Tax Information
BRIEF REPORT ON FISCAL AND GENERAL OBLIGATIONS WHEN BUYING, SELLING OR RENTING A DWELLING IN SPAIN
(Information provided for guidance)
January 2010
WHEN BUYING A DWELLING
First conveyance of a dwelling, garages and storerooms (if the deed of sale is signed at the same time as the dwelling’s and no more than 2 garages and 1 storeroom): 8% VAT(1)
First conveyance of garages and storerooms: 18% VAT if deeds are executed separately from the apartment’s.
Buying a plot: If the seller is a company the VAT is 18%. Otherwise the Transfer Tax (ITP(2)) is 8%.
Second conveyance of a property, garages and storage rooms: The Transfer Tax (ITP) is 8%. If the seller and the buyer are companies the transaction may be subject to 18% VAT. Waiver of ITP exemption is permitted, applying it to VAT if the buyer is 100% entitled to deduct VAT and if both the seller and the purchaser are subject to VAT.
Important: check that the seller has paid the Property Tax (IBI(3)) for the last 5 years. If it is not paid the buyer is responsible.
The buyer of the dwelling must withhold 3% of the price of the property if it is bought from a tax non-resident in Spain and will have to pay it directly to the Tax Authorities.
A tax non-resident needs a Certificate of Registration in the Central Register of Foreigners and the NIE(4), identification number for foreigners.
Additional purchase expenses:
Notary’s expenses: they will depend on the type of Title Deed, on the amount of the transaction, if there is a mortgage, etc. For example: for a simple Title Deed and a value of 300,000€, a notary will charge about 640€. For a value of 500,000€, the fee will be about 725€
Land Register expenses: more or less the same as the Notary’s fees.
Stamp Duty (AJD(5)): if there is a mortgage, the Stamp Duty is 1%, calculated on the amount of the mortgage loan plus 3 years interest and costs (depending on terms and conditions of the mortgage) which usually adds up to approximately 1.5% of the total mortgage.
Capital Gain Tax (Plusvalía(6)): according to the law, the seller has to pay this tax, unless agreed otherwise. This is a tax on the property and thus has to be paid at the time of conveyance.
Lawyer’s expenses: about 1% of the value of the transaction plus applicable VAT at the current rate of 18%. Negotiable.
Real Estate Agency Commissions: Normally they are paid by the seller, who is the one who has put the property on the market and has requested the Agency’s services. The fees agreed on are increased by VAT at the current rate of 18%.
WHEN SELLING A PROPERTY
If the seller is Spanish, or is a foreigner who is a resident in Spain for tax purposes, over the age of 65 years and has lived in the property for more than 3 years: he/she is not subject to the 19% (as from 01/01/2010), tax on the capital gains.
If the seller is Spanish or is a foreigner who is a resident in Spain for tax purposes and reinvests to buy another main residence: he/she is not subject to the 19% (as from 01/01/2010), tax on the capital gains.
If the seller is Spanish: no withholding will be applied at the Deed of Sale. Taxes at a rate of 19% (as from 01/01/2010), are paid on the capital gains, except when the proceeds are re-invested in another main residence. The taxes are payable when filing the Tax Return of the year in which the profits were generated.
If the seller is a foreigner who is a Resident in Spain for tax purposes: there are no withholdings and the fiscal implications are the same as for a Spanish seller.
If the seller is a foreigner who is a non-resident in Spain for tax purposes: withholding of 3% on the price that appears in the Deed of Sale. The capital gain has to be filed within 30 business days following execution of the Deed of Sale and 19% (as from 01/01/2010) tax paid, deducting any withholdings which may have been applied.
If the seller is a Spanish company: taxes payable are 20, 25 or 30% on the profits obtained as part of the company’s annual results.
Important: when paying taxes, the cost of acquiring the property and the additional purchase expenses may be updated by applying monetary correction coefficients to try to place the cost of purchase on equal footing with the profits obtained.
Capital Gains: according to the law it corresponds to the seller. Usually the sellers include a covenant whereby the buyers accept to pay this tax, although the Town Hall will always file a claim against the seller in case of non-payment.
If it is covenanted that the capital gains tax is on account of the buyers, the seller can claim payment thereof in court.
Lawyer’s fees: about 1% of the value of the transaction, negotiable.
Real Estate Agency Commissions: The amount previously agreed with the Real Estate Agency, plus VAT at the current rate of 18%.
Owners must be up-to-date with payment of the Property Tax (IBI) of the last 5 years, the garbage tax, and the Property Owner Community fees.
ONCE THE DWELLING IS BOUGHT
The Town Hall will issue the following receipts, which we suggest you pay by direct debit to your bank account:
1- Property Tax (IBI): The annual municipal tax is approximately 1% of the cadastral value. The IBI receipt shows the cadastral reference number and the cadastral value of the dwelling/garage/storeroom.
2- Garbage: the receipts are usually issued every 6 months.
3- Special contributions (if any)
Property Owner Community fees must also be paid.
OBLIGATIONS OF NON RESIDENTS AS PROPERTY OWNERS
To pay taxes on an assumed annual income from the property of 24%, calculated on 2% of the cadastral value if it exists. If no cadastral value has been assigned to the property, the tax is calculated on the basis of 1.1% of half the purchase value, and applying 24% to the product obtained.
This tax is also paid by foreign residents in Spain for their second residences and other properties in Spain.
A dwelling in Spain owned by an offshore company is subject to an annual tax of 3% calculated on the cadastral value, and in case of sale the capital gains will be taxed 19% (as from 01/01/2010).
RENTING YOUR PROPERTY
Spaniards or Residents in Spain for tax purposes: add the amount received as rent to your annual income tax return (IRPF(7)).
Non residents: declare your rental income and pay a tax of 24%.
Greenlife Estates offers this information as guidance with the intention of helping its clients. We are not responsible for the consequences that might arise from the information provided and recommend that the interested parties consult the Tax Authorities (Agencia Tributaria) or qualified entities and professionals.
(1) IVA: Value Added Tax (Impuesto sobre el Valor Añadido). Current Reduced Rate: 7%. General: 16%. They will be increased in July 2010 to 8% and 18%, respectively.
(2) ITP: Transfer tax. (Impuesto de Transmisiones Patrimoniales).
(3) IBI: Property tax (Impuesto de Bienes inmuebles). Levied by townships. Approximately 1% of the Cadastral Value.
(4) NIE: Identification number for foreigners (Número de Identificación de Extranjeros).
(5) ADJ: Stamp Duty (Actos Jurídicos Documentados).
(6) Plusvalía: Capital gains – (Tax on the increase of the value of urban land. This municipal tax is levied on the increase of the value of land in the case of sale of plots, and on the land attributed to a dwelling as of the last conveyance).
(7) IRPF: Personal income tax (Impuesto de la Renta de las Personas Físicas).
