Selling Real Estate in Spain and Its Tax Repercussions

 

Understanding the tax implications of selling a home in Spain is critical. In addition to the taxes that you, as the seller, must pay, the buyer may be required to post a tax deposit. Your NIE (Numero de Identidad de Extranjeros) will be required at some point during the sale, so be prepared.

 

It is important to understand Spanish property sales taxes thoroughly to avoid unexpected costs.

You can rely on our Spanish property attorneys for help with:

  • What taxes you will need to pay when selling Spanish property
  • How tax deposits for buyers work
  • When you will need your Numero de Identidad de Extranjeros (NIE)
  • Any possible tax exemptions you may be eligible for (e.g. the main residence exemption)

Any liability for UK Capital Gains Tax (including the rules around double taxation)

 

When selling a home in Spain, what are the taxes?

When you sell a home in Spain, you may be subject to two taxes: Plusvalia and Capital Gains Tax.

 

 

Plusvalia

To pay the local property tax, you must go to the Town Hall in the region where your house is located. It is based on the ‘Valor catastral del Suelo,’ or ‘rateable value of land,’ which is the growth in the land’s worth throughout the period you’ve held the property.

The annual growth in a property’s valour catastral has nothing to do with its market worth. In the wake of legal challenges, Town Halls can no longer recover Plusvalia if the value of the land sold is lower than when it was acquired. This implies that even if the property’s value has dropped after you bought it, you are still liable for plusvalia for the time it was owned.

 

 

Spanish Capital Gains Tax

Profits from the sale of your home may be subject to Capital Gains Tax if you are not a Spanish tax resident. Capital Gains Tax is still required even if you are a tax resident of Spain and the property is not your primary residence.

 

Spanish Capital Gains Tax is computed by comparing the purchase and sale prices you disclosed when you acquired the property. When a property sells for more than you bought for it, you’ve made a profit. You will be taxed on this gain, not the wholesale price.

EU and EEA non-residents will typically be taxed at 19 percent, whereas non-EU/EEA non-residents outside the EU/EEA will be taxed at 24 percent.

Before determining your Capital Gains Tax due, keep in mind that you may be able to deduct a variety of expenses from the gain. Expenses related to the sale, the cost of substantial renovations to the property, and an inflationary allowance are all deductible expenditures that might be claimed.

Residents of any EU or EEA nation that has engaged in an agreement with Spain to share tax information can claim a main home’ exemption from Capital Gains Tax since 2015. Residents of the UK may no longer be able to take advantage of this exemption in the future if Brexit impacts their country. For example, selling your primary residence to buy a new primary residence would be relevant.

If you’re a UK resident, you’ll also have to report the gain on your home country’s tax return. The rate and rules for capital gains tax in the UK will be used to calculate the tax due. Owed to a Double Taxation Treaty between Spain and the United Kingdom, you can deduct any taxes paid in Spain from any Capital Gains Tax due in the United Kingdom.

 

 

Withholding taxes on the purchase price for the buyer of a Spanish property

Non-residents and those who haven’t had a home in Spain since 1985 are exempt from paying taxes on the sale price, which is why you only receive 97% of what you’re owed when your property is sold.

Contrary to popular belief, this is not a tax but rather a levy by the tax authorities. When the tax authorities are satisfied that you have paid all your taxes, they will refund it. If you haven’t paid your taxes, they’ll hold the money. You will be reimbursed for any taxes you have already paid.

As a rule, the government will not refund your money for up to a year after you request it. The purchaser is responsible for making this payment to the appropriate tax authorities.

 

 

NIE is the shorthand for (Numero de Identidad de Extranjeros)

Your NIE (Foreigner’s Identity Number, or Numero de Identidad de Extranjeros) is your tax identification number in Spain.

You will most likely be asked to produce your NIE number on multiple occasions:

  • When you’re looking to buy or sell a home,
  • When establishing a bank account
  • Having to deal with utility companies
  • Purchasing insurance
  • Dealing with the Internal Revenue Service (IRS)
  • Buying and selling stocks, bonds, and other securities
  • Purchasing a vehicle

 

You may not have realised you required an NIE when you bought it several years ago, but you will need one to sell. It may be necessary for you to get this yourself, or it may be possible for someone else to do it on your behalf. The regulations governing NIEs are subject to change regularly and vary by region. As a result, when you contact us, we will tell you how this works and how much it costs.

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