase and sale contracts in general. Hidden defects would normally only apply to the state and condition of a building or the status of planning permission thereon, and one would expect a diligent purchaser to demand specific representations from the Vendor on these points (besides any examination he may have carried out on its own). The opinions on title in Spain are substituted by the Certificate of Ownership and Encumbrances (Certificado de Titularidad y Cargas) issued by the relevant Registrar and the communication on the title and encumbrance situation of a property sent by the Registrar to the Notary before the execution of any Property Transfer or Encumbrance Deed. No title insurance policy is generally available in Spain. 3.- Acquisition Limitations: 3.1.- Land Use Planning and Other Government Rights: The planning permission system in Spain is organised basically at the Municipal Level, although there are wider areas of planning. The primary competence for urban development planning lies with the local Town Halls, although the final approval takes place at an autonomous government level (Comisión de Urbanismo). Municipal planning is drawn up by means of the General Plan or Subsidiary Rules, which involve the whole municipal area and categorise the land within such area. In developing the General Plan or Subsidiary Rules both the Plan Parcial (for land to be developed) and the Plan Especial or Detailed Study (for urban land) can be drafted. Likewise, Special Plans can also be drawn up in order to protect land not to be developed. These are generally referred to as Planes Urbanísticos. Municipalities have the competence to grant building licenses against a tax (income from municipal building licenses is an important part of the budget). The Plan is initially approved by the Town Hall, announced for public comment, reconsidered by the Town Hall and sent to the Comisión Provincial de Urbanismo for final approval. Appeals can be made by interested parties before the Administrative authorities, and if rejected by these there is an appeal to a Court of Law which has the power (seldom exercised) to suspend the efficacy of the Administrative decision, which is otherwise executive irrespective the existence or not of appeals thereon. Some big Town Halls as Madrid and Barcelona also have planning authority delegated from their respective Autonomous Governments by means of the so-called Carta Municipal.
Competences in Town Planning legislation are shared between the State and the Autonomic Government. Applicable Law for all Spain is Ley del Suelo 20/2008 dated 20 th June. 4. Taxes: 4.1.- Corporate Tax: Corporate Tax is applied throughout all Spanish territory without prejudice of the special regimes for territory reasons and international Agreements. The legislation foresees a taxation for residents (Personal Income Tax for individuals and Corporate Tax for companies) and taxation for Non Residents (Both for individuals and Companies) that is to say, for those non-resident who obtain profits or capital gains in the territory or obtain earnings generated by a resident entity. A company is considered to be resident whenever it has been constituted according to Spanish Law, has its registered office in Spanish territory and has its effective management centre located in Spain. Resident entities are liable on the world-wide income and capital gains obtained, irrespective of the place where they were generated and the residence of the payer. The amount of the income obtained in the tax period, coincident with the financial year of the corporation, constitutes the taxable income. It includes the financial results, which can be corrected by the application of fiscal regulations. The general tax rate applicable is 30% of the taxable income (25% for small companies) and some tax credits can be claimed on Research and Development expenses and investments on the opening of foreign markets, environmental protection and investments involved with the commercial use of new technologies. The taxable income being negative, its amount can be offset against future profits during the following fifteen financial years, in the proportion considered appropriate by the company. No loss carry-back provisions apply. 4.2.- Taxation for Non Residents: Taxation on non-resident companies differs depending on whether the earnings have been obtained through a permanent establishment or not. A) Incomes obtained through a permanent establishment, the rate will be the current for resident corporate taxation (30% rate). Profits can be transferred abroad, provided that payment of corporate tax for the last financial year is justified. Such payments will receive the same treatment as dividend payments, i.e. withholding of 19% as a general
rule (In most cases, when the permanent establishment is held by a company domiciled in a EC country or in country who has signed a double taxation agreement with Spain the payment would be non subject to withholding tax). Three types of permanent establishments are identified: Establishments with continued activities, establishments with sporadic activities and establishments with an incomplete business cycle. B) Incomes obtained without a permanent establishment is taxed at a general rate of 24%. The capital gains are taxed at 19%, dividends and interests also at a 19% tax rate (In most cases, when the permanent establishment is held by a company domiciled in a EC country or in country who has signed a double taxation agreement with Spain the payment would be either non subject to taxation in Spain or would benefit from a reduced tax rate). In order to operate in Spain through a permanent establishment a non-resident entity is legally bound to appoint a tax representative resident in Spain. In the case of earnings obtained through a permanent establishment, the establishment will be considered as its tax representative which in some cases will be jointly liable with the non-resident entity for the payment of the tax. Taxation on income obtained by non-resident companies may be modified by the application of international agreements, which have priority over internal laws. A company resident in a country with which Spain has signed a Double Tax Treaty will benefit from the fiscal treatment established in such Treaty. A 3% withholding Tax applies on any sale of real estate located in Spain by nonresidents (either individuals or corporations) who do not operate through a permanent establishment assessed on the deemed sale price. The purchaser (be it a resident or not) is bound to pay to the Tax Department the amount withheld within one month and the vendor must declare the payable Tax (non residents income tax arising on the capital gain obtained by the sale) and deposit the difference within three more months. Should the 3% withholding exceed the total liability on the sale (19% on the capital gain roughly the difference between sale price less acquisition cost - obtained), the difference is refunded by tax authorities. 4.3.- VAT Tax: The Tax levies the delivery of goods and supply of services in commercial or professional activities. There is a standard rate of 16% (18% from 1 st July 2010) and a reduced rate of 7% (8% from 1 st July 2010), plus a 4% special reduced rate for certain goods of first necessity. Owing to the intimate relationship between Transfer Tax and
VAT in Real Estate operations, the application of VAT in this context shall be analysed in greater depth in paragraph 4.4 below. Irrespectively to the above to be noticed that under certain requirements, corporate restructurings involving the transfer of real estate located in Spain are neither subject to VAT nor to Transfer Tax. 4.4.- Transfer Tax: The situation with regard to Transfer Tax is complicated by the coexistence of two different taxes: the Transfer and Stamp Duty (Transmisiones Patrimoniales y Actos Jurídicos Documentados or ITP) and the Value Added Tax (VAT). To make matters worse, the collection and inspection of ITP has been transferred by the Central Government to Local Autonomous Governments as a general rule, whilst VAT is still very much the competence of the Central Government. With all the risks inherent to oversimplifications, the Transfer Tax (ITP) situation can be summarised as follows: in the sale of land the general rule is ITP (at 6% or 7% depending on the Autonomous Community) except when the land is sold by VAT taxpayers, and the land is used for commercial or industrial endeavours, where VAT at 16% (and not ITP) is paid if the land can either be built upon or has been prepared for building. Lease of land pays ITP, on a scale basis over the total lease price, except when used for parking spaces, open-air warehousing or exhibitions, etc., it is a subject to VAT (16%). Sale of buildings or any part thereof is generally subject to VAT for the first transfer (from whoever has the title vested on the land and building) and ITP for successive transfers, except whenever the building is going to be extensively rebuilt under certain requirements, in which cases the transfer would pay VAT and not ITP. However, if i) the Seller is a VAT subject ii) the transfer constitutes part of its professional or commercial activities and the purchaser iii) has the right to fully deduct the VAT paid, the parties will be able in any case to ask for the transfer being subject to VAT, both in the purchase of land and/or in the purchase of buildings or parts thereof. Transfer of residential properties are in almost all cases subject to Transfer Tax as the purchaser has not the right to fully deduct the VAT paid on the acquisition, thus entailing the VAT entails a non refundable cost for the purchaser. To avoid that, in Catalonia government has established by Law 25/1998 dated 31 st
December, a 2 1% reduced transfer tax rate for the case of a Real Estate developer acquiring residential property to be incorporated to his working assets and then sold in a maximum of five years. The VAT rate is the general one of 16% (18% from 1 st July 2010), except for residential property where the reduced 7% (8% from 1 st July 2010), rate is applicable. VAT is compatible with 1% Stamp Duty Tax applied on all Public Deeds that have access to the Property and Mercantile Register (irrespective of the fact that these are or not recorded there). Likewise, the purchase of a building, whenever subject to VAT, would also pay 1% (or 1 5% in special cases) Stamp Duty Tax, but not when subject to Transfer Tax (ITP), because this Tax excludes the Stamp Duty. Lease of commercial property is subject to 16% VAT, but lease of residential property pays Transfer Tax on a scale basis on the total amount to be paid over the duration of the contract (or, if the contract is deemed of indefinite duration, over three years). Leasing operations are subject to 16% VAT in all cases. The complexity of the situation is perhaps more evidenced in the case of taxation of Mortgages when the lender is a registered bank. In principle these transactions are subject to VAT, but declared exempt by its regulations. Subjection to VAT (albeit exempted by its regulations) implies non-subjection to Transfer Tax, but then the mortgage loan is subject to 1% Stamp Duty. The final comment on Transfer Tax should be a brief reference to the acquisition of shares which is exempt from any tax whatsoever, except when acquiring more than 50% of the shares (or once having such stake to increase it) of a Company which has more than 50% of its assets represented by Real Estate, in which case a 7% ITP is to be paid by the purchaser. 4.5.- Plus Value Tax: An important Tax on transfer is the Municipal Plus-value Tax, which is levied on official (cadastral) value of the land (excluding any buildings which may have been erected on it) at rates thereof increasing in respect of the number of years of ownership limited to a maximum period of 20 years being the Seller bound to pay such tax. 4.5.- Land Tax: It is a Tax on Real Estate Assets ( Impuesto sobre Bienes Inmuebles IBI- formerly
Contribución Territorial ), which is collected by Municipalities since January 1990. The basis is an assessment of the value of the land and any building thereon, and the Tax is levied at a minimum of 0,4% on urban estates and 0,3% on rustic estates. However, under some circumstances, Municipalities can increase these ratios up to 1,30% for urban properties and 1,22% for rustic ones. 4.6.- Special Tax on Real Estate for Non Resident Corporations: Special Tax on Real Estate owned by non-resident Corporations is in principle set out at 3% of the deemed value of the property for IBI purposes, although it can be yearly changed by Budget Law, and the tax return thereon should be filed (and paid) as of 31 st January of each year, unless a specific declaration of exemption has been obtained before. This Tax applies to corporations (excluding foreign sovereign states and their agencies, as well as International Organisations) who i) are not domiciled in a country which has a double Taxation Treaty (with disclosure of information clause) with Spain, ii) do not carry out any significant activity in Spain other than the exploitation of real estate, and iii) cannot justify the origin of the funds invested and the identity of their ultimate shareholders. 4.7.- Withholding Taxes: 4.7.1.- Corporate Tax: Entities subject to corporate tax are bound to withhold and transfer to the Treasury as a payment on-account of corporate tax, 19% of the profits on investments such as dividends and interest which will be satisfied to third parties. On 20 th April, October and December a prepayment of 18% of the total tax paid in the previous year has to be advanced (totalling 54% at the end of the year). For companies whose turnover exceeds 6.010.121,00 per annum, prepayment is in generals 21% of the accumulated current taxable income for the first three, nine and eleven months of the year. These withholdings and prepayments can be deducted in the corporate tax income declaration. In case they exceeded the final tax to be paid, there is the right to obtain a refund from the Tax Department. Individual entrepreneurs and legal entities, resident as well as non-resident, operating in Spain through a permanent establishment, are also bound to withhold a quantity of
the personal income tax in respect of employees, income from investments or income from professional activities. 4.7.2.- On Leasing Rents: Individual businesses and legal entities, residents as well as non residents are bound to withhold and transfer quarterly to the Treasury an amount of 19% of the payments made to third parties from leasing/subleasing of real estate for commercial purposes, except in the following cases: When the yearly rent does not exceed the amount of 900,00. When the owner is subject to Tax on Economic Activities (IAE) because of its activities of leasing and the cadastral value ( valor catastral ) of the real estate leased is higher than 601.012,00. 4.8. Tax on Construction Works: This tax is levied on construction works which shall be performed under licence issued by the Town Hall (almost all construction works must be performed under license). Tax basis is determined by the total amount of the construction works and tax rate, depending on the Town Hall, is between 2% and 4%. The developer of the construction works is bound to pay the Tax at the beginning of the works, according to its estimate final cost. At the end of the construction works the developer is bound to pay the difference between the tax paid according the previous estimation and the final tax, calculated according to the final cost of the works, if it is higher than the previous estimation or having the right to refund for the difference if the final cost is lower than the previous estimation.. 4.9.- Tax on economic activities: This Tax, collected and inspected by Town Halls, is levied on the mere fact of carrying out an independent economic activity in Spain, irrespective of whether or not profits are obtained. The Tax accrues from the commencement of activities although in the event of beginning or ending the activity it is prorated quarterly. Tax rates vary according to the activity carried out, the occupied surface, and the location of such activity.