Which costs and taxes will the seller be faced with

1.- Plusvalía tax (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana)

It is a local Spanish property tax levied on the increase in the value of urban land when a property changes hands payable by the vendor for the years the seller owned the property .

It is payable directly to the local Town Hall (Ayuntamiento) of the municipality where the property is physically located

2.- 3 % NON RESIDENT TAX OVER THE VALUE OF THE SALE OF THE PROEPRTY :

When the seller is a non-resident in Spain and sell a property, the buyer is legally required to withhold 3% of the total purchase price and pay it directly to the Spanish Tax

This 3% retention is not a final tax; it serves as an advance payment toward your potential Capital Gains Tax (CGT) to prevent non-residents from leaving the country without paying their tax obligations.

How the “3 % Retention “Process Works

At the Notary: When signing the public deed of sale, the buyer pays the seller 97% of the agreed purchase price and holds back the remaining 3%.
Buyer’s Deadline: The buyer must deposit this 3% with the tax authorities within 1 month of the sale date, using the Tax form model 211. The buyer must provide the seller with a copy of this paid form as proof.
Calculating the Final Capital Gains Tax

Non-residents face a flat 19% tax rate on the actual net profit (capital gain) made from the property sale.

Net Profit = Sale Price (minus selling expenses/fees) – Original Purchase Price (plus original purchasing costs, taxes, and home improvements

Filing Your Tax Return (Two Possible Scenarios)

The seller has a strict timeline of 4 months from the sale date to file the final non-resident tax return using Model 210 on the Tax Agency Portal.

Scenario A: Your 19% CGT is higher than the 3% retention. The seller must pay the difference to the Spanish Tax Agency when you file Model 210.
Scenario B: Your 19% CGT is lower than the 3% retention (or you sold at a loss). The seller is entitled to a tax refund of the difference from the Spanish government

EASYLEGAL WILL BE HAPPY TO HELP YOU TO PRESENT YOUR TAX RETURN

3.- Latest service bills ) like for water, electricity and gas) , Local tax ( IBI) and community fees

Plus all the before mentioned documents ( Energy Efficiency Certificate, Certificate of Occupancy, Certificate of being up-to-date with the Community of Owners) if there are not available or have expired the date of the sale.

Necessary documentation to sell a property

In order to sell a home, it is necessary to have updated documents related to it and its owners.

1.- Identity Documents — Passports and NIE Number

The identity document serves to identify you as the owner and seller of the property. You will have to include this number in all the documents that are going to be signed during the sale process.

2.- Property title or deed of the Housing – “ Escritura publica “

It will be necessary to have documentation that proves that the house is yours. With this document, real estate operations that affect this situation can be carried out.

3.- Energy Efficiency Certificate

The Energy Efficiency Certificate is mandatory for any residential real estate operation, both for sales and rentals. A technician comes to the home to carry out a study and assesses the energy information of the property, as well as issuing a report on it and it will be valid for 10 years.

4.- Certificate of Occupancy- “ Declaracion responsable “

This document confirms that the property meets the technical and sanitary requirements that allow minimum habitability conditions. It is valid for 10 years.

Having this document is essential for registering water, electricity, and gas supplies.

5.- Real Estate Tax (IBI)

This local tax is paid every year by the owner of the propert

When selling the home, it is important that the buyer can check, with a document, that the IBI has been paid every year to show that the tax is up-to-date. Thus, the next receipt will be the responsibility of the new owner.

6.- Service bills

You will have to produce copies of the latest paid service bills like for water, electricity and gas.

7.- Certificate of being up-to-date with the Community of Owners

When the property is part of a community of neighbours, the owners have to pay a monthly fee to meet the various expenses of the common areas. Before proceeding with the sale, the property must be up-to-date with payments, that is, without outstanding debts. The secretary or property manager can issue a certificate to deliver to the buyer.

8.- Pending debt certificate and Registry cancellation in case you have a MORTGAGE

If the property is mortgaged, it will be necessary to get a pending debt certificate.

In this document, the financial entity indicates the amount that remains to be paid at the moment of the sale. This amount can be paid before transferring the flat or house, or it can be assumed by the buyer, deducting it from the total agreed price. If there is no pending amount, the debt cancellation deed must be registered so that the mortgage no longer appears in the Property Registry.

9.- Information from the Land Registry Office “ Nota simple”

Last but not least, it is highly recommended to include the nota simple provided by the Property Registry. It contains all the information related to the property: who the owners are, where it is located, the characteristics of the property, and if it has any mortgage or other type of charge. Including this document provides maximum transparency from the first contact with the buyer.

In EASYLEGALS we take care of MOST OF THE LISTED DOCUMENTS required for the sale such as :

Energy Efficiency Certificate

Certificate of Occupancy- “ Declaration responsable “

Certificate of being up-to-date with the Community of Owners

Information from the Land Registry Office

NIE, Taxes, and Wills: Your Legal Guide in Spain

THE FISCAL REPRESENTATIVES

The Spanish Tax Authorities until recently required any person who had dealings within Spain but who was not a full time resident in Spain to appoint a fiscal representative.

A fiscal representative is a person who undertakes on behalf of the tax payer all dealings with the Spanish Tax authorities. The appointment of a fiscal representative is the only way in which you can be sure that the Spanish Tax Authorities, unable to contact you because you are not in the country, do not take damaging and expensive action against you to collect any sums of taxes which they allege to be due.

N.I.E. (Número de identificación para extranjeros)

There is a new Law as of the 1st. January 2003 that status “any foreigners purchasing a property in Spain now need a NIE (National Identification Number for Foreigners)”.

A NIE is needed to hold a Spanish insurance policy, to open a bank account, to buy or to sell property and to pay any taxes. It is necessary for practically any transaction in Spain.

WILLS

As you may know a will is not exclusively about making sure that the right people will inherit you without disagreement or problems. It is a formal declaration of intention made by a person in his life-time of his wishes concerning the disponsal of his property after his death.

There are many doubts that non-residents have about the distribution of their goods in Spain when they die. If you are in this situation we strongly recommend you always make a will for the goods you own on Spanish territory because this way you simplificate the administration of your heritage for your children or each other person, that has a direct interest on your heritage. Then you can decide the distribution of your Spanish assets.

SPANISH WILL:

Known as an open will. This is the normal and more suitable kind of will for most people. Its contents must be known to the Notary who is responsible for ensuring that the will is a legal and properly drawn up document.

The will is individual and personal.

We pare the will in your native language and in Spanish, which will be signed by you in front of a Spanish Notary.

The original of the will be kept in the Notary’s office and will be registered in the “Registro de Ultimas Voluntades” (Spanish Central Registry of Wills) which is situated in Madrid. The Notary will give you a copy of the will.

The prices used to calculate the tax liability are those declared in the Title Deed.

Taxes payable on the transfer of property

Impuesto sobre Transmisiones patrimoniales (I.T.P.)

All sales of second hand dwelling houses (i.e. re-sales) carry Transfer Taxes. It is generally 10 % of the declared value of the property as expressed in the Escritura de Compraventa (Title Deed).

Impuesto sobre el valor añadido (I.V.A.)

This is the Spanish equivalent of V.A.T. on NEW DEWELLINGS (when you buy from a promoter/ builder )

It is charged at the rate of 10 %.

Impuesto sobre actos jurídicos documentados (A.J.D)

In addition to VAT you will also have to pay a document tax or stamp duty at 1,5 % of the purchase price.

Plusvalía ( payable by the vendor )

The other tax on property sales is the Plus value tax, which is the municipal tax on the increase in the value of the land since its late sale.

In the case of a purchase in a new urbanisation there has been a little increase in value because a short time has passed since it was developed, the tax can be very low. But if you buy a house with several square metres of land, which has not changed hands for a long time, the tax can be much higher. This tax – by law- is always payable by the vendor.

Land registry fees.

They are not strictly taxes but rather administrative fees but, for the sake of completeness, are referred in this part of the book.

These vary according to the locality, type and value of the property.

Notary’s fees.

Again they are no exactly taxes but something you have to consider.

They vary depending on the value of the property and various other factors. Allow 1% of the price of the property for initial planning purposes.

PROPERTY TAXES

Impuesto sobre bienes inmuebles (IBI or SUMA)

The annual real estate tax on your Spanish property must also be paid every year. The amount of the tax is calculated by reference to the “valor catastral” (official value of the property) registered in respect of all properties in Spain. It can vary widely from town to town for the same type of property because it is a municipal tax. This tax is raised every year, as a result of inflation.

In general terms, IBI will cost less than taxes on a similar property in the U.K.

PERSONAL TAXES

INCOME TAX- Personal Impuesto sobre la renta de las personas físicas

A person non resident in Spain for tax purposes must still make an annual declaration for income tax which should be done by your lawyer.

Typical examples of this will be interest on any money you have on deposit with a Spanish bank . Any income you derive from letting your apartment or house here in Spain must be declared ever 3 months to the Tax authorities.

Impuesto sobre el incremento del patrimonio (Capital Gains Tax)

Anyone who buys property in Spain today will be liable to pay Spanish capital gain tax when he sells his flats or villa in the future. This is for residents and non residents alike.

Non residents pay a flat rate of 19 %. Buyers from no resident sellers are required to withhold three percent of the total purchase price and pay it directly to the Spanish Tax Agency, thus making sure that the seller does not take the money and run.

The prices used to calculate the tax liability are those declared in the Title Deed.

Power of attorney

A «Poder general» or general power of attorney is frequently used in Spain. The power comes in a standard form, which lists all the actions that can be carried out by the holder. These include buying and selling property, handling bank accounts, spending and receiving money, taking out a mortgage or other loan, and just about anything that the person himself can do with his assets.

The form contains a clause declaring that all of these actions shall be taken for the benefit of the granter of the power.

There are also other forms of power of attorney, limited to carrying out certain specific actions in the name of the granter, such as signing a contract for the sale of a specified property at a given price, during a given time period, after which the power lapses.

But the general power of attorney is the one most used, simply because situations change and unforeseen complexities arise in any transaction. This can mean that the holder of the power is unable to act because the power does not mention a specific circumstance that has arisen, such as signing at the bank to obtain the money transfer from abroad.

The wide powers of the general power of attorney avoid these problems. In an international property market, it often finds that a seller or a buyer cannot be physically present at the moment of signing a purchase deed at the Spanish Notary, so he gives his lawyer or some other trusted person a general power of attorney to sign for him.

Once the deed is accomplished, the granter can revoke the power of attorney, again at the Notary, and all goes on as before.

What are the taxes and legal implications?

You should allow approx. 13% of the purchase price to cover these costs. They are broken down as follows:

NEW PROPERTY	RESALE PROPERTY
10% VAT 1,5% Legal rights (Stamp duty) 1% Notary fees Land registry fees	10 % Transfer tax 1% Notary fees Land registry fees

It is impossible to give tax advice without detailed knowledge of your personal circumstances. You should therefore treat this guide as no more than background reading designed to give you some idea of the structure of the tax system in Spain.

We can accept no responsibility for any action that you take or fail to take as a result of reading this document.

The Spanish Authority responsible for the collection of taxes is the Agencia Tributaria (Hacienda). This is organised on a provincial basis. In each province there is a main office of Hacienda. And in some cases there are also one or more sub-provincial offices.

La escritura – Public deeds and registering your property

“La Escritura” is the title document (Title Deed) proving who is the owner of the property and containing a detail description of the property itself. It is, under Spanish Law, necessary for the Escritura to be signed by the seller and the purchaser before a Spanish Notary Public (Notario) in order to make it legally binding.- This will be handle by your solicitor -. Do ensure that the person signing as seller is the one who can transfer valid title.

The Notario, or Notary, is an official of the State who makes sure that contracts are legal. He keeps the original document in his files in case any questions arise later. The Notario is a public official, not a private lawyer. His duty is to certify that the contract has been signed, the money paid, and the purchaser and seller have been advised of their tax obligations.

If you can not be in Spain to complete before the Notary you can appoint your lawyer to sign on your behalf by giving him a Power of Attorney executed before a Notary Public in the U. K. and then legalised with an apostille.

After the Escritura has been signed in front of the Notary, your lawyer arranges for it to be presented to the appropriate Land Registry (Registro de la Propiedad) and for the payment of the Land Registry Fees. Take in mind that before the Deeds are presented to the Land Registry, your lawyer will pay the taxes on your behalf. Without the payment of the taxes it is impossible to register the Deeds.

The Land Registry is an extremely important office for the property purchaser, nearly all land in Spain is registered. Any mortgage on the property must be registered there, and the true owner of the property is listed. Once it has been registered no one can make a valid claim to have a better title than you unless such title has been registered before yours.

Several months can elapse before the process of registration is concluded, but as soon as your lawyer is notified that the deeds are ready he will have them collected, check them and then forward them to you.

Registration and Notary’s fees are usual payable by the purchaser unless the parties agree otherwise.

The purchase agreement

When you have found a property which you want and you have agreed the price with the seller before you pay a deposit or sign a document reserving the property that is the time to see a solicitor.

Two basic types of document could be offered to you by the seller or the state agent. One is simply an “option to purchase”. This is exactly what is says, you pay for the right to be able to buy the property. The money you hand over will be lost if you do not exercise the option within the deadline given you and even if you do decide to buy you

may find that the money paid for the “option” may or may not go towards the total price of the purchase.

Second and better document to clinch the deal is a private contract of purchase and sale (contrato privado de compraventa). This is a document which set out all the terms and conditions of the purchase. There might be terms which are not mentioned in the document but implied by law regulating those aspects of the transaction. Although, if in doubt they can be expressly stated. (You should have a copy of the contract translated into English).

A private contract of purchase and sale should cover:

– Seller: The contract must fully identify the seller.

It is essential to ensure that the seller is either the registered owner of the property or someone who is acting in behalf of him (her) by a Power of Attorney.

– Purchaser: The contract must fully identify the buyer. You should make clear if you are going to buy the property in your name, or in the name of yourself and your wife/husband, or in the name of a company. .Otherwise you may find that later you may not be able to register the property as you would like.

– Property: The contract must accurately describe the property being sold.

If the building has not yet been completed you should demand from the seller a performance bond which will guarantee the return to you of any money which you pay him, plus interest at 6% p.a. (or an interest rate according to the law).

You should make sure that the seller has the correct licenses to build and that the house if new, has a licence for habitation.

– Price: The contract has to contain the full price of the purchase: the deposit that you have paid and the payments by stages and also deadlines for payments. You must be careful here since you have to forfeit what you have paid in advance cannot complete your side of the bargain.

The price should also state whether it includes any fixtures and fittings.

Last payment You should take care to agree that you do not make your last payment except in exchange for the seller signing the “Sale and Conveyance Deed” (Escritura de Compraventa) over to you.

The importance of solicitors – lawyer

Our basic advice is always to consult a lawyer when purchasing a new or resale property, even when buying a timeshare. The Spanish legal system is very different to the English one; your English lawyer studied (knows) English law, not Spanish law.

As well make sure that you contract the services of a lawyer who belongs to the Bar of Lawyers as unfortunately there are many persons or companies who speak English and Spanish and sell you “their legal services “as “legal assistants or advisors “when they ARE not entitled to do so as there “legal “knowledge is very basic or non existent. . Most of them will charge you the same fees as a lawyer who has got a civil responsibility covered by an insurance policy up to one million Euros to cover any negligence were you can not make responsible any of the “legal advisors” as they will not have any civil responsibility insurance.

Please always ask the person you contract for his number from the Bar of Lawyers, only if they can give you this number and show you his ID card from the Bar of Lawyers you will be in save hands.

Unfortunately very often people purchasing property in Spain take little or no legal advice and are indeed quite “casual” about the purchase and about the signing of legal documents. They may then find there is no title to the property that it was built without planning permission, whilst frauds are News, luckily they form a small part of the many thousands of transactions which take place every year in Spain.

Having instructed a solicitor to handle the purchase, you have the reassurance that all the important aspects will be covered.

The title of the property is checked.
The person selling the property actually owns it.
Whether there are any charges on the property.
Building licenses and permissions are in order, where applicable.
And finally the terms an conditions stipulated by the seller are checked for fairness.

A report of the findings is then compiled for you to consider, before deciding whether to proceed with the purchase. If you proceed your solicitor will then arrange:

– The transfer of the title into your name.

– For the fees and taxes to be paid.

– For the title to be registered with the government land registry.

Please also note that the Spanish Notary Public (Notario) – in front of whom all land transfers in Spain have to be signed – is not there to give legal advice to either the buyer or the seller. His function is to witness the signature of the title deeds and to deal with certain administrative matters.

3% non resident tax

Tax for non resident buyers

If you are buying a property in Spain from a non-resident, before going to the notary’s office, you should know that you will be responsible for paying the seller’s taxes on the transfer to the Spanish Treasury. For this reason, you must withhold 3% of the sale price from the seller. This means withholding this amount from the seller’s payment at the time of signing the deed of sale.

The reason for this withholding is the capital gain derived from Non-Resident Income Tax. In all real estate transactions, the seller is obligated to pay tax on the capital gain obtained as a result of the transfer. Tax legislation establishes the rules for calculating this gain, which is generally determined by the difference between the transfer and acquisition values. However, when the seller is a non-resident in Spain, to ensure the collection of the tax, the law requires the buyer to withhold 3% of the sale price and pay this amount to the Spanish Tax Agency (Agencia Estatal de Administración Tributaria). Generally, this 3% is deducted when the buyer formalizes the checks that the seller delivers to the notary at the notary’s office upon signing the deed of sale.

How to sell a Spanish property

A guide to sell a property in Spain

Necessary documentation to sell a property

Costs and taxes faced to the seller

3% non resident tax

Tax for non resident buyers