Before initiating a property transaction in Spain, it's crucial to gather all necessary documentation. This includes obtaining a Certificate of tax residence, which proves your fiscal status, and a Nota Simple, an extract from the Property Registry that provides essential details about the property.
For newer constructions, you may need to secure a First Occupancy Licence, while older properties require a Certificate of Habitability. These documents are vital for ensuring a smooth sale process.
Many of the articles in this section of the website deal with buying property in Spain, however, what if you are planning on selling property in Spain, this guide will cover the main points that you need to consider – from estate agents to lawyers in Spain and from taxes to utility bills.
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1. Advertising the Property in Spain
Anyone who has spent any time in Spain will have seen the Se Vende signs protruding at various angles from houses and apartment windows. However, this is quite old fashioned, and is not seen nearly as often nowadays.
Another possibility that has proved popular in more recent times has been to advertise the property via an internet property site. Of course, this has the potential to reach a much larger audience, located anywhere in the world, though the effectiveness will depend on the website chosen to market the property in Spain. Some of these companies offer their services for free, while others charge.
Of course, another, more traditional method, would be to contract a local estate agent to market the property. As previously mentioned the biggest downside of this is the fact that the agent will charge a fee, though it is worth pointing-out that this will normally be a portion of the sales price, and therefore they have to be successful in order to benefit.
When listing your property, especially in popular tourist destinations like the Canary Islands or Balearic Islands, highlight unique features that appeal to both local and international buyers. These regions often have specific regulations and tax considerations that may affect the sale process.
2. Practical Tips for Marketing a Property for Sale in Spain
To sell your property quickly and at the highest possible price, it's essential to focus on presentation and effective marketing strategies. Here are some practical tips:
- Enhance Curb Appeal: First impressions matter. Ensure the exterior of your property is well-maintained. This includes mowing the lawn, trimming hedges, and possibly adding some potted plants for a welcoming touch. A fresh coat of paint on the front door can also make a significant difference.
- Professional Photography: High-quality photos are crucial as they are the first thing potential buyers see online. Hire a professional photographer who can capture your property in the best light, highlighting key features and spaciousness. Aim to include around 25-30 photos in your listing to give a comprehensive view of the property
- Declutter and Depersonalise: Remove personal items and excess furniture to make the space appear larger and more inviting. Potential buyers need to envision themselves living in the space, which is easier when it's not cluttered with personal belongings
- Highlight Key Features: Craft an appealing property description that emphasizes the best features of your home, such as a newly renovated kitchen, proximity to local amenities, or stunning views. Be honest but highlight the aspects that set your property apart from others
- Utilize Online Listings: List your property on popular real estate websites. These platforms attract a large number of potential buyers and offer various tools to enhance your listing, such as virtual tours and floor plans. If you have engaged a reputable estate agent to market the property, they should take care of this for you.
- Set a Competitive Price: Conduct a market study to set a realistic and competitive price for your property. Overpricing can deter potential buyers, while underpricing can lead to a loss. Use tools available on real estate websites to estimate your property's value accurately
- Leverage Social Media: Promote your property through social media channels. Share your listing on Facebook, Instagram, and other platforms to reach a wider audience. Social media can be particularly effective in attracting international buyers.
- Prepare for Viewings: Ensure your property is clean and tidy for viewings. Consider 'staging' each room with tasteful furniture and decor to help potential buyers see the full potential of the space. Keep the property well-ventilated and well-lit during visits.
3. Spanish Real Estate Agents Fees
At the height of the Spanish property boom that gripped the country in the early 2000s, it was possible for a real estate agency to charge as much as 18% of the sales price!
However, in the current market, and due to competition from marketing models developed on the internet, mentioned previously, fees have been in a long-term decline, such that it is quite normal to be quoted a fee of anywhere between 3% and 5%.
One thing to be careful about when dealing with an estate agent is the possibility that they will request that you sign an exclusivity contract, i.e. that you will not contract any other real estate agency or company to market your property.
While you may be able to negotiate a lower commission rate if they are given exclusive rights to market the property, this has to be balanced against the benefit to be gained by being able to market the property across a number of agencies and internet sites.
Any contract, be it exclusive or otherwise, should clearly state the commission fee the agent will charge for successfully marketing the property.
One of the main benefits of contracting a local estate agent is the possibility of them being available to show the property in Spain when you may be out of the country. They will also know the best forms of local marketing, such as which papers to place adverts in. But you would be advised to ask them what forms of marketing they will be using to market your property to get a better idea.
Before engaging an agent, request a Certificate of outstanding debt to ensure there are no unexpected financial obligations attached to the property.
This includes verifying that all Local Council Rates and fees to the Community of property owners are up to date. The valor catastral, or cadastral value, of the property should also be checked as it impacts various tax calculations.
4. The Selling Process: Closing and Payment
Once an offer has been made and accepted on the property, then typically the buyer's lawyer will carry out due diligence checks on the property in Spain. Assuming no issues arise, the next advisable step is to prepare and sign what is known as a 'deposit contract'. This involves a deposit being paid by the property purchaser which effectively grants an exclusive right to purchase with a date being fixed for the purchase to be finalized.
During the closing process, you'll need to present various forms of sale documentation, including your identity document and the purchase-sale contract. Payment can typically be made via bank cheque or bank transfer, depending on the agreement between parties. Ensure that any existing direct debits related to the property are cancelled or transferred to avoid future complications.
Should the sale not go through due to a change of heart on the part of the purchaser, then their deposit, often 10% of the purchase price, is lost. During the selling property in Spain process, should the failure of the property transfer be caused by the vendor then they are obliged to pay the purchaser 20% i.e. double the amount of the deposit.
Once again, assuming that everything happens smoothly, the next important date is 'the closing'. This is a meeting that will include any or all of the following: the purchaser, the vendor, their legal representatives, the bank representatives and the notary. The notary is required as the purchase deed is a public document and requires a notary to formally witness it.
At the closing stage it will be necessary to sign the public deeds of ownership, though it is sufficient for your lawyer to be present if they have full power of attorney.
5. Transfer of the purchase monies
Payment is made typically with a bank guaranteed cheque, though it may be possible to use the notary's escrow account. The public deeds will contain a detailed description of the property as well as contain the details of the purchaser, vendor, the purchase price, form of payment and any other relevant conditions.
6. Contractual Terms
It is worth highlighting the point that it is advisable to contract the services of a lawyer for the sale of such an important and costly asset as Spanish property.
There can be many terms in a typical deed of sale-purchase of property, and such terms can assign responsibility for the payment of taxes such as the sales taxes on one or other of the parties, regardless of who is typically responsible for their payment.
Therefore, to avoid the possibility of unwittingly accepting responsibility for taxes that you are not liable for or indeed agreeing to any other disadvantageous terms, make sure to have a qualified lawyer assist you with the sale.
7. How much tax do you pay when selling property in Spain?
A transfer of property in Spain can function differently from other jurisdictions and so it is important to be aware of the assumptions that the law makes with regards to responsibilities and liabilities for payments of taxes and charges when selling property in Spain.
The tax implications of selling property can vary depending on your residency status and whether the property was acquired through inheritance or as an investment. Non-residents should be particularly aware of the need for a Certificate of tax residence from their home country to avoid higher withholding taxes.
In the context of taxes payable on the sale of property in Spain, it may be worth mentioning that a sale does generate a potential obligation to pay taxes, it does at least avoid potential liability for inheritance tax in Spain, which may be more costly when legal and notary fees are taken into consideration.
The main taxes and charges connected with property ownership include the following: IVA or ITP (VAT on new or second-hand homes) Plusvalía , IBI (Local Municipal Tax), Comunidad Charge (If in a shared building or urbanisation), utility bills and, of course, any mortgage on the property.
8. ITP
Where the property being sold is second-hand then the tax payable is ITP and the rate is typically between 7% and 8% depending in which region the property is located, as ITP is set by the regional government rather than at a state level and so varies a little as between each region.
When buying a new property IVA is paid on the purchase price to the developer or promoter when buying the property. It is then the responsibility of the developer or promoter to make their IVA returns to Hacienda (Spanish Tax Authorities) in the usual way. If a second-hand property is being purchased then it is the responsibility of the purchaser to pay this tax directly (using form 600) in the local tax offices within one month of signing the deeds.
9. IBI
Municipal tax in Spain is know as IBI (Impuesto de Bienes Inmuebles). It may be the case that the vendor has already paid the local municipal property Tax in Spain for the full year, yet will only be in the property for a portion of that time.
If that is the case then upon facilitation of receipts showing payment of the tax, a vendor will be entitled to add this extra amount to the price of the property. In any case the new property owners will be anxious to see receipts for the previous and current years IBI as they are otherwise liable. The purchaser's lawyer will typically request a copy of the town hall receipt showing payment was made by the vendor.
10. Plusvalía tax
This tax is ordinarily the responsibility of the vendor as they have benefited from the increase in the value of the property since they previously bought it.
This is not written in stone however and should the two parties come to an agreement it can become the responsibility of the purchaser to discharge this liability. In fact, where the vendor is a non-resident this liability actually shifts to the purchaser.
Of course if the vendor is resident and reinvests the funds in another primary residence then there is no liability for plusvalía. If however, the vendor is a non-resident then the purchaser is obliged to retain 3% of the selling price and pay this to the tax office. Evidence of payment is demonstrated with a stamped copy of form 211 and the vendor can then deduct the same amount from the selling price.
11. Tax on Capital Gains
As is the case when you sell property in the UK or indeed sell any overseas property, you may have to pay capital gains tax when you sell property in Spain.
The amount of capital gains tax in Spain that you must pay is a function of the difference in the property prices paid and received in the purchase and sale of property in Spain. The idea is that if you have made a capital gain, you must pay tax on that capital gain. Given the increase in Spanish property prices over recent years, this can be a considerable sum.
- Up to 6.000 Euros: 19%.
- From 6.000 to 50.000 Euros: 21%.
- From 50.000 Euros to 200,000 Euros: 23%.
- Above 200,000 Euros: 26%
Non-resident EU citizens in Spain pay a standard rate of 19% and this rises to 24% for non-residents from outside the EU/EEA.
Firstly, it is necessary to take into account that on the day of the signing of the sales deeds, the purchaser will retain 3% of the sales price in order to comply with their obligation to deposit this amount with the Spanish tax authorities, using Form 211, within a period of one month.
12. Exemptions from Tax on Capital Gains
An exemption from Capital Gains tax exists for those residents over the age of 65 or those who reinvest in a new Spanish property.
The period for reinvesting the funds in the purchase of a new personal, primary, principal home is 2 years from the date of the sale of the property.
If a Spanish tax resident - or a tax resident of any EU/EEA state sells the home dwelling (having lived there for a minimum of 3 years prior to the date of sale) AND being 65 years of age or more, then the capital gains tax is totally tax free, without any other requirements: Article 38 of Law 35/2006.
If the seller invests the proceeds (fully or partially) of the sale of the Spanish property (being this property the habitual residence) in another property with the same purpose (being used as habitual residence), those funds would be tax free -this exemption is only to be applied to the citizens of certain countries (all of the European Union, and Iceland and Norway)-.
Should there be no profit on the sale (or if the profit is less than the 3% of the purchase price initially retained by the buyer), there then arises the possibility of claiming back from the tax authorities the whole of the 3% retention or part thereof. Being able to do so may also depend on other factors such as having paid the previous four years non-resident tax.
13. Capital gains tax rate changes following Brexit
Now that British citizens are considered non-EU citizens- for tax purposes - any profit on the sale of a property where the British citizen is non-resident in Spain will be taxed at a standard rate of 24%.
On the other hand, should the British citizen be ordinarily resident in Spain, they will be taxed at the same rate as other residents i.e. in a range of 19% - 26%.
14. Lawyers Fees
Legal fees will vary according to the law firm you instruct to assist with the sale of the property, but will typically amount to somewhere between 0.5% - 1% of the value of the property.
15. Non-Residents: 3% Withholding Retention on Selling
Firstly, it is important to distinguish between the vendor who is a Spanish resident and the vendor who is non-resident.
In the latter case, there are tax implications in that 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 Spanish tax office, 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.
16. Additional Costs
Finally, and in addition to the taxes that correspond to the vendor it is convenient here to mention the other costs associated with a property sale, like for example the Energy Efficiency Certificate.
This is a type of registrable Energy Performance certificate that measures the energy consumption of the property as compared to an established norm, and which must be taken to the Notary on the day of the signing.
Also, worth mentioning are the expenses associated with the cancellation of any mortgage held by the vendor as well as the Notary fees and the contingent Spanish land registry expenses.
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17. Frequently Asked Questions
How do I avoid Capital Gains Tax on my property in Spain?
- Primary Residence Exemption: If the property has been your primary residence for at least three years and you are over 65, you may be exempt from Capital Gains Tax.
- Reinvestment in Primary Residence: Reinvesting the sale proceeds into another primary residence within two years can exempt you from the tax.
- EU/EEA Residents: If you are an EU/EEA resident, reinvesting in a property within the EU/EEA may also qualify for tax relief.
What taxes do you pay when you sell a property in Spain?
- Capital Gains Tax (CGT): You must pay CGT on the profit made from the sale. The tax rate ranges from 19% to 26%, depending on the amount of gain.
- Plusvalía Tax: This municipal tax is based on the increase in the value of the land since its last sale. The rate varies by municipality.
- Income Tax for Non-Residents: Non-residents must pay a 3% withholding tax on the sale price, which is deducted by the buyer and paid to the tax authorities.
What are the rules on selling a property in Spain?
When selling a property in Spain, you need to follow these rules:
- Property Ownership: Ensure you have clear legal title to the property.
- Energy Performance Certificate (EPC): Obtain an EPC, which is required by law before selling.
- Capital Gains Tax (CGT): Be prepared to pay CGT on the profit from the sale. Rates range from 19% to 26%.
- Plusvalía Tax: This municipal tax is based on the increase in land value since its last sale.
- Non-Resident Sellers: Non-residents must have 3% of the sale price withheld by the buyer for the tax authorities.
- Legal Fees: Consider costs for notary, land registry, and potential real estate agent fees.
What paperwork do I need to sell my house in Spain?
- Title Deed (Escritura): Proof of property ownership.
- Energy Performance Certificate (EPC): Required by law to provide to buyers.
- Property Registry Extract: Confirms the property details and ownership.
- Habitation Certificate (Cédula de Habitabilidad): Certifies that the property meets basic living conditions.
- Tax Information: Including proof of payment for local taxes (IBI) and recent utility bills.
- Community Fees Certificate: If the property is part of a community, proof that all fees are up to date.
- Mortgage Information: Details and clearance certificate if there is an existing mortgage.
What is a Nota Simple and why is it important when selling property in Spain?
A Nota Simple is an official document issued by the Spanish Land Registry that provides key information about a property, including ownership details, mortgages, and any legal claims against it. It's crucial for sellers as it verifies your right to sell the property and alerts potential buyers to any issues that might affect the sale.
How does selling property in the Canary Islands or Balearic Islands differ from mainland Spain?
While the general process is similar, these island regions have some specific tax regulations and property laws. For example, the Canary Islands have a special tax regime that can affect capital gains calculations. Always consult with a local expert when selling property in these areas to ensure compliance with regional regulations.
