Tax aspects in the purchase – sale of real estate in Spain.
We will start this exposition, informing you about what the Spanish Civil Code establishes in its article 1445 on Spanish purchase sale agreements:
“By the contract of purchase and sale (of a property in Spain), one of the parties is obliged to hand over one particular thing, and the other to pay for it an agreed price in money or figure equivalent thereof.”
As you may know, the parties at a purchase or sale contract in Spain must be identified, they must have legal personality and show their identity, through the presentation of identity card or passport. Also, in case of foreigners, they must be holders of NIE in Spain.
The seller has the obligation to deliver the thing sold, to respond about its legal possession, and about any hidden defects that it might have. The purchaser has the obligation to pay the price in the agreed form.
With regard to the obligation to settle the price of the property in Spain, we recall the limitation of payments in cash established by Spanish legislation since 2012, according to which no transactions can be paid in cash, when any party is an entrepreneur or professional, for an amount equal or over than 2,500 euros, or equivalent amount in another currency.
This limit will be of 15,000 euros or equivalent in the currency of your country, when the payer is a individual who does not have his fiscal residence in Spain and does not act as an entrepreneur or professional.
In Spain, please remember that the payment by bearer check is considered a cash payment.
Tax in Spain
If you intend to buy a property in Spain or, to the contrary, to sell a property you own, the Spanish taxes you have to take into account would be the following:
In the event that you wish to acquire a property in Spain:
- Transfer Tax in Spain (Impuesto sobre transmisiones patrimoniales ITP. )
Transfer Tax in Spain is applicable on the transmission of assets and rights. It is due when the vendor is a private owner.
The applicable rates in the acquisition of a property plus 1 o 2 garages are the following:
DWELLING + 1&2 GARAGES
- Up to EUR 400.0000 8%
- From EUR 400.000,01 to EUR 700.000 9%
- Over EUR 700.000,01 10%
- Up to EUR 30.0000 8%
- From EUR 30.000,01 to EUR 50.000 9%
- Over EUR 50.000,01 10%
A reduced rate of 3.5% is applied in the purchase when the real value of the property does not exceed 130,000 € and it is to be used as home address of the purchaser, who is less than 35 years old, or when the value does not exceed the amount of € 180,000, it is intended for the buyer’s habitual residence, and the acquirer is disabled with a recognized degree of disability equal to or greater than 33%.
Reduced transfer tax in Spain. The rate to be applied will be 2% in the acquisition of the property for resale by an individual or by a company that carries out a business activity, when the regulations of the General Plan of the Real Estate Sector are applicable.
- VAT in Spain, Spanish VAT- Stamp Duty.( IVA –Actos jurídicos documentados AJD.)
VAT in Spain also applies to the transfer of goods and rights. In general, Spanish VAT is applied when the seller is an entrepreneur or professional.
- IVA for constructions ……………10%
- IVA for plots ………………………21%
- Stamp Duty………………….……1,5%.
- b) If to the contrary, you are planning to sell, please consider the following taxes:
- Plusvalia Tax.
The Spanish Plusvalia tax is a local tax to be paid to the corresponding Town Hall. It is calculated on the rates value of the land where the property is built and the time that has lapsed from the last transaction, when it was acquired.
The taxpayer of the Spanish “Plusvalia” tax, is the person or entity who sells the property. In addition, one should take into account that the person or entity who acquires the property becomes the subsequent tax payer in the event the transferor is not resident in Spain.
- Capital gain tax in Spain.
Capital Gain Tax in Spain. This tax is to be settled for the gain obtained by the vendor in the sale of a property in Spain.
It based on the difference between the present sale price (less costs) and the purchase price paid when the property was acquired (plus costs), at a rate of 19% (E.U Tax residents only).
The person who buys the Spanish property, whether resident or not in Spain, is obliged to retain and deposit at the Tax Office 3% of the sale price, being a payment on account of the corresponding capital gains tax of the vendor derived from the sale.
In the event that the 3% retention is not deposited with the Tax Authorities, the property will be subject to the payment of the 3% retention or to the capital gains Tax.
When there is no gain for the vendor, he will be entitled to claim for the refund of the retention. To be able to recover the same, he must have the Non Resident Income tax up to date in its payments for the last five years.
If you need advice on buying or selling real estate, please contact our Law and Accountancy firm in Marbella, Málaga Spain. We will inform you from the beginning about the taxes and disbursements associated to your transaction and we will assist you throughout the procedure until the signing of the notarized deed in Spain, payment of your taxes and registration of your documentation in the Land Registry.
At “Welex” we provide full advice on the purchase and sale of real estate, so that you comply with all the legal and tax obligations inherent to your transaction.