BRIEF REPORT ON FISCAL AND GENERAL OBLIGATIONS WHEN BUYING, SELLING OR RENTING A PROPERTY IN SPAIN
(Information provided for guidance only)
WHEN BUYING A PROPERTY
• First conveyance of a property, garage or storeroom: VAT(1) at 10% is payable if the deed of sale is signed at the same time as the dwelling’s and includes no more than 2 garages and 1 storeroom), plus 1.5% of Stamp Duty (AJD).
• First conveyance of garages and storerooms: 21% VAT payable if deeds are executed separately from the apartment plus 1.5% of AJD(2).
• Second conveyance of a property, garages and storage rooms: The Transfer Tax (ITP)(3) on a private sale is 7% for taxable events accrued as of 28/04/2021. A waiver of the ITP is permitted, if both the seller and the purchaser are subject to VAT. If the seller and the buyer are both companies, the transaction is subject to 21% VAT plus 1,5% AJD.
Important: check that the seller has paid the local taxes (IBI Property Tax and Garbage Tax). If not paid the buyer is responsible and the amount owed should be deducted from the purchase price.
If the seller of the property is non-resident in Spain, the buyer of the dwelling must withhold 3% of the price of the property and will have to pay it directly to the Tax Authorities within a month from the date of sale.A tax non-resident needs a Certificate of Registration in the Central Register of Foreigners and an NIE(5), identification number for foreigners. Or they can name a legal representative in Spain.
Additional purchase expenses:
• Notary expenses: these depend on the type of Title Deed, on the amount of the transaction and if there is a mortgage, etc. For example: for a simple Title Deed with a value of 300,000€, a notary will charge about 850€. For a value of 500,000€, the fee will be around 950€
• Land Register expenses: somewhat less than the notary fees.
• Stamp Duty: if there is a mortgage, the Stamp Duty (AJD) is 1,5%, calculated on the amount of the mortgage, which usually adds up to approximately 1.5% of the total mortgage.
• Capital Gains Tax (Plusvalía(6)): according to the law, the seller has to pay this tax, unless agreed otherwise. This is a tax that is based on the increased value of the asset from the last property transaction and thus has to be paid at the time of conveyance. Should the seller not be a resident in Spain, then the purchaser is liable to pay this tax.
• Legal expenses: around 0,5 -1% of the value of the transaction plus applicable VAT at the current rate.
• Real Estate Agency Commissions: normally paid by the seller.
WHEN SELLING A PROPERTY
When selling a property you are taxed on the difference between the cost of acquisition and the selling price.
• If the seller is Spanish: he/she should declare the sale in his annual tax declaration, including the sale price, deducting costs of acquisition and reforms if he/she can prove their payment. The remaining profit is entered in the capital gains tax section at the applicable rate (currently is 19%) . The seller must also pay municipal capital gains.
• If the seller is a foreigner who is resident in Spain for tax purposes: the fiscal implications are the same as for a Spanish seller.
• If the seller is a Spanish company: taxes payable are 25% on the profits obtained as part of the company’s annual results, depending on the condition of the property and the activity that the company exercises.
• When the seller is Spanish, or is a foreigner who is resident in Spain for tax purposes, over the age of 65 years and has lived in the property for more than 3 years (principal residence): he/she is not subject to capital gains tax.
• If the seller is a foreigner who is a non-resident in Spain for tax purposes: a withholding of 3% on the price that appears in the Deed of Sale is payable to the tax authorities. The Capital GainsTax has to be declared within 90 days following execution of the Deed of Sale (currently 19%), deducting any withholdings, which may have been applied. If a loss is incurred on the sale you can request a refund on the withholding tax.
Additional charges on the sale:
• Capital Gains: according to the law this applies to the seller. Usually 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.
• Legal fees: about 0,5-1% of the value of the transaction, negotiable.
• Real Estate Agency Commissions: The amount previously agreed with the Real Estate Agency, usually 5% plus VAT.
Owners must be up-to-date with payment of the Property Tax (IBI), the garbage tax, and the Property Owner Community fees.
ONCE THE PROPERTY IS PURCHASED
The Town Hall will issue the following receipts, which we suggest you pay by direct debit via your bank account:
1- Property Tax (IBI): The annual municipal tax is issued on 1st January each year and in Marbella it is payable between August and September. The value is updated each year in the municipal budget.The IBI receipt shows the cadastral reference number and the cadastral value of the dwelling/garage/storeroom.
2- Garbage Tax: the receipts are usually issued every 6 months.
3- Special contributions (if any).
4- Property Owner Community fees: We recommend consulting the administrator of the urbanization who should issue a certificate showing that community payments are up to date. In the absence of this certificate, legal responsibility passes to the buyer for payments corresponding to the purchase and also the previous three years community fees.
OBLIGATIONS OF NON-RESIDENTS AS PROPERTY OWNERS
To pay taxes on an assumed annual income from the property of 24%, calculated at 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 amount obtained. If the cadastral value has been revised (as is the case in Marbella), 1.1% rather than 2% is applied. You also pay a wealth tax if the value of your assets in Spain exceeds 700.000€ per person (apartments, garages, storerooms, bank accounts, vehicles, shares in Spanish companies etc.)
This tax is also paid by foreign residents in Spain on their second residences and other assets in Spain.
A home 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 at 20%.If you declare the titled owner of a company to the tax authorities, you do not pay the annual 3%, but if the titled owner is not a Spanish resident then he has to present a non-resident tax return (Model 210).
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%.
(1) IVA: Value Added Tax (Impuesto sobre el Valor Añadido). The current Reduced Rate: 10%. General: 21%.
(2) ADJ: Stamp Duty (Actos Jurídicos Documentados).
(3) ITP: Transfer tax. (Impuesto de Transmisiones Patrimoniales).
(4) IBI: Property tax (Impuesto de Bienes inmuebles), levied by the town hall. Approximately 1% of the Cadastral Value.
(5) NIE: Identification number for foreigners (Número de Identificación de Extranjeros).
(6) Plusvalía: Capital GainsTax on the increase of the value of urban land. This municipal tax is levied on the increase of the value of property 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).
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.
We recommend consulting a legal expert for exact percentage rates of VAT, property transfer tax, stamp duty, capital gains and other income derived from real estate, as changes may occur.