TAXES AND PAYMENTS FOR NON TAX RESIDENTS FOR PROPERTIES’ SALES
TAXES AND OBLIGATIONS FOR NON RESIDENTS
When you, as vendor, bought your property in Spain, you paid the taxes involved in the same transaction of the purchase as normal buyer. These expenses were, mainly, the notary and land registry fees, legal and solicitor fees, the Transfer Tax.
But, when you sale, there is a very important tax to be paid in Spain which is the CAPITAL GAINS. This tax passes the obligation to the BUYER to retain a percentage of the price to pay to the vendor, and to deposit it at the Spanish tax office. doing it in this way, the Spanish system have some amount on account of this taxes from the vendor, which is used as a guaranty on the fullfilement from the vendors obligations derived from the sale.
After 2007, the retention was reduced from 5% to 3%. So now the Capital Gains retention for Vendors when NON SPANISH RESIDENTS IS THE 3% on the selling price.
When you bought the property, as owner of Spanish property, you had declaration of taxes, EVERY YEAR, DURING THE TIME IN WHICH YOU WERE THE OWNER OF THE PROPERTY:
– Income Tax: After completion, the Spanish government considers that you, just for the reason to part of the General Income Tax.
– Wealth Tax: Mainly, the 0.2-0.4 % from the price of the property. famous 214 model , and after 2008, only exists the Income Tax for because the Wealth Tax is only for personal fortunes over 500.000 EUR.
If you have not made any of these declarations, please, feel free to consult us in order to instruct you how to do it.
– Capital Gains is of 19-21 %, over the net profit.- Retention is of 3 %
In the past, the control for the Capital Gains from the part of the government was very weak. official prices reduced from the real ones, with the intention to reduce the Capital Gains payments from the vendors, and the Transfer Tax, from the buyers. from the vendors, and the Transfer Tax, from the buyers. In order to control transactions which could result in illegal reductions of prices, between buyers and vendors, the control is extremely higher now than in the past.
But, being non resident in Spain, there is another tax that the buyer has to retain on completion of the sale to the vendor, this is what we call PLUSVALIA. This tax is a payment to the local Town Hall of the area, similar to the Council Tax, which is paid on the sale of the property. They way to calculate this tax is using determinate concepts as the years that the owner owned the property, and others like the cadastral value of the land where the property is placed, distance and use of public infrastructures, etc.
This tax is paid AFTER completion of the sale. And, if the vendor is non-resident, the tax office issue the bill in the name of the buyer. This creates high confusions in the market as buyers are forced to pay a tax whcih does not belong to them, and with the undesirable situation to claim to the vendors when, after the sale, have returned to their countries. In order to avoid these situations, the solution is calculate in advance the amount of the tax and to be retained from the price to be paid by the buyers in order to use it to pay the plusvalia after completion.
And, finally, being non resident in Spain, you have to pay the COUNCIL TAX of the year in which you are selling your property. Every year, the Council Tax office issues the bill for this tax in the name of the owner of the property on the 1st of January. So, even if you sold your property on the 2nd of January the bill would still come on your name. The tax office uses to send the bills for this tax from May-June-October every year.
Buyers and sellers may agree to pay this tax proportionally to the effective time that each one of them will own the property oever the year, but this must be agreed in the private contract of the sale from the very begining of the transaction. If this is not the case, the vendor will pay the total year in which the sale is done. In order to guaranty that this tax is paid, is recommendable to make the proper retention to the vendor from the price to receive from the sale .
So, when the vendor is NON-tax resident in Spain, on completion of the sale:
The buyer must retain the 3 % of the price for Capital Gains
A retention for Plusvalia must be made
A retention for Council Tax must be made
WHEN VENDORS ARE SPANISH TAX RESIDENTS
OBLIGATIONS AND TAXES ON PROPERTIES’ SALES
TAXES AND OBLIGATIONS FOR SPANISH TAX RESIDENTS
When the vendor is Spanish resident he pays also Capital Gains from 19-21 % from the net profit. As difference from non-resident there is not retention when the sale is made by Spanish residents. So, they do not have to pay the 3 % Retention on completion.
If they are selling their main residence, and they invest in another main residence in Spain in less than 2 years, they have 100% exemption of CG tax for the sale of the property.
If they are aged than 65 years old, they have 100 % exemption for CG tax for the sale of the property.
In order to verify the Spanish Tax Residence, it is used the Padron, the escritura, Passports, water +electric bills, and the NIE number. Also, and very important, the previous years declarations of Income Tax (model 100).
These documents will confirm that the owner was living in Spain for more than 6 months each year, so acquired the Spanish tax residence. It means, that, before 2010, a vendor could avoid to pay the 3 % Capital Gains Retention, if he showed a Certification made from the Spanish Customs confirming he was Spanish resident, called “CERTIFICADO DE RESIDENCIA FISCAL”. This confirmed that the vendor was living in Spain for more than 6 months per year.
So, when the vendor is tax resident in Spain, on completion of the sale: