TAXES WHEN YOU SELL

There are 2 taxes due as a vendor when you sell your property.

 
Plus Valia

Plus Valia is a local tax calculated as a percentage of the difference in the increased value of the land from when it was last sold. The calculation is based on the rateable value (not on the real value) of the property and is a one-time payment charged when property changes hands.

Each Town Hall defines the percentage and it varies according to municipality.

Capital Gains Tax

Capital Gains Tax varies according to your status.

There are certain occasions when there will be no Capital Gains Tax to pay when you sell your property.

1.      If you are 65 or over and have lived in your principal place of residence as a resident of Spain for more than 3 years

2.      If you are under 65, have lived in your principal place of residence as a resident of Spain for more than 3 years and invest the total of the sale proceeds of your home into another home.

3.      If you bought your property before 31 December 1986 whether you are a resident or not, although as from 1 January 2007 there will be some tax to pay but calculated after 1 January 2007.

If you don´t fall into those categories you will have to pay Capital Gains Tax at 18% whether you are resident or not.

So what if the non-resident “takes the money and runs”? The Spanish Tax Authorities have covered themselves by forcing the buyer to pay them 3% of the total declared purchase price on account of the vendor´s tax liability.

The non-resident vendor then has to either reclaim tax if he has overpaid or make up the difference if he has underpaid.

Let us quote an example:

Say the profit on a property is 100,000 Euros with the sale price of 300,000 Euros. The non-resident would have to have 3% of the 300,000 Euros withheld and paid over to the Tax Office. That would be 6,000 Euros, but his real tax liability would be 18% of 100,000 Euros or 18,000 Euros.

If the profit on a property were 30,000 Euros on the same property of 300,000 Euros, the real tax liability would be 18% of 30,000 Euros or 5,400 Euros so he would want to claim back the difference between the 9,000 Euros and 5,400 Euros (therefore 3,600 Euros), which was retained by the buyer and paid to the Tax Authorities.

Now it gets a bit more complicated. To the initial purchase price you can all your purchase costs, any fixed improvements to the property, such as air-conditioning, a pool etc, and depending on what year you bought the property you can take a percentage of inflation into consideration, thereby reducing your Capital Gains Tax.

If you would like to obtain approximate quotation of your Capital Gains Tax liability, please contact us. Be sure to have a copy of your Escritura (Title Deeds) or solicitor´s completion statement, date of purchase and sale price.