Whether you manage the sale of your property yourself, or leave it in the hands of an estate agent, when you decide to put a property on the market in Spain, a number of questions arise that should be considered as they will have an influence on the asking price. To effectively manage this most important aspect of the sale, it is essential to be well informed and advised ahead of signing a contract of sale with the purchaser.
3% Non-Residents Retention
Firstly, it is important to distinguish between vendors who are resident and those who are non-resident. In the latter case, it is necessary to take into account that on the day of the signing of the property deeds, the purchaser will retain 3% of the sales price and does so in order to comply with their obligation to deposit this amount with the Tax Agency, using Form 211, within a period of one month.
This 3% contributes towards the total 21% (soon reducing to 19%) central government Capital Gains tax. Should there be no profit on the sale, there then arises the possibility of claiming back this 3%. Being able to do so may also depend on other factors such as having paid the previous four years non-resident tax. It is also possible to have the money paid directly to your UK bank account – you just need to have the lawyer managing this for you to make the appropriate application to the Tax Office.
In addition, there is the obligation to pay to the local Town Hall, the Tax on the Increase in Urban Land Value (known commonly as the Plusvalia Municipal). In order to calculate the amount of this tax, the ‘catastral’ value of the property when it is purchased is taken as a reference point, and this is multiplied by the number of years that have transpired since the prior purchase, and a percentage coefficient that is determined by each Town Hall locally.
It is worth noting that nowadays this tax is somewhat questionable given that it no longer reflects any real profit or loss incurred as a result of the purchase and sale of a property but rather the assessed ‘increase’ in value according to the Town Halls’ own particular mathematical rules. It is for this reason that in recent months some Courts have expressed opposition to the interpretation of the law by the Town Halls, considering that in order for the Plus Valia tax to be payable, it is necessary for there to exist a real increase in the value of the property. In any case, if you are selling a property at a loss, do not fail to pay the tax that will be demanded by the Town Hall, but rather consider the possibility of appealing the tax following advice from your lawyer. We shall provide more information on legal challenges of this type in a later article.
Finally, and in addition to the taxes that correspond to the vendor it is convenient here to briefly summarise the other costs associated with a property sale, like for example the Energy Efficiency Certificate, appropriately registered, that is obligatory to produce at the Notary on the day of the signing, and the expenses associated with the cancellation of any mortgage held by the vendor and Notary as well as the contingent property registry expenses.
Of course, in order to safely navigate the various legal requirements to ensure an orderly sale of your Spanish property assets, it is always advisable to obtain the advice and assistance of a qualified, registered solicitor in Spain.