TAXES ON THE SALE OF SPANISH PROPERTIES

 A) VENDORS SPANISH NON-RESIDENTS

When  you,  as  vendor,  bought  your  property  in  Spain,  you  paid  the  taxes involved in the same transaction. These, apart from other general expenses like notary,  land  registry or  solicitor fees,  and others like the Transfer Tax,  and  the 3 % for  the  Capital  Gains retention (this last one, if the previous owners were non residents).

After 2007, the retention changed from 5% to 3%. So, now the Capital Gains retention for Vendors when NON SPANISH RESIDENTS IS OF 3 % of the price of the sale.

After the sale , as owners of Spanish properties, the vendor had  to  make  the following declaration of taxes:

–     The first year after completion: After completion, the Spanish government considers that you, just for the reason to own a property in Spain, have to pay the 0.50 % (approx) of the official price of the property. It is paid only once, and specifically the year in which you bought the property. This tax is a part of the General Income Tax.

–     The  following  years: You  have  to  make  the  proper  declarations  of  the Income Tax, and the Wealth Tax, with the famous 214 model (after 2008 only Income Tax because the Wealth Tax is cancelled-New Model 210). These taxes are calculated over the general incomes received, and from the official value of the property.

If you  have  not  made  any  of  these  declarations,  please,  feel free to consult us in order to instruct you how to do it.

I.-  From  01-01-2007,  the  Capital  Gains  system  for  non-Resident vendors is the following modifications:

–    Capital Gains is of 19 %-21%, over the net profit.

–    Retention is of 3 %, instead of the previous 5 %.

II.- In  the  past,  the  control  for  the  Capital  Gains from  the  part  of  the government   was   weak.                                      It   resulted    in   that, for sure,  hundreds  and   thousands   of transactions  in  the  area  were  made  with  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.

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.

– Third: If the Spanish customs detect a non declared value,  fines  will be double than in the past, and, in some situations vendors and buyers could   be   denounced   not   only   for   fiscal   actions,   also   for   money laundering.

B) VENDORS SPANISH RESIDENTS

FOR CAPITAL GAINS:

• They pay 19% – 21 % of the net benefit.
• 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.

BEFORE 2010 the  “Spanish  fiscal  residence” could  be  obtained  in  the Spanish Customs  showing  the  Padron,  the  escritura,  the Passports, water +electric bills, and the NIE number, confirming that he/she was living in Spain for more than 6 months each year.

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.

But, IN JANUARY 2010, has entered in force a new requirement from Notaries and the Spanish Customs from which they require a NEW CERTIFICATION from the Spanish Customs, confirming not only that the vendor is Spanish resident (living in Spain for more than 6 months during the year), also, that he/she has paid the taxes in Spain as RESIDENT. Usually, declaring with the Models 100, or 110.

Thus vendors who have been paying their taxes as non residents, with the Model 214, or the new 210, or simply not declaring anything, they will be considered as Non-Residents, and subjected to the payment of the 3 % retention for CG.

It means, that, after January 2010, vendors will be forced to pay the 3 % retention on the sale of their properties, if they do not proof that:

–          First: They are living in Spain for more than 6 months each year. This is proved with the “Certificado de Residencia Fiscal”.

–          Second:  They are declaring and/or paying their taxes in Spain as “Residents”. It means that they have been declared previously as non residents in their countries of origin, and paying the Spanish Income Tax as Spanish residents, with the models 100, 110,etc.

–           Third: They present a “Certification from the Spanish Custom Office” confirming they are subjected and joined to the Spanish resident System.

So, after January 2010, vendors who do not present this last certification from the Spanish Customs confirming they are subjected and joining the Spanish resident System, will be retained with the 3% for Capital Gains.

Before of this new regulation just with the Certificate of Spanish resident it was enough to avoid the 3 % retention. NOW is absoltely necessary to show the PREVIOUS YEARS TAX  DECLARATIONS as Spanish residents (at least the last 3 years), and the SPECIAL CERTIFICATION from the Tax office, confiming the vendor is joining the Spanish Tax system as resident.

IMPORTANT: BUYERS WHO DO NOT ASK VENDORS TO PROVIDE THESE DOCUMENTS, AND WHO DO NOT RETAIN FOR CAPITAL GAINS MAY BE RESPONSIBLE OF THE VENDOR’S CAPITAL GAINS PAYMENTS.

Click here for more info and check WHY THE SPANISH CERTIFICATE OF FISCAL RESIDENCE IS NOT ENOUGH TO AVOID CAPITAL GAINS RETENTION  

OTHER TAXES FOR VENDORS-PLUSVALÍA

Mainly, the PLUSVALÍA, is a tax over the increase of the value of the land in which  your property is, from  the buying and the selling time. It is the sole tax that  we  are  not  in  the  position  to  calculate  previously  to  the  sale,  because depends on specific criteria from the town hall. And only after completion they quote it in some municipalities.

In these cases, a retention from the buyer to the seller is enough to cover the payment of this tax. Overall when seller is leaving the country after the sale.

LAND REGISTRY INFORMATION

From September 2006, buildings or extension of buildings younger than 5 years will not be passed to the land registry.

Interesting?. Just click here for further information.