Tax aspects in the purchase – sale of real estate in Spain

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 rate is of 7% over the purchase price of the property, or reference value when it is higher that the agreed purchase price.

The reference value is determined by the Cadastre Office taking into account the prices of all properties in the transactions made before a notary public, based on the data of each property, as recorded in the Real Estate Cadastre.

The following reduced rates area also applicable under the following circumstances:

– Transfer of a property intended for the habitual residence, if the value of the property does not exceed 150,000 euros: 6%.
– Transfer of a property whose value does not exceed 150,000 euros when it is intended for the acquirer’s main residence and the acquirer is under 35 years of age, a victim of domestic violence, a victim of terrorism or is acquired in a municipality with a depopulation problem: 3.5%.
– Transfer of a property destined for the habitual residence, the value of which does not exceed 250,000 euros, when the purchaser is legally considered to be a person with a disability of 33% or more, or a member of a large family: 3.5%.
– Acquisition of a property for resale by a natural or legal person carrying on a business activity to which the rules for adaptation of the General Plan for the Real Estate Sector are applicable: 2%.

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………………….……1,2%.

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.