WHEN you sell a property in Spain, there are various taxes you are required to pay to municipal and national authorities, on gains in the value of the land and capital gains, as well as any mortgage cancellation costs.
Once a sale is completed, the seller is liable for various taxes which must be paid to different authorities. The first is the Impuesto de Plusvalía (equivalent to capital gains tax), which is charged by your local town hall. This is calculated as a percentage of the change in value of the land on which the property stands and varies from town to town.
It’s worth noting that, even if you sell your property at a loss in terms of the sale price being lower than the price you paid, you can still be liable for this tax, as it is charged on the increase in value over the term of ownership, rather than prices paid.
Obviously, the longer you have owned a property, the higher the tax. I heard about a recent case where someone who had owned a property for more than 20 years had to pay a plusvalía of 50,000 euros. So, it is vital you calculate this cost before you put your property on the market or agree a selling price.
Then, there’s the Impuesto Sobre la Renta (the equivalent of income tax), which is payable to Hacienda (Spain’s central tax authorities). The taxable base is the difference between the original purchase price (plus taxes and costs incurred) and the sale price (minus taxes and costs), and is calculated depending on the seller’s status.
For resident vendors, this is levied as part of your income tax declaration. For non-residents, the rate is 21% of the taxable base. To offset this tax, the buyer is obliged to retain and pay 3% of the purchase price to Hacienda. If there is no gain, the seller can request a refund, but Hacienda will not return the 3% withholding until all the vendor’s taxes are paid up to date (including income tax and wealth tax, if applicable.)
If your property is mortgaged and the mortgage is to be paid off when the sale is completed, then all the costs incurred are normally the responsibility of the seller.
Finally, one of the biggest costs for sellers in Spain is the commission paid to estate agents. This is normally 5% of the agreed sales price, plus VAT. To sellers from overseas, this may seem high, but, this is an open, very competitive marketplace and unless your agent works out of a bar (and some do…) every agent I know that has tried to charge less eventually goes out of business.
All the other costs which arise from the sale of a property and its transfer to another owner – land registry fees, transfer tax and VAT, the notary’s fees for the new escritura, and the Impuesto Sobre Actos Jurídicos Documentados (AJD, the equivalent to stamp duty) – are usually paid by the buyer.