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Could someone advise me please about the rules on a property sale. A friend used to live in Spain but returned to the uk after 20 years here. She owns a flat and has received an offer which she will probably accept. The agent keeps on about a 3% retention on the sale proceeds. I know if my friend pays this retention she will not see a cent back from Hacienda they have been conning the public for many years and that the figure was 5% until the EU stepped in and told Spain to reduce the figure to 3%. Would my friend be able to give the address in Spain, produce her Empadrimiento from the local town hall, her old plastic residencia which has expired and the new useless green form which has replaced the old type residencia and say she lives in Spain .
I think the CGT , she has made a big loss , is less if one is a resident rather than a non resident..
If someone could help, I would really appreciate it. I have received so many conflicting opinions I am totally confused.
Thanks
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In Andalucía notaries now ask for receipts of tax domicilio. This is not the foreigners tax but normal income tax. If they have not been paying spanish income tax or sent in a no tax due return then they will take the 3% retention.
Both spanish and foreigners pay 18% capital gains. For residents if the proceeds are from their only home is invested in another then no CGT is payable.
Even if a house is sold cheaply and there is no CGT due the authorities have their own valuations and will not accept anything lower. That is why it is rare for anyone to get any of the 3% retention back. Best to facture the amount into the selling price as it’s a lose, lose situation right now.
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The problem is that the buyer (if he knows that 3% retention should be held as you are non-resident) would be unlikely to proceed as the tax debt falls onto the property. So they would be liable for the 3% retention and it would be a debt placed on their new property.
It has nothing to do with the estate agent.
Katy says that the notaries will not proceed if the 3% retention is not withheld at the signing of contracts. I can’t comment on that as I haven’t tried to sell demanding all of the sale proceeds.
On a plus note I have now received my 3% retention back (in full), almost 1 year on from the sale. I thought I would never see it.
Whether it has anything to do with the fact that my Spanish wife’s name is on the paperwork (and not mine as only one name is required) I will never know!!!
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Katie is totally correct. That 3% has to be factored in at sale point – if you cant pay it then the sale will not proceed and obligation is on the buyer to ensure those funds are there.
You do have to prove you are a resident if you want to avoid this and its very strict now, so unless you can prove residency you will have to stump it up.
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@DrRobert wrote:
Anyone got any experience of a foreign seller just taking the full sale proceeds, telling the estate agent to stick it up their jumper and just heading back to UK with the full amount? Making sure all Spanish bank accounts are shut, of course.
In the vast majority of cases the 3% is witheld by the buyer, when the seller is a non-resident. The reason being many leave without paying plus valia, etc
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There are 2 different taxes to be paid by the vendor:
– Capital gain tax; which is the 18% of the net profit of the sale (3% of the purchase price is withheld by the buyer on completion to pay this amount to the tax office).
– Plusvalía tax: paid to the Town Hall
Be careful with the plusvalía, as in some Town Halls, i.e. Benalmádena, is a really expensive tax. The buyer also withholds funds to cover the payment of the plusvalía tax, as he is personally liable of the payment in case the vendor fails to do so.
Thanks
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