Tax aspects of the sale of property in Spain
What taxes must non-residents pay when selling their property in Spain?
According to the Spanish personal income tax regulations, non-residents who sell their property in Spain must file a tax return and pay tax on the gain from the sale of the property (Impuesto de Incremento de patrimonio de no residentes) or capital gains tax. The rate of this tax is 18% and the taxable base is the difference between the sale and purchase price, less a number of expenses related to the purchase and sale of the property. The following purchase costs are deductible: 7% real estate transfer tax, notary costs, registration costs, consulting and case administration costs. Agent's fees and legal advice for the sale of the property are also deductible. In addition, the purchase price is indexed according to the year of purchase (appropriate coefficients are published annually).
What are the particularities of paying Capital Gains Tax?
When executing the notarial deed of sale, the buyer must deduct 3% of the purchase price and pay it to the tax office on behalf of the seller, within one month from the date of signing the notarial deed of sale. Failure to do so will result in an embargo on the property by the tax office. This 3% of the sale price paid by the buyer constitutes the first payment towards the full amount of capital gains tax. The seller must calculate his profit within three months, making any necessary deductions, and submit a declaration to the tax office. Depending on the calculation on the return, the seller will either have to pay additional tax or receive a refund of part of the amount. An application for a tax refund is made when the tax due will be less than the amount already paid by the buyer of the property. All necessary documents - declarations and applications - are usually prepared and submitted with the help of a tax representative, who is a lawyer or a tax advisor.
Is it worth accepting an understatement of the purchase price?
It is very important to bear in mind that the lower the declared value of the property on the deed when buying it, the higher the capital gains tax will be when the owner decides to sell the property. Property transfer tax is 7% and capital gains tax is 18%. It is therefore best to consult competent professionals before buying a property, who can help ensure that the transaction is legally and tax-secure. Specialist help is also needed when selling real estate, and paying for their services reduces the tax base for calculating capital gains tax.