Expenses when selling a property in Spain
When you sell your house you will need to pay tax to the Hacienda or tax office for the profits you will have made on the sale of your house. The amount you pay and how you pay them will depend on which of the following categories you fall into.
You are required to pay 20% on the profit from the sale of your house (the difference between what you declared when you bought the house and what you will declare when you sell the house).
On the day that you complete on the sale you will be charged a flat rate of 3% on the full amount of the declared sale price (the amount shown in the esctritura or title deed). This amount will be deducted from the final money you will receive when you visit the Notary to complete on the sale of the property. (Buyers from non-resident sellers are required to withhold 3% of the total purchase price and pay it directly to the Spanish Tax Agency, usually through their lawyer or asesoria).
This 3% paid on the day of completion is a part payment of the amount of 20% to be paid on the profit made on the sale. You will be required to pay the remaining amount of the 20% on the profit when asked to by the tax office.
All non-residents are required to pay a 3% retention on the day of completion.
If the 20% on the profit works out to be less than the 3% on the full amount, it might be a good idea to ask your lawyer or asesoria to make an application to pay the 20% and then he can claim back the 3% already paid and just pay the lesser amount of 20%. He has one month after completion to make this application.
To qualify and be treated as a Spanish resident requires you to have been living in Spain for 3 or more years and to be able to prove this, by providing the previous 3 years tax returns, an
escritura in your name that is more than 3 years old or a certificate from your local town hall to say that you have been registered as living there for more than 3 years. You will also need
to prove that you intend to continue to live in Spain by providing a contract to purchase a new home or a rental contract for at least 6 months. Your lawyer or asesoria will apply for a
certificate (O2) from the tax office to say that you qualify to be exempt from the normal retention of 3%.
In this situation you must pay 20% tax on the profits from the sale. This amount is not paid on completion of the sale, but is declared in your following year’s tax declaration. If within 2 years of the sale you invest all of the proceeds from the sale into another primary home you will not have to pay this tax. If you do not then you will pay 20% on what is not spent on your next home.
If you are selling a second Spanish home you will be required to pay 20% on the profit. Rollover credit is not available for any other house than your primary residence.
Foreign residents who are aged 65 and over
If you are selling your primary residence you are not liable to pay capital gains tax. Again you will need to prove that you have lived in Spain for 3 years or more and intend to continue living here. If you intend to go back to your home country you pay 3% tax on the full declared price on completion and then in your next years tax declaration you can claim this money back from the tax office. If you don't decalre your taxes here, but can prove that you earn less than 11,200 euros per year, then you are exempt from paying Capital gains tax.
In addition to capital gains tax, the plusvalía tax is also paid by the vendor in this area.
The plusvalía tax is based on the increase in the value of your land from the date you bought it to the date you sell it and it is calculated by your local Town Hall.
Each Town Hall determines the amount of plusvalía to be levied on each house sale. The original purchase price and the sale price of the property do not have any effect on the plusvalía tax.
The plusvalía tax is calculated according to the rateable value of the land and the number of years it has been in the ownership of the vendor.
For an indication of the amount of plusvalía tax you are likely to have to pay, you need to go your local Town Hall with your Escritura and an IBI receipt for your property. They will be able to tell you the tax accrued if the property was to be sold on that date.