Not remembering the Tax Office when selling a property is a very common mistake among foreigners with properties in Spain. The tax office plays a big role in this type of transactions and it is important to have these expenses already foreseen.
If you want to sell your property and want to know what taxes are payable to the Spanish Treasury, keep reading.
In transfers of non-resident properties, the buyer is obliged to withhold 3% of the sale value and pay it to the Tax Authorities. The deadline is one month from the date of sale and it is presented through form 211.
This withholding is a payment on account of the tax payable by the non-resident on the gain obtained in the transaction.
This tax must be calculated by the seller himself and this is where a good advisor plays a very important role. The gain is calculated as the difference between the acquisition value and the transfer value.
Of course, when calculating this tax, the purchase price should be increased as much as possible and the selling price reduced as much as possible. How to do this?
Always following what is established by the Spanish Tax Authorities, the purchase price must include all the expenses generated by the purchase itself. That is to say, the costs of advice, notary, VAT or transfer tax, among others.
In addition, you can include expenses incurred during the period that you have enjoyed the property, such as renovations.
In relation to the sale, there are also numerous expenses that can be subtracted from the sale price, such as real estate costs or capital gains tax.
The aim is to minimise the profit as much as possible, as 19% capital gains tax is payable on the calculated difference. This tax is filed by means of a form 210 or the Non-Resident Income Tax.
The optimal result is to prove the capital loss, i.e., that the difference between what it cost you to buy the property and what you have gained by selling it, is equal to or less than 0. In these cases, a request is made for a full refund of the 3% withholding tax withheld after the sale by the buyer. The deadline established by the tax authorities for the refund is 6 months. Once this period has elapsed, if the tax authorities have not returned the amount due, interest for late payment will be included and added directly to the refund.
It can also happen that a profit is made, but 19% of that profit is less than the 3% withheld. In this situation, a partial refund of the withholding is requested.
Finally, if 19% of your profit is more than the 3% withheld, you have up to 4 months after the sale to pay the additional amount.
The tax authorities have 4 years to review the calculations and request additional information.
Another tax to be paid by the seller is the increase in value of urban land (IIVTNU) or better known as the “plusvalia municipal”. It is a tax established by each local council and is paid on the increase in the value of the land.
This tax has caused a lot of controversy as the Treasury used to charge it whether or not there was a capital gain. Today, thanks to the Supreme Court, operations where there is no increase in value will not be subject to taxation and it will be necessary to prove at the taxpayer’s request that no gain has been obtained.
Local Taxes (IBI and rubbish taxes) are municipal taxes paid annually by property owners. Although it is very common to negotiate the payment of this tax in a purchase or sale, the reality is that in case of doubt it should always be paid by whoever was the owner on 1st of January of the year of sale.
If you are thinking of selling your property, do not hesitate to contact Despacho Lamas.