Taxes and costs when selling property in Spain

Withholding of 3% of the price

In property conveyance, obtaining a gain is considered as taxable income. The gain is determined by the difference between the conveyance value and the acquisition value.

When the seller is a natural or legal person that is not resident in Spain, the acquirer is under obligation to withhold a percentage of the purchase price, a percentage which is set by law and at this moment in time is fixed at 3%, and the acquirer must pay this sum to the Spanish Treasury within a maximum period of one month, by way of a down-payment for any possible increase in the seller’s equity.

When a loss of equity is produced or when the amount of the withholding is greater than the amount the seller must pay in Capital Gain Tax, a refund can be requested by submitting a specific form for this purpose to the Spanish Tax Office.

If the Spanish Tax Authorities do not challenge the values recorded in the statement or open an inspection, the withheld amounts (or those paid in excess) will be paid back in a period of approximately six to ten months as from the date of sale.

Nevertheless, for the Tax Authorities to authorise a refund, the tax payers must have submitted their annual income returns as a non-resident and be up-to-date with all payments.

As part of the services we provide to the seller, and at no additional cost, at Vicente & Otaolaurruchi we will submit your tax returns, request any refunds that may apply, and represent you before the Tax Authorities should they require any further information.

Plusvalía Tax

This is a municipal tax that is calculated on the basis of the increase in value of the land on which the property is located. The law holds that the Plusvalía Tax must be paid by the seller. 

The legislation regulating this tax has recently changed due to a ruling by the Constitutional Court which declared the previous method of calculation unconstitutional.

Currently, no “Plusvalia Tax” is generated when the sale of a property is not profitable, this being understood as the sale value (price) being equal to or less than the acquisition value at the time, without taking into account taxes and deductible expenses.

The Royal Decree-Law regulating the tax establishes two methods for calculating the tax base, being the taxpayer able to choose the one that suits them best.

Objective Method: The cadastral value of the property will be multiplied by coefficients that will be established each year and that will evolve according to the real estate market. 

Real Method: The difference between the sale price and the purchase price of the property is calculated and the percentage of the cadastral value corresponding to the value of the land is applied to this difference.

It is not a thumb rule but usually the objective method turns to be a lot cheaper in most occasions. 

Lawyers’ fees

In general, they come to 1% of the sale price, plus current VAT. These fees must be agreed at the start of the contractual relationship and not increase throughout that relationship, except where the initial assignment undergoes considerable modifications at the client’s express request. The lawyer’s professional fees are an expense that can be deducted when calculating the Capital Gain Tax associated with the sale.

Our lawyers do not charge by the hour or number of meetings, for documents and communications sent, or for visits, as experience has shown us that, in those cases, if we applied the rates recommended by the Bar Association, the costs for the client would rise considerably. Our minimum fee in any case would amount to 1.500 Euros plus VAT.

Estate agents’ fees

These usually range from 4% to 7% of the sale price, plus VAT at the current rate of 21%. The estate agent’s commission is paid when the deed is signed, once the total sale price has been received. This cost can also be deducted when calculating the taxable Capital Gain.

Capital Gain Tax

As we have already mentioned, the gain obtained through property conveyance is considered as taxable income. The current rate is 19%, which is applicable to the net gain (once deductible expenses have been considered)

The net profit is basically obtained by calculating the difference between the purchase and sale prices, which the deductible expenses will already have been added to and subtracted from, respectively. Application of a corrective index (indexation) to the resulting purchase value was abolished as from 1 January 2015.

For the sale of property acquired before 31 December 1994 there is a special transitional arrangement that enables certain reductions to be applied when calculating the CGT. You can read more about it in this entry of our blog

Energy performance certificate

In compliance with European directives on energy and environmental issues, the owners of existing homes must provide potential buyers with the property’s energy performance certificate, which must be issued by a qualified technician.

The following, among others, are excluded from this regulation’s scope of application:

a)    Properties with a useful surface area below 50 m².

b)   Properties that are used for less than four months a year, or which are inhabited for a longer period of time, but whose energy consumption does not reach 25 % of what its use would normally be for a whole year.

Do you still have queries on this subject? Have a look in the FAQs about sale of real estate in Spain.

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