SELLING
Taxes when selling
1. Capital Gains Tax (Impuesto sobre el Patrimonio) ( 3 % Retention of the selling price for No Residence.)
For this purpose you should have ready a copy of your latest Spanish Income Tax declaration (Declaración de la Renta) for residents or Form 214 for non-residents.
Capital Gains Tax is payable on the profits arising from any property sale in Spain whether you are resident or non-resident. However, different rates and payment methods are applied to residents and non-residents. Residents can also benefit from a series of deductions, which reduce or even exempt them from liability, that are not available to the non-resident seller. Both residents and non-residents are liable to pay Capital Gains Tax on their net profits. To calculate the net profits from a sale you take the original price you paid for the property, which appears on the title deed. Now, add to this all the expenses you incurred in the purchase of the property. Next, apply the official Inflation Correction Factor (Coeficiente de Actualización) to this sum. The resulting amount is now deducted from the price you have received for the property, along with any expenses you have incurred during the sales process, to give you a figure for your net profit. Non-residents pay 35% Capital Gains Tax on this net profit, while residents pay a lower rate of 20% as part of their annual Income Tax declaration. If you are a non-resident, remember that your buyer will have to pay 3% of the purchase price directly to the Inland Revenue to ensure that any potential tax liability is met. In the event that your actual liability is lower than this 3% figure you can claim a refund of the excess once the sale has been completed. To do this you must complete tax form 212 and submit it to your Tax Office within 90 days of completion. The refund should be made within 90 days. In contrast, if your actual liability amounts to more than 3% of the sales price you must complete form 212 and submit it to the Tax Office along with the amount you owe. There are a number of factors that can reduce the figure that the Inland Revenue considers as your net profit for the purpose of calculating Capital Gains Tax. Recent changes in Spanish legislation have complicated calculation of the reductions that are applicable, but the current situation for residents and non-residents alike can be summarised as follows:
If you had already owned your property
for over 10 years on 31st December 1996, in other words you bought your
property before 31st December 1986, you are exempt from paying Capital
Gains Tax. If you are a non-resident who qualifies for this exemption your
buyer will not be obliged to pay 3% of the purchase price directly to the
Inland Revenue.
2. Municipal Tax on Property Sales (Plus Valía) This tax is paid to the local administration ( Townhall ) and is based on the increase in the value of the land since it was last bought. Logically, as the beneficiary of this increase in value, the seller under the law takes charge of paying the Plus Valía. However, some Sales Contracts stipulate that the buyer is responsible for meeting this expense. This is an important issue during negotiations over the terms and conditions of the Sales Contract and it is essential to consult your lawyer before making any agreement on this point. If you finally agree to pay the Plus Valía you will find that it is based on the official value of the land, which is always lower than the actual market value. The tax is charged at between 10% and 40% of the annual increase in the value of the land. The exact percentage depends on a number of factors including the location of the property and the length of time between sales. Local authorities periodically carry out valuations of land and maintain up-to-date records in order to calculate Plus Valía charges.
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