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This is from a spanish laywer, (I have added this as I didn’t know you only get 97% of the sale and then have to claim it back, just in case others did not know also)
Tax involved when you sell a property in Spain
10 November 2010Nowadays, selling a property in Spain can involve many difficulties, basically because Spanish tax legislation, requires to complete several measures in order to avoid being banned, and then not incurring in extra charges implemented by the revenue commission Admnistracion Tributaria.
First of all, I am going to break down, what situation would affect a non- resident when he proceeded to sell his property.
The Purchaser will have to retain the 3% of the total price of the sale. After that, the purchaser will have to deposit it in the revenue commission Administration Tributaria within 30 days of the completion date. The justification about this retention is, because the revenue commission, to make sure that the non-resident is going to pay the Plus Valia capital gains obtained by the selling. In conclusion, the non-resident seller will receive the 97% price of the sale.
In relation to the Plus Valia or capital gains , after the completion, the seller independently being resident or non-resident, will have to declare before the revenue commission , the revenues obtained, from the sale of your dwelling. The Plus Valia, is the capital gain obtained, after selling your property. It will have to pay a tax of 19% of the capital gains.
Referring to the non-residents, will have to submit an application within 30 days of the completion date, declaring the said tax and as a result, they will be able to recover the retention deposited by the purchaser.
In connection with the residents, given that they have been living in Spain, and maybe they will have been assisted by an accountant. They will have done their application forms and everything involved with the tax legal services. Theoretically, and they will have to declare their capital gains obtained.
Otherwise, if they infringed the tax legal system, the revenue commission would be able to impose a huge penalty; increasing considerably the amounts which should have been deposited initially.
I consider that it is very important to be well advised in this kind of matters , because you would be able to avoid consequences unexpected. Therefore it is always interested to be assisted by specialist lawyer.
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Yes, I think most people on here know about the 3% retention, it’s been well discussed, but it doesn’t hurt to remind.
Typically Spanish!!! 30 days to submit the documentation to claim the retention. How do they expect non-residents to comply with such a short deadline. What is wrong with 12 months or within the current fiscal year!
Anyway the point I wanted to make is… yeah submit the documentation within 30 days and then wait years for the refund!!! Going rate seems to be about 2 years wait to receive it. It took just over 1 year to get my refund and I am sure it’s because the documemtation was in my Spanish wife’s name and we visited the tax office twice to push the process along.
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It can take up to 18 months to 2 years to get your money back if your solicitor is any good. I sold my garage this year and I had to go the administrators office to prove there was no debts outstanding and get a certificate to prove this and pay for it – then produce it at the notary’s office -even though you have this certificate they still hold on to the 3% plus valia. The other thing is if you are buying a property and you buy it below the catastral value – the revenue out there can come after you for this and make the purchaser pay a tax between the price he/she paid the the catastral value – which in most cases the catastral value are way out of date and not in line with current saleable prices. In cases of selling don’t forget your legal costs plus vat and notary fees – they all add up.
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@ethnatkev wrote:
so what happens it you have not made a profit at all on the sale and are just covering the cost of the morgatge? Do they still retain 3%? I mean if you sell it for the amount you owe the bank, that would mean you would have to come up with the 3% elsewhere!
That’s correct.
Not only in my case did I need to provide extra funds because I was selling below the outstanding mortgage debt, but I also had to transfer this 3% retention from the UK to allow the mortgage debt to be cleared in full. Maybe for some people this could prevent the sale as they don’t have the 3% retention to stump up if they sell at or below their mortgage debt.
Also this new legislation is introduced just before the worst property crash that Spain has ever seen. For the next 10 years or more virtually all properties bought in the preceding 15 years will have made no capital gain (when inflation is considered) but the whole process of buyer and seller submitting retention and then reclaim documentation is farcical.
I bet they don’t change the procedure though as it will be a nice income stream for the next few years
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@angela wrote:
It can take up to 18 months to 2 years to get your money back if your solicitor is any good. I sold my garage this year and I had to go the administrators office to prove there was no debts outstanding and get a certificate to prove this and pay for it – then produce it at the notary’s office -even though you have this certificate they still hold on to the 3% plus valia. The other thing is if you are buying a property and you buy it below the catastral value – the revenue out there can come after you for this and make the purchaser pay a tax between the price he/she paid the the catastral value – which in most cases the catastral value are way out of date and not in line with current saleable prices. In cases of selling don’t forget your legal costs plus vat and notary fees – they all add up.
its not buying below the valor catastral but the valor fiscal.
For example, went to completion on a property today, sales price 130.000€. Thew valor catastral stands at 101.500€ (round up). Each town hall has their own calculation they do to work out hte valort fiscal. In this case 2.2. So the valor fiscal of this property is 223.300€. As thye have bought it for 130.000 the taxman might try and claim and additional 6531€ (223.300 – 130.000 x 7%) from the buyer.
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its not buying below the valor catastral but the valor fiscal.
For example, went to completion on a property today, sales price 130.000€. Thew valor catastral stands at 101.500€ (round up). Each town hall has their own calculation they do to work out hte valort fiscal. In this case 2.2. So the valor fiscal of this property is 223.300€. As thye have bought it for 130.000 the taxman might try and claim and additional 6531€ (223.300 – 130.000 x 7%) from the buyer.
Surely this is not legal. Who the hell do they think they are. Well if they did that to me and insisted I pay a tax for something that is just a load of nonsense figures, I would certainly get a lawyer and take it all the way. I think the way they operate is disgusting and I hope the rest of Europe put a stop to their outdated laws and rules! They need realise this is 2010! It makes me embarrased to be half spanish to be honest.
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Morning folks. The original posting is a little ambiguous. I had a sale go through early part of this year and we handled the sellers part of the transaction – which made for some interesting running around!
The buyer has to deposit the 3% after collecting it at notary. Then the SELLER has to collect the deposit paper and has 60 days from the date of deposit to place his declaration, which is fairly easy to complete but they do ask a couple of difficult questions. The forms cost 2 euros. This signed form has to be stamped by the bank accepting the funds and make sure the account stays open!! The time taken to repay varies on the area.
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It’s not only non-residents sellers that have this retention but residents also now ,unless you have a certificate of fiscal residency for 3 years. If you haven’t made a tax declaration , even if you have no tax to pay, the notaries are now required to ask for this certificate & if you haven’t got one then you’ll be subject to the 3% retention.
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Quote:its not buying below the valor catastral but the valor fiscal.
For example, went to completion on a property today, sales price 130.000€. Thew valor catastral stands at 101.500€ (round up). Each town hall has their own calculation they do to work out hte valort fiscal. In this case 2.2. So the valor fiscal of this property is 223.300€. As thye have bought it for 130.000 the taxman might try and claim and additional 6531€ (223.300 – 130.000 x 7%) from the buyer.
Surely this is not legal. Who the hell do they think they are. Well if they did that to me and insisted I pay a tax for something that is just a load of nonsense figures, I would certainly get a lawyer and take it all the way. I think the way they operate is disgusting and I hope the rest of Europe put a stop to their outdated laws and rules! They need realise this is 2010! It makes me embarrased to be half spanish to be honest.
Legality has very little to do with anything , the rules are made up to screw the maximum out of foreign suckers.
A friend of mine got a nasty shock yesterday morning. She was all prepared to go to the Notary at 1pm (Alicante Province) to complete the sale of her flat.A few hours before the agent contacted her to say that they would have to go first to SUMA , who collect rates etc for municipalities in the area, to pay Capital Gains Tax , as my friend was losing 50,000 euros on the deal this sounded crazy to her. The agent assured her this was CGT on the increase in value on the land on which the block of flats is built ,there are 11 flats in the block. She was told if she did n´t pay the sale would fall through. The agent had no idea what the figure would be , on arriving at the SUMA office a bill was presented FOR 1,250,00 euros. She had no option but to pay or lose the sale.The history of the property is as follows
Puchased in 2005 for 156,000 euros plus the usual 10% EXPENSES.
Sold yesterday for 97,000 euros
59,000 euros loss realised
15,000 euros costs of purchase
2,900 euros retencion 3% WHICH I SUPPOSE SHE WILL
never see.
1,250 euros local CGT on land.
78,150 euros True loss of 50% in 5 yearsLuckily the money is being sent to the UK so the damage , in Sterling terms, will not be as great as the GBP has fallen from 148 to 117 against the Euro in the time period..
I would point out this is a better type pf property not a junk build , the building standard for Spain is high, it is in a pleasant village , not a lousy rabbit hutch built to gerry build standards on the side of a mountain . 11 flats in the block
She is relieved to be out of Spain,and although she has lost a lot of money the relief of what might have happened had she died before completing a sale and leaving her sons with a black hole of problems , Inheritance tax,Capital Gains Taxes etc, any new taxes the cobbler, town hall might have come up with, Community charges rocketing , IBI rocketing, threat of Extraordinary taxes ETC ETC ETC ETC ETC . Yesterday afternoon she looked 10 years younger , the relief of being out of Spain will probably increase her lifespan by many years.
She spent a week running around like a blue derriered fly, tax office, administrator, town hall etc etc etc .
Now my thoughts pass to the buyer, will Hacienda fine them because of the sale price appearing low, silly me they are Spanish have to pay nothing. I wonder if my friend had bought from them if all this tax would have been charged to Spanish vendors, and she would almost certainly receive a letter from the tax man , saying she had bought cheap and would be fined.
I rent it is better. I WOULD N´T BUY A SPANISH PROPERTY IF IT WAS GIVEN TO ME.
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I posted on this subject a while back.
Your friend paid “Plus Valia” to the local council and as you said it’s a charge based on the increase in the land price between buying and selling. It has nothing to do do with the price of the property.
I had to pay around 350 Euros when I sold in March 2009. However, in my case I only owned the property for 18 months, bought at the peak in 2007 and sold well into the crash. Had land prices really risen in that time!!!
Also the developer had to pay 75 Euros for Plus Valia when I bought, I know the figure as they tried to make me pay which I declined. However the developer must have owned the land for at least 6+ years simply due to the time to build the relevant phases (we were phase 2).
So the rate of land price rises whilst I owned (in a falling market) was around 15 times faster than when the developer owned the land.
The figures are simply pulled out of the air!
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I quite agree the figures are made up, as it was a Friday I wonder if the guy in SUMA was doing his Euromillones entry and mixed up the numbers.
The worrying thing is most town halls are bankrupt, they have an incredible number of funcionarios(form fillers) who were taken on during the boom and in a lot of cases are still being taken on to massage the unemployment figures(so much for the austerity programme) who now have little or no work to do. I recently went into the palatial offices of a local council , the size of the office was about 250 m2 ,and three people were working there, lots of open spaces or filled with exotic plants, the one I needed to see was out having his coffee!!!!!!. The mayor of Madrid recently went cap in hand to the cobbler about the level of debt of MADRID TOWN HALL got a flee in his ear . Think the level of debt for Madrid is 276 million euros. Because of the high levels of risk when loans are granted, they are short term and at high interest rates, if interest rates rise sharply over the next few years, councils will be renegotiating loans at unfavourable rates.I read a year ago that Spain is unlikely to recover until 2017, this is beginning to look optimistic.
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@ethnatkev wrote:
its not buying below the valor catastral but the valor fiscal.
For example, went to completion on a property today, sales price 130.000€. Thew valor catastral stands at 101.500€ (round up). Each town hall has their own calculation they do to work out hte valort fiscal. In this case 2.2. So the valor fiscal of this property is 223.300€. As thye have bought it for 130.000 the taxman might try and claim and additional 6531€ (223.300 – 130.000 x 7%) from the buyer.
Surely this is not legal. Who the hell do they think they are. Well if they did that to me and insisted I pay a tax for something that is just a load of nonsense figures, I would certainly get a lawyer and take it all the way. I think the way they operate is disgusting and I hope the rest of Europe put a stop to their outdated laws and rules! They need realise this is 2010! It makes me embarrased to be half spanish to be honest.
sorry i did not see this before. In this case, should the taxman try and claim the extra money, the buyers can context it. In this case a valution would need to be done. This figure is then used to calculate the difference between buying price and value.
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