What taxes do I pay when selling a property in Spain?
Capital Gains Tax
Capital Gains Tax is a tax levied on the profit made on the sale of a property. The profit is the difference between the registered purchase price (plus incidental costs of acquisition such as land transfer tax, notarial and land registry fees) and the sale price specified in the notarial deed of sale.
Any value or capital enhancing construction activities (eg. construction of a pool, Barbacoa, heating system) can are taken into account on presentation of the relevant invoices.
The percentage of capital gains tax varies for residents and non-residents:
In 2019 the capital gain taxes for residents up to EUR 6.000: 19%, 21% for EUR 6.000 – 50.000 and with a profit of more than EUR 50.000: 23%
For residents, there are two ways to be exempt from capital gains tax:
- Residents aged over 65 years who sell their principal residence in which they themselves have lived for the last three years need not pay any capital gains tax.
- Residents who invest the entire sale price in the purchase of a new property can also be exempted from capital gains tax, provided the property has been their principal residence for at least 3 years. If only a portion of the money will be invested in a new property, the amount of tax due shall be calculated pro-rata.
Non-residents from EU-States, Island and Norway are charged 20% in 2015 of the capital gains tax, in 2016 will be charged 19%. Non-residents from other states (also Switzerland) 24%.
If the seller is not a Spanish resident, the buyer must withhold 3% of the total sale price and pay it to the tax office. This will transfer the deposit to the capital gains tax. The seller is obliged to file a tax return based on the actual capital gain and an additional tax payment or a Client rebate which shall be calculated taking into account the 3% retained sum. In this regard it is advisable to consult a tax advisor because the Spanish tax authorities check certain parts of this information provided for property sales concerning non-residents and also enforces any subsequent claims by means of administrative assistance from other countries (this includes Germany).
This tax (land value tax) is charged on the increase in value of the land (suelo valor) from purchase to sale. The calculation of Plusvalía varies from community to community. The amount of financial burden can be queried before sale in the respective municipality (Ayuntamiento), or the SUMA. Basis for calculating the Plusvalía are the cadastral value of the land (Referencia Catastral suelo) between the purchase and sale of the property. The “Referencia Catastral” of your property can be found on the IBI-notification (property tax) or on the bank statement of the last IBI automatic debit.
What taxes do I pay when purchasing a property in Spain?
The additional costs when buying property in the Valencian region are about 12% of the purchase value. The costs are made up of the following taxes and fees:
Value Added Tax (VAT)
When you purchase a new-build property directly from builders or a construction company, this will incur Spanish VAT. Value added tax (VAT) on the property is 10% of the registered value in the notary deed (escritura publica).
Real Estate Transfer Tax (ITP – Impuesto sobre Transmisiones Patrimoniales)
If you buy a property from a private person, no VAT will be incurred, but there will be incurred a real estate transfer tax (Impuesto Transmisiones patrimonial, in short ITP). The amount of this tax is calculated differently in the various provinces and is, in the Valencian Community and the Balearic Islands for example, 10%.
The basis of the assessment is the notarised purchase price or – if higher – the known “Valor Real,” which is derived from the cadastral value and a community-specific factor. On this point it is therefore advisable to seek advice prior to purchase on the matter of the actual amount of land transfer tax in order to avoid unpleasant surprises.
Document tax or Impuestos de Actos Juridicos Documentados (AJD)
The documents tax is payable on the acquisition of a new property, as well as on setting up a mortgage to finance the property. The document tax is from 1.2 to 2% of the property value or the mortgage amount.
The purchase contract must be notarized by a notary in Spain in order to be registered in the public land register. The notary fees depend on the value of the property. As a guide, these can be about 0.5 – 1% of the purchase price.
Land registration fees
After the notary contract, the property must be re-registered with the Land Registry. Here, a fee of approximately 0.5% of the purchase price shall be incurred.
Legal and tax advice fees
We recommend that our customers always seek advice from a tax advisor and / or attorney. The advisors will represent your interests and check all documents before purchase so that you can be sure that you will not get any hidden surprises after purchasing the property. In general, the consultation will be approximately 0.5% – 1.5% of the purchase price. When sourcing a reputable and professional advisory body, we are happy to help.
What steps are required to buy a property on the Costa Blanca?
If you have found your dream home with us and have reached an agreement with the seller on price, follow these steps
Private pre-contract / reservation contract
In this private pre-contract all the details of the property acquisition is set and the buyer is usually obliged to pay a deposit of about 10% of the purchase price. In return, the seller shall take the property off the market.
Please note that under Spanish law this contract great importance. Unlike for example in Germany, acquisition of property can be effected without notarization and subsequent land registration. Whereas in Germany the property can only pass when land registration (known constitutive effect) has taken place, in Spanish law, property can pass at the conclusion of a private written contract. The Land Registry has only a so-called declaratory effect. Therefore, we place great value on creating for our customers legally sound (pre) contracts for the seller and the buyers.
Applying for a VAT number
Each purchaser of a property requires a Spanish tax number – the NIE. This number is required to inform the Spanish tax office of the taxes incurred and also to pay the same. The NIE is applied for at the local police station at the foreigners department. We help our customers apply for this tax number.
Opening a bank account
Payment of the purchase price on acquisition of a property is generally made via a Spanish bank account. Therefore, a bank account in Spain should be opened early on. We are also happy to assist you in this regard.
The so-called public contract (escritura de Compraventa Publication) must be certified by a notary which allows you to record the acquisition in the land register. On signing the notarial contract, the balance of the purchase price will usually be paid by certified bank check and in return, the buyer will receive the keys and thus complete legal ownership.
Payment of all applicable taxes
Following the notarized deed of sale, the new owner is obliged to pay all the necessary taxes. The deadline for this is usually one month after the conclusion of the notarized contract.
Entry into the land register
With the new escritura, the buyer will be registered in the land register as the owner of the property.
What annual ancillary costs are there with owning a property in Spain?
With the purchase of a property, the buyer shall incur the following annual additional costs:
The property tax (bienes de IBI- Impuesto inmuebles) is a municipal tax payable annually. It is levied on the cadastral value of the property and the province has the right to determine its own multiplier. In most towns and cities, the land tax is due for payment in late September / early October
Comunidad / Urbanisación
If the property belongs to a Community Association, the communal costs incurred shall be split between the member owners. The amount of this allocation is dependent on the size of the community and on maintained community services.
Each owner must pay its share of the municipal waste disposal. In general, the charge is payable in March or April of each year.
Electricity / water / gas / phone
These costs depend on the individual consumption of the owner. We will be happy to help you register with or change to another utility company.
Property owners in Spain may be subject to income tax declaration obligations for their property.
For non-residents in Spain this is true in principle! Even for non-rented property, non-residents have to pay tax on a notional rental value. The tax return for this should be submitted by December 31 of the following year and the tax calculated up to this point should be paid. We can gladly nominate a competent tax consulting firm for you to assist with the preparation of this declaration.
Since this information is only a summary, which corresponds to the legal position as at January 2015, we strongly recommend that you take professional advice – we do not assume any liability for the content of this information. We are happy to nominate for you a knowledgeable, German, English and Spanish speaking tax advisor to pinpoint your individual needs and takes action in accordance with the Spanish tax legislation.