There is often confusion over costs that accrue to the seller
A) The tax on the gain from the sale
The gain obtained from the property will be taxed from 21% to 27%. The difference between the purchase and sale price, as recorded in the public deeds, will be the base for this calculation. However, this is not completely true as there are determined values and multipliers that can be deducted. This way, the additional costs arising from the purchase, such as the ITP or estate agents commission, can be calculated based on the purchase price thus reducing the tax value. Thus, roughly, we can calculate the tax amount from the difference between the prices you sell for, minus the price you bought the property for. This difference is taxed at 27%.
The retention of a 3% is for the sellers expenditure seen as a kind of down payment on that amount.
Retention in the case of non-residents
Sellers who do not live permanently in Spain do not leave after selling before leaving a new address and without paying the sales tax, the tax office uses the following list: Do not ask the seller to enter the payment but the buyer. The buyer is required to retain 3% (retention) of the purchase price and not give it to the seller. The buyer pays this amount to the Spanish tax office as a sort of advance payment for the tax liability of the seller. (But do not worry: we will of course take care of these formalities for you).
Therefore, the seller does not receive 100% of the purchase price agreed but 97%. The buyer pays the amount agreed but in a number of payments resulting from the amount of the purchase price.
In the case that the retained amount exceeds tax payable, you can reclaim it from the tax office by the corresponding tax declaration.
Does retention exist for residents?
Those living permanently in Spain, residents, do not have to pay 3% retention at the time of signing of the deeds, if they are also residents for tax purposes. The emphasis here is on the term “tax”!
It is not only necessary to be registered in Spain as a resident but also to have made tax returns as a primary resident in Spain for at least 3 years. (Beware! There can also be confusion here as there are also resident tax declarations which cannot be formed as “principal tax returns”. These will not be recognised). You should be able to demonstrate to a notary that you are resident for tax purposes by using a tax office form, called the “Certificate of tax residence of residents”.
Tax exemption for tax residents
– If the owner of the property is over 65 years of age and is a tax resident no tax will accrue at the time of sale of the residence. Note: in the case of the seller owning more than one property this rule will only apply to the habitual residence.
– If the house sold is the only property belonging to the seller (regardless of the age) and is used as habitual residence, the money earned from this sale is free from tax as long as it is used to buy another property in Spain within two years.
B) Surplus value (Plusvalia)
This tax is called in short “Surplus” (Tax on increased value of land). This tax is collected by municipalities; it is a one off payment and only takes into account the size of the plot, the location and how long the property has been there. It does not take into account any existing building on the site.
C) Property IBI taxes
This tax accrues at the end of summer / autumn. Even if the property is sold in January, the seller is still required to pay the corresponding IBI for the full year.
D) Corrective action of property documentation
The seller is required to sell the property with the correct documentation. However; frequently new builds have not been fully registered. We can usually arrange full registration before the signing the deeds, charging the costs incurred to the seller.
Energy efficiency certification
The Spanish government introduced the certificates for anybody selling or renting a property.
A certificate must be issued by an architect, engineer or a qualified technician who is authorised to undertake building projects and thermal installations for buildings. Not all architects and engineers are certified. The professional must belong to an official provincial association and have a membership number.
The price should be between €200 and €500 Euros per home.
E) Cancelling a mortgage
If you have a mortgage on the property, cancellation costs will accrue with your bank. Your bank will inform you in more detail of the exact cost.