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Taxes when Selling Spanish Property

marbella-lawyers.com
2nd of May 2002

Capital Gains Tax (non-residents)

A non-resident seller is liable for payment of a 35% Capital Gains Tax on the profit of the sale of their property unless it was bought before January 1st 1.987. However, there are exemptions available for those who have owned their property since 1.994 and before. Also, the vendor can offset against the gain made on the sale other costs.

A vendor will be able to mitigate his tax exposure by three different ways:

Reductions on when the property was purchased

• Those who bought a property after the 31st of December of 1.994 will not be entitled to any reductions.
  
• Those who bought in 1.987 of after will enjoy of a reduction of 11.11% on the net gain for every year they have owned the property before the 31st of December 1996 after taking the first two years. This means that a seller starts benefiting from this reduction, his first 11.11%, if he bought in 1.994, 22.22% if he bought in 1.993 and so on.
  
• Those who bought before the 31st of December 1.986 will be pay not tax, as the cuttoff point is 1.996.
  

Reductions on the inflationary movements

This reduction is obtained by applying a percentage to the l purchase price, raising the original price to the level of the value of the peseta today. This inflationary correction factor is applied to the entire purchase price, as well as to all costs surrounding the purchase. Likewise, improvements and extensions on the property will have to be updated inflation-wise.

The correction factor to be applied will be the following:





Reductions on the inherent costs of the purchase, works done on the property and others.

• Costs of the purchase: these would include VAT or Transfer Tax, Plusvalía Tax (where paid by the buyer), Land registry and Notary fees, lawyer´s and real estate agent´s fees, where applicable.
  
• Extensions and improvements done on the property: These should not be confused with maintenance and conservation costs, as these are not deductible. In practice, there is no clear cut distinction between one and the other.
  

Examples of not deductible costs are repair or maintenance works, such as painting, repairs on heating systems, lifts, plumbing and so on.

Examples of deductible costs are the installation of iron bars, doors, double glazing windows and similar improvements on the property.

We've put together this Capital Gains Tax calculator so you can determine how much Cgt you will attract when you sell your spanish property.

Plusvalía Tax (Municipal Tax on the increase of the value of the land over the years)

From a little as a few thousands pesetas for small properties recently purchased to as much as a few million pesetas for larger estates purchased many years ago. This tax is calculated on the basis of two variables; ratable value of the property and number of years of ownership by the vendor. The market value or the sales price does not have an effect on this tax.

It is recomendable for the seller/legal representative to find out with the Town Hall the amount of tax they will demand.

Discuss this Article

• M Vaughan Says:

  Tue, Dec 30th 2008, 05:40

  Surely, the EU law reduced this unfair tax and Spain complied this year 2008 with the new law, therefore you need to update your site.

• Lawbird Lawyer Says:

  Tue, Dec 30th 2008, 10:57

  Dear Sir, You are absolutely correct. After a protracted process grounded on discrimination the European Commission forced Spain to equate the Capital Gains Tax for residents and non-residents alike leaving it at 18% as from the 1st of January 2007 not as from 2008 as you mistakenly write. We don't update old articles; we publish new ones with the new laws that are passed and we always include the date when they are published. The reason is that we have been publishing articles for over a decade and we can ill afford the time to amend each and every legal article every time a new fiscal law is passed, which occurs almost on a monthly basis as new laws are enacted every day and published in Spain's Official Law Gazette (BOE). What really matters is that the companys' lawyers are aware of the changes in law and are always up-to-date. In any case I confirm we will be writing a new updated article on this matter within the next weeks so as to avoid any further confusions in this important matter. Which is why it is a good idea to always ask a lawyer to confirm if the tax rates you've read in legal articles dating back years -such as the one you quote- are correct and updated. Quite often it will not be the case. Yours faithfully, Raymundo Larraín Nesbitt

• tricia Says:

  Mon, Jul 13th 2009, 15:14

  Do all pensioners have same rights when selling i.e Spanish and English etc? Does a pensioner pay tax when selling a property? If a pensioner has residencia, PADRON, NIE is this sufficient not to pay tax? Do they need to opt out of Ingles tax system and become fiscal tax resident in Espana? Kind regards

• Lawbird Lawyer Says:

  Mon, Jul 20th 2009, 13:00

  Dear Madam, Owners > 65 years old qualify for a CGT tax exemption on selling their primary dwelling in Spain (must be their main residence, not a second residence). Owners < 65 y.o. qualify for a roll-over benefit. They will not pay CGT taxed at 18% within the following 2 years subject to them reinvesting the sales proceeds in another property in Spain (or elsewhere) which must be used as their main residence (they must have lived in it the 3 previous years and wil lbe required to prove it providing conclusive evidence i.e. utility bills). On you speding more than 183 days in Spain you will become a fiscal resident and are subject to be taxed on your Worlwide income. This includes your UK pension, yes. A pensioner pays taxes on selling property, yes, Capital Gains Tax and Plus Valía tax with the exception above. Having residencia, NIE and Padrón makes no difference in you being liable to pay taxes on selling property. It will however affect your IHT bill. Being tax resident in Spain will make it unnecessary the buyer retains 3% of the sales proceeds on account of your CGT liability. In any case foreigners who live in Spain should join the Padrón: Embassy encourages foreigners to register on local ‘padrón’ Benefits of registering include tax reductions, access to social care and discounts 26.08.09 - Yours faithfully, Raymundo Larraín Nesbitt

• Jenny Says:

  Tue, Sep 15th 2009, 15:44

  Can you tell me please, if you have owned your property for less than 3 years when you sell (non-resident), are you liable to pay higher tax? By that I mean, is there a set number of years defined where if a seller has owned the property for less than that number of years (as a non-resident) when he/she sells, are they liable to pay higher tax?

• Lawbird Lawyer Says:

  Wed, Sep 16th 2009, 11:31

  Dear Jenny, No, it is not the case. You pay 18% CGT. Yours faithfully,

• John Connor Says:

  Mon, Oct 12th 2009, 00:32

  If I were to sell my property in Spain I understand I'd have to pay CGT. I live in the US now, so when I pay CGT in Spain, the US can't tax me on any of the money if I send it over here over a wire transfer, right?

• Lawbird Lawyer Says:

  Tue, Oct 13th 2009, 11:37

  If I were to sell my property in Spain I understand I'd have to pay CGT. I live in the US now, so when I pay CGT in Spain, the US can't tax me on any of the money if I send it over here over a wire transfer, right? Dear Sir, That is incorrect. In the case of UK citizens, with which I'm more familiar, they may have to pay CGT twice on selling Spanish property. Both to the Spanish Tax Office and also to the HMRC depending on how much is their UK tax rate. I'm unaware of the IRS but I suggest you query a US lawyer in the state where you live on this matter as you may be required to pay CGT twice (taxed on the difference in the US). Yours faithfully, Raymundo Larraín Nesbitt

• carole Says:

  Tue, Nov 10th 2009, 14:48

  i am non-resident in spain i brought holiday home in 2000.in2007 i brought a larger house but could not sell holliday home,i now have buyer for holiday home,can the profits and taxes be offset against property brought in 2007. yours faithfully carole

• Lawbird Lawyer Says:

  Tue, Nov 10th 2009, 17:51

  Dear Madam, You are querying in relation to post number 4? This will not be your case as it was not your main residence following your own post, it was a holiday house. The roll-over benefit wouldn't apply to you as it was not your main residence. Yours faithfully, Raymundo Larraín Nesbitt

• Sue Price Says:

  Thu, Feb 4th 2010, 13:05

  When I bought my finca it cost 42000euros. The valor catastral is now 39,847,89 pesetas. I make that about 239000 euros. Ihave extended the property to a large villa. What plusvalia would I be paying if I sell?

• Lawbird Lawyer Says:

  Thu, Feb 4th 2010, 13:24

  Dear Madam, You can request an estimation of the town hall where the property is located. You will need the original Title deed and the intended sales price and date of sale of the property. As a sidenote, I hope you registered the extension, otherwise your buyer may run into problems: Buying Property In Spain Part I. Buying Resale: Avoiding the Pitfalls - 31st January 2010 Quoting an excerpt: 2. Has the Property Been Registered Properly? It is commonplace that extensions on properties are unregistered at the land registry. You will only find out on requesting a mortgage loan when the bank either turns you down or else offers significantly less money than what you were expecting because the extensions remain unregistered i.e. a 4 bedroom villa which has only 2 bedrooms registered at the Land Registry. This problem can be easily overcome by signing a New Build Deed at the Notary and paying the associated local tax levied by the Town Hall for the extension. This deed is then registered and the property description is amended accordingly adapting it to reality. This ought to be done by the vendor prior to the sale, unless agreed otherwise. This case is especially true of rural properties. Other cases, such as illegal rural properties, may be fraught with legal problems i.e. the property had only been given a licence to build a small tool hut of 3x3 m2 to plough the fields and yet a villa has been built instead. Rural properties can be a legal quagmire and it is essential you retain a lawyer to act on your behalf and best advice you on the matter, from the very beginning. In other cases, for perfectly legitimate reasons, properties remain unregistered or they lack the Title Deed (escritura). i.e. property inherited from one generation to another. There are different legal ways to overcome this minor problem: Acta de Notoriedad or else following an Expediente de Dominio. Yours faithfully, Raymundo Larraín Nesbitt

• Senga Says:

  Tue, Feb 9th 2010, 20:46

  i live in the UK but we have a holiday apartment in Lanzarote which is in my husbands name only does this mean i have no rights to the property

• Lawbird Lawyer Says:

  Wed, Feb 10th 2010, 11:00

  Dear Madam, What nationality do you and your husband hold? Did did you marry in the UK? Yours faithfully,

• Paul Says:

  Thu, Feb 11th 2010, 10:38

  We bought a property in 1984 for the equivalent of 16.000 euros. We want to sell it to our son for a reduced price of 80.000 euros thought the real value is twice as much. Can you tell me if we will have CGT to pay and if so how much?

• Lawbird Lawyer Says:

  Thu, Feb 11th 2010, 11:24

  Dear Sir, The answer to your query is in the article which starts off this very thread: Taxes when Selling Spanish Property 2nd of May 2002 Capital Gains Tax (non-residents) A non-resident seller is liable for payment of a 35% (as from the 1st January 2007 this has been lowered to 18%) Capital Gains Tax on the profit of the sale of their property unless it was bought before January 1st 1.987. However, there are exemptions available for those who have owned their property since 1.994 and before. Also, the vendor can offset against the gain made on the sale other costs. A vendor will be able to mitigate his tax exposure by three different ways: Reductions on when the property was purchased Those who bought a property after the 31st of December of 1.994 will not be entitled to any reductions. Those who bought in 1.987 of after will enjoy of a reduction of 11.11% on the net gain for every year they have owned the property before the 31st of December 1996 after taking the first two years. This means that a seller starts benefiting from this reduction, his first 11.11%, if he bought in 1.994, 22.22% if he bought in 1.993 and so on. Those who bought before the 31st of December 1.986 will be pay not tax, as the cuttoff point is 1.996. Yours faithfully, Raymundo Larraín Nesbitt

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