Selling Your Property In Spain; Taxes And Fees

 

Taxation is a complex issue, and it is always advisable to seek the advice of an accountant or tax adviser with comprehensive and up-to-date knowledge of the Spanish property tax rules.

 
Selling Your Home in SpainWhen you find a buyer for your property, you will first receive a reservation fee, at which time you must take the property off the market. The private purchase contract is then signed within a specified time frame and you will receive a full 10% deposit on signature of the contract. The private purchase contract will stipulate all the terms and conditions of the sale, including the final date by which the balance of the sales price must be paid and title deeds signed before the notary public.
 

3% Tax Retention for a non-resident vendor

 
Up until January 1, 2007, all buyers of Spanish property from non-resident owners were required to withhold 5% of the total purchase price and pay it to the Spanish tax authorities due to the non-resident seller’s capital gains tax liability. The new law has cut this retention to 3%. Non-resident sellers and persons who buy from non-resident owners must remember that they are required to make this retention and declare it to the tax authorities by filing tax form 211. If they do not do this, the tax authorities can charge the retention to the property itself.
 
As a seller, once the sale has been completed, you will therefore need to file your capital gains tax form 212, indicating the capital gain payable, within 30 days of the sale taking place. Should this amount exceed the 3% deposit, then you will be entitled to a refund of the difference, or alternatively if the capital gains tax is more, you must pay the difference within the 30 days.
 

Capital Gains Tax

 
On November 28, 2006, the Spanish parliament passed law 35/2006, modifying the 2007 regulations, with the outcome that, as of January 1, 2007, a non-resident owner pays 21% of the profit made when selling a Spanish property. The resident owner’s capital gains tax has been raised to 21% from 0 to 6,000 euros of gain, 25% from 6,000 euros to 24,000 euros and 27% from 24,000 euros onwards. The non-resident tax cut comes in response to a ruling from the European Union that the former rate of 35% discriminated against non-resident EU property owners in Spain, while residents were taxed at only 15%. These rates have now been made equal. Since January 2010, the new rate of 21% applies to all sellers, resident and non-resident, even if they are not EU citizens.
 
Until January 1, 2007, all buyers of Spanish property from non-resident owners were required to withhold 5% of the total purchase price and pay it to the Spanish tax authorities because of the non-resident seller’s capital gains tax liability. The new law has cut this retention to 3%. Nonresident sellers and persons who buy from nonresident owners must remember that they are required to make this retention and declare it to the tax authorities. If they do not do so, the tax authorities can charge it to the property itself. As a vendor, you will need to file capital gains tax form 211 on which the non-resident declares his capital gain or loss when he sells his Spanish property. On this form the non-resident seller applies for a refund, if the deposit of 3% is greater than the tax, or makes an extra payment, if the deposit is less that the tax due.
 

Long-term Owners

 
Long-term owners are no longer exempt from capital gains tax when they sell their Spanish property. Until 2007, owners who bought before December 31, 1986 were able to apply a reduction factor and had no capital gains tax at all. This total exemption was cancelled with effect of January 20, 2006. Now the long-term owners are also required to pay this tax. The original reduction is still in force, so they will pay only for the percentage of profits generated after January 20, 2006; however, they must pay something. The long-term owners applied a reduction factor of 11.11% per year of ownership, i.e. after 10 years, they had no capital gains tax at all.
 
This reduction factor was cancelled in 1996 so that only those who owned their property for 10 years before 1996 had a total exemption. Buyers between 1986 and 1994 had partial reductions. Even when the factor was cancelled, the early buyers retained their right to exemption. They retain their reductions up to January 20, 2006. After that they face capital gains tax of 21% on the portion of their profits generated after January 20. All sellers, both resident and non-resident, still have the right to use the inflation correction factor which helps to reduce their taxable profit.
 

New Andalusian Decree On Real Estate

 
The Andalusian government enacted the Decree 218/05 to support consumers in buying and selling properties. Briefly, the decree imposes the obligation on real estate agents to have one “data sheet” for each property on their books which must include the following data (Article 10) which you as the vendor must make available to the estate agent:
 

  • Address of the property.
  • General description of the property and of the building or development.
  • Price of the property.
  • Owner, land registry charges or encumbrances, possible rights of way, residential and constructed size, i.e. all of these backed up by a recent (no older than 3 months) land registry “nota simple”.
  • Date of construction, if available.
  • Percentage of the communal elements allocated to the property.
  • Note of the presence of electricity, water, telephone or gas supplies.
  • When visiting the property, there is a period of time during which the buyer will be able to process the required paperwork for completion.
  • Declaration as to whether the vendor can or cannot provide the following documentation: copy of by-laws of the community of owners, certificate indicating that there are no debts with the community, available insurances and guarantees, the property book (only provided by developers).
  • Certificate proving that council tax IBI is paid up to date.
  •  
    Article 12 provides for a mandatory document containing the right of the consumer to be given a copy of the property data sheet in Spanish. Articles 14 and 15 relate to enforcement of the obligations and to the fines imposed in the event of non-compliance, ranging from 200 to 5,000 euros (pursuant to articles 71.4 LEY 13/2003, DE 17 DE DICIEMBRE, DE DEFENSA Y PROTECCION DE LOS CONSUMIDORES Y USUARIOS DE ANDALUCIA).
     
    Contraventions which are considered “serious” may be subject to higher fines (5,000 to 30,000 euros) if the agent has deliberately or negligently ignored the obligations, repeats the offence (which is therefore considered habitual) or if such non-compliance affects a large portion of the market. With respect to developers, it must be remembered that failure to guarantee down payments is subject to a fine of 5,001 euros to 30,000 euros, depending on the size and gravity of the offence but fines can be as high as 30,001 to 400,000 euros.
     

    Non-resident Certificate

     
    This may be required by the buyer, not by you as the vendor. If the buyer is non-resident and the form of payment is not via a bank cheque which identifies the buyer, as the issuer, and the issuing bank, the buyer must in advance obtain a certificate of non-residence from the Spanish Ministry of the Interior; it can take up to two months for this certificate to be issued. If payment takes place abroad, by transfer from the buyer’s account in the UK to your account in the UK, this is perfectly legal, but it offers the Spanish tax authorities no control over the transaction for documentation purposes.
     
    The tax authorities therefore require the certificate with full details of the buyer and vendor and their respective banks outside Spain. If the buyer pays through a Spanish bank, a certificate of conversion of the respective currency into euros for the property purchase will have been issued, and the transaction will have Spanish documentation. If the sale takes place in pounds sterling or in any other currency outside Spain, this is also perfectly legal and acceptable as long as the cheque is presented when the deal is completed before the Spanish notary.
     

    Income Tax Declaration

     
    As a non-resident vendor you will normally be requested to submit the form 210 in which you have declared and paid property owner’s income tax as well as the Spanish wealth tax each year. The buyer may also ask to see the form 210 in which the imputed income tax has been declared. If your annual non-resident tax declarations are not up to date, these taxes may be deducted from the 3% retention amount by the tax authorities.
     

    Taxes and Fees

     
    As the vendor, the only tax that you may be liable for is the local “plusvalia” tax. However, you can negotiate for this tax to be paid by the buyer. All other costs related to the sale, for example the transfer tax ITP, notary fees and land registry fees are payable by the buyer. Other costs, however, may include legal fees and estate agent’s fees.
     


    P.S. Please note, however, that this overview is no substitute for legal or fiscal advice from a qualified professional. When buying property in Spain you should always use an independent lawyer.