If you’re planning on selling property in Spain, you should familiarise yourself with the tax implications. Both the seller’s taxes and any taxes the buyer may be required to pay as a deposit are included here (which comes out of the sale price you receive).
You should also be aware of the times during the sale process that your NIE (Numero de Identidad de Extranjeros) will be required.
You can avoid unpleasant financial surprises and plan ahead with confidence if you have a firm grasp on the Spanish property sales taxes that will apply to your transaction.
Registered Spanish real estate attorneys will help you with:
- How much tax must be paid when selling a Spanish home?
- Buyer Tax Deposits and Their Purpose
- When you’ll need your Foreigner Identification Number (NIE)
- Possible tax breaks for which you qualify (e.g. the main residence exemption)
- Any potential liability for UK CGT (including the rules around double taxation)
- Read on for more info about Spanish property sales taxes,
We can recommend lawyers to help with the purchase or inheritance of real estate in Spain.
Here is a list of commonly used legal terms in Spain, along with their English translations, to help you get around the Spanish legal system with ease.
Get in touch with our helpful, knowledgeable Spanish property lawyers in the UK for guidance on the specifics of selling a property in Spain, including any applicable taxes.
The Spanish Real Estate Transfer Tax
There are two possible taxes to pay in Spain when selling property: Plusvalia and Capital Gains Tax.
Plusvalia
If you own property in a particular municipality, you may be required to pay a local sales tax to the local town hall. Plusvalia is calculated by adding the increase in the land’s value (the “Valor catastral del Suelo,” or “rateable value of the land”) to the number of years you have owned the property.
The annual increase in a property’s valour catastral has nothing to do with its actual market value. In other words, you were once expected to pay plusvalia regardless of whether or not the property’s value had decreased since you bought it. However, due to legal challenges, municipalities cannot recoup Plusvalia if the land’s value at sale falls below its purchase price.
Revenue Tax on Capital Gains in Spain
Capital Gains Tax could apply to any money you make from selling Spanish property if you are not a tax resident of the country. If the property is not your primary residence, you must pay Capital Gains Tax even if you are a Spanish tax resident.
The amount of Spanish Capital Gains Tax you owe is determined by the difference between the purchase and sale prices you reported. The gain is the difference between the sale price and the original purchase price. You will only be required to pay taxes on this gain, and not the entire sale price.
Capital Gains Tax rates for non-residents within the European Union and the European Economic Area are 19% and 24%, respectively.
In determining your Capital Gains Tax liability, it is important to remember that certain expenses may be deducted from the gain. The costs of selling the property, the price of any major improvements made to the property (with receipts to back up the claim), and even the rate of inflation over the time period in question may all be deducted.
With effect from 2015, citizens of any EU or EEA member state that has signed a tax information exchange agreement with Spain are eligible for a “main residence” exemption from Spain’s Capital Gains Tax. For example, if you are using the money from the sale of your primary residence to buy a new primary residence, you would fall under this category. This exemption may be lost for UK citizens in the future as a result of Brexit.
The Capital Gain should be reported as part of your Worldwide Capital Gains, which you must file in the UK if you are a UK resident. UK Capital Gains rules and rates will be used to calculate the tax due in the UK. The Capital Gains Tax in the United Kingdom can be reduced by the amount of tax you paid in Spain thanks to the Double Taxation Avoidance Agreement between the two countries.
Tax payments made by buyers when purchasing a property in Spain
The buyer must pay 3% of the sale price to the Spanish tax authorities if you haven’t lived in Spain since 1985 and haven’t owned the property since then. You’ll get the remaining 97% after the sale is finalised.
Although it may seem like a tax, this is actually a retention by the government. This sum will be held by the IRS until they verify that you have paid your full tax obligation. If you filed your taxes and are due a refund, you will receive it. If you haven’t, the government can keep the money you owe in taxes.
To get your money back, you have to file a formal request with the appropriate authorities, and even then it could take up to a year. The buyer must fork over this sum to the government in the form of taxes.
NIE (Numero de Identidad de Extranjeros) (Numero de Identidad de Extranjeros)
Your Tax Identity Number in Spain is your NIE (Numero de Identidad de Extranjeros, literally your Foreigner’s Identity Number).
Your NIE number may be requested from you in a variety of situations;
- When making a real estate transaction,
- Create a new bank account
- Managing interactions with service providers
- Implementing a policy of insurance
- Tax administration
- Investing in or selling stocks, bonds, or other securities
- A Car Purchase
You may not have known you needed an NIE when you purchased, but you will need one in order to sell, if you made your purchase more than a few years ago. NIE regulations are subject to frequent and regional shifts. You may need to do this on your own, but others may be able to help you out. Therefore, when you contact us, we will let you know how everything is going and how much it will cost.
Do you need assistance selling a Spanish home contact us today?
