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Can anyone advise how the retention of tax for a seller is calculated PLEASE as I have been given conflicting information. Is the 5% retention based on the difference of the figure on the original Escritura and the price the property is being now sold at ? OR is the tax based on the full price/ value of the property?
Any advice on this would be greatly appreciated.
Many Thanks
Flynn -
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Thank you Drakan for your reply, I have also another question that I am becoming very confused on. I am resident here in CDS and my residencia has just run out, I am fully intending to renew BUT my EA has advised via their accountant that I should sell the property as NON resident as the tax is lower !!! However my lawyer has advised that I renew the residencia also get tax certificates (whilst waiting) and sell the property using resident status (HELP) !!! who is correct, everyone advises and interprits the law differently !!
Will a copy of the renewal form be good enough if I sell before the residencia is processed??Your advice is very much appreciated and respected
Flynn -
Thank you Drakan for your reply, I have also another question that I am becoming very confused on. I am resident here in CDS and my residencia has just run out, I am fully intending to renew BUT my EA has advised via their accountant that I should sell the property as NON resident as the tax is lower !!! However my lawyer has advised that I renew the residencia also get tax certificates (whilst waiting) and sell the property using resident status (HELP) !!! who is correct, everyone advises and interprits the law differently !!
Will a copy of the renewal form be good enough if I sell before the residencia is processed??Your advice is very much appreciated and respected
Flynn -
I’m sure Drakan will correct me if I’m wrong, but you should sell as a resident to pay less CGT, 15% (assuming you have held for longer than 1 year) compared to 35% as a non-resident.
I expect that the resguardo you are given when applying for residency renewal will be fine. Anyway, if you apply for renewal now you’ll have your card in a couple of weeks. And anyway, your card is not as important as your fiscal status, which is based on the number of days you spend in Spain during a calendar year. More than 183 days here, then you’re a resident for tax purposes, like it or not.
Mark
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I’m sure Drakan will correct me if I’m wrong, but you should sell as a resident to pay less CGT, 15% (assuming you have held for longer than 1 year) compared to 35% as a non-resident.
I expect that the resguardo you are given when applying for residency renewal will be fine. Anyway, if you apply for renewal now you’ll have your card in a couple of weeks. And anyway, your card is not as important as your fiscal status, which is based on the number of days you spend in Spain during a calendar year. More than 183 days here, then you’re a resident for tax purposes, like it or not.
Mark
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Hi Mark. Thank you for your reply, I’m just so confused as Spanish EA and Spanish accountant say resident tax is higher and as non resident only 5% of the full price of the property will be withheld by the buyer !!! BUT Spanish Lawyer says that non resident tax is higher (up to 35%) and as resident we will only have to pay 5%!!
This is all so confusing, where doe’s CGT come into play as my CG would be less than 50,000€ over 4 years but the tax I am led to believe would be on 170,000€ which is the full value of the property. I don’t understand this as I am not making a profit of 170,000€ , can you give me any help on this??
Many Thanks
FlynnPS Forgot to mention that we are/ have been resident for a number of years and paid tax via an accountant until 12 months ago, at which time we stopped working and have lived purely off savings and have had no income, the savings of course are from a Spanish residents B. account , could this cause more problems ??
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Hi Mark. Thank you for your reply, I’m just so confused as Spanish EA and Spanish accountant say resident tax is higher and as non resident only 5% of the full price of the property will be withheld by the buyer !!! BUT Spanish Lawyer says that non resident tax is higher (up to 35%) and as resident we will only have to pay 5%!!
This is all so confusing, where doe’s CGT come into play as my CG would be less than 50,000€ over 4 years but the tax I am led to believe would be on 170,000€ which is the full value of the property. I don’t understand this as I am not making a profit of 170,000€ , can you give me any help on this??
Many Thanks
FlynnPS Forgot to mention that we are/ have been resident for a number of years and paid tax via an accountant until 12 months ago, at which time we stopped working and have lived purely off savings and have had no income, the savings of course are from a Spanish residents B. account , could this cause more problems ??
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nothing to add to Mark’s post.
The European Commission has warned Spain that this is unfair play and the non-residents CGT must be reduced to 15% same as residents.
The advice given to you by your lawyer is the correct one. It’s always better to pay 15% than 35%.
You are confusing two things Flynn.
The Spanish Government witholds 5% of the money paid by the purchaser If the seller (yourself) is a non-resident. This is done to gurantee that you will not run away without paying your taxes to Spain.
Note I write the 5% is withheld it is not taxed, so it is in fact recoverable or refundable through Tax form 212 and takes approximately between 12-18 months at most.
Another different matter is the Capital Gains Tax:
R= 15%
NR= 35%What you must do is see what profit you’ve made.
Eg.- Say the property was bought for 170 k and you sell for 200k at the notaries.
Your profit is 30k.
Your CGT as a NR is 10.5k
the 5% witheld on account of the CGT as NR is on 200k= 10k
You owe us 10.5k in Taxes but we’ve already witheld from you 10k. So now you only owe us 500 Euros in CGT.
Now this is when a good lawyer comes into play. Your lawyer will make sure that the 170k you bought the property for is raised, through technicalities, to as close as possible to the 200k mark (selling price). In this manner, your “supposed” profit will be lower, thus paying less CGT.
For a majority of our clients, the profit is scant (we make it so) lowering there tax liability. So for most of them, the 5% witheld is actually returned to them in a years time. Normally 80% or more of the 5% withheld.
So without a lawyer= you lose the 5% witheld and you even have to pay more (500 euros).
With a -good unbiassed- lawyer you actually have part of the 5% returned to you. We charge on average 300 euros for this service because obviously it is not included in the 1% fee to purchase a property.
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nothing to add to Mark’s post.
The European Commission has warned Spain that this is unfair play and the non-residents CGT must be reduced to 15% same as residents.
The advice given to you by your lawyer is the correct one. It’s always better to pay 15% than 35%.
You are confusing two things Flynn.
The Spanish Government witholds 5% of the money paid by the purchaser If the seller (yourself) is a non-resident. This is done to gurantee that you will not run away without paying your taxes to Spain.
Note I write the 5% is withheld it is not taxed, so it is in fact recoverable or refundable through Tax form 212 and takes approximately between 12-18 months at most.
Another different matter is the Capital Gains Tax:
R= 15%
NR= 35%What you must do is see what profit you’ve made.
Eg.- Say the property was bought for 170 k and you sell for 200k at the notaries.
Your profit is 30k.
Your CGT as a NR is 10.5k
the 5% witheld on account of the CGT as NR is on 200k= 10k
You owe us 10.5k in Taxes but we’ve already witheld from you 10k. So now you only owe us 500 Euros in CGT.
Now this is when a good lawyer comes into play. Your lawyer will make sure that the 170k you bought the property for is raised, through technicalities, to as close as possible to the 200k mark (selling price). In this manner, your “supposed” profit will be lower, thus paying less CGT.
For a majority of our clients, the profit is scant (we make it so) lowering there tax liability. So for most of them, the 5% witheld is actually returned to them in a years time. Normally 80% or more of the 5% withheld.
So without a lawyer= you lose the 5% witheld and you even have to pay more (500 euros).
With a -good unbiassed- lawyer you actually have part of the 5% returned to you. We charge on average 300 euros for this service because obviously it is not included in the 1% fee to purchase a property.
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Dear Drakan, Thank you so much for explaining how the tax system works and is calculated. Your explaination is so clear and straight forward, it now all makes perfect sense. I only wish my lawyer and EA could have explained it this way, then I would not have felt as if I where going round in circles.
I hope that Mark will keep your reply on file, so that anyone else who comes forward in a similar confused state, will have the benefit of such a great and simplistic explanation.
I thank you Drakan, from the bottom of my heart for taking the time to offer help and advice to myself and others on this site.Another question for Mark, if I may, on your reply, you said that residencia renewal could be achieved in 2 weeks !!! Have you managed to achieve this yourself in such a short timescale? as I am still being led to believe it will take many months, maybe, possibly up to a year !!
Any tips to cut this time down? I intend to re apply this week and any advice/insight you can offer, before I do so, would be most appreciated.Many thanks again to both Drakan and Mark
Kind Regards
Flynn -
Dear Drakan, Thank you so much for explaining how the tax system works and is calculated. Your explaination is so clear and straight forward, it now all makes perfect sense. I only wish my lawyer and EA could have explained it this way, then I would not have felt as if I where going round in circles.
I hope that Mark will keep your reply on file, so that anyone else who comes forward in a similar confused state, will have the benefit of such a great and simplistic explanation.
I thank you Drakan, from the bottom of my heart for taking the time to offer help and advice to myself and others on this site.Another question for Mark, if I may, on your reply, you said that residencia renewal could be achieved in 2 weeks !!! Have you managed to achieve this yourself in such a short timescale? as I am still being led to believe it will take many months, maybe, possibly up to a year !!
Any tips to cut this time down? I intend to re apply this week and any advice/insight you can offer, before I do so, would be most appreciated.Many thanks again to both Drakan and Mark
Kind Regards
Flynn -
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@Anonymous wrote:
Drakan, your last paragraph was very interesting regarding minimising the CP amount. I have never been offered this service by any lawyer. Do I have to suggest it to them?
You’re welcome Flynn.
Hi Guest.
Your lawyer ought to do this automatically when hiring his service to file a Tax model 212 to obtain a refund for the 5% withheld money (being yourself the NR seller).
It has to do with the amount of costs you had -and can prove- at the time of the purchase plus other technical legality issues.
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@Anonymous wrote:
Drakan, your last paragraph was very interesting regarding minimising the CP amount. I have never been offered this service by any lawyer. Do I have to suggest it to them?
You’re welcome Flynn.
Hi Guest.
Your lawyer ought to do this automatically when hiring his service to file a Tax model 212 to obtain a refund for the 5% withheld money (being yourself the NR seller).
It has to do with the amount of costs you had -and can prove- at the time of the purchase plus other technical legality issues.
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