TAXES INVOLVED IN 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, the 7% for the Transfer Tax, and the 5 % 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 0.25 % 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 %, 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% 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.