Guide to Costs & Taxes When Selling a Property in Spain
This guide sets out a summary of all the taxes and costs
involved when selling a property in Spain.
1. Plusvalia
The main tax applicable to property sales in Spain is the
plusvalia municipal sales tax, also formally known as the “tax on the increase
of value of urban land”. Although the name implies that it is a sort of capital
gains tax calculated on a percentage basis, in reality it a fixed amount
calculated on a series of indexes and rates set by local authorities.
Given that the plusvalia applied irrespective of a capital
gain, there has been a considerable criticism over the past years because it was
deemed a form of double taxation and owners had to pay it even if selling for a
loss. In view of this, a 2019 judgment from Spain´s superior tribunal declared
that the plusvalia does not apply if there is no capital gain. This has
resulted in numerous claims against the tax office from owners affected by the
global financial crisis who sold at a loss when property prices dropped
considerably in Spain.
The amount payable of plusvalia can be estimated by contacting
the local tax office. In the case of Costa del Sol, the Malaga Province Tax
Office (Patronato de Recaudacion Provincial) has an online calculator that can
determine the value by entering the tax reference and the relevant transaction dates.
After completing the sale at the notary, resident owners
have 30 days to submit the plusvalia payment application in their local tax
office. The actual payment letter is issued circa 1 to 3 months thereafter.
In the case of sellers who are not tax-resident in Spain, it
should be noted that buyers have the obligation to retain the plusvalia irrespective
of whether there is a loss or gain (see details in section 3 below).
2. Capital Gains Tax
The rates of capital gains tax (CGT) applicable to real
estate transactions in Spain depends on the tax-residence and nationality of
the seller as follows:
(i) Sellers who are tax-resident in Spain irrespective of
nationality pay a 19% CGT. It should be noted that if the sale concerns the
primary residence and the seller then buys another property within two years or
is retired, no CGT applies.
(ii) Non-resident sellers from the EU and some EEA countries
also pay 19% CGT.
(ii) Non-resident sellers from third countries pay 24% CGT.
With regards to the latter, British owners who are not
tax-resident in Spain should be aware that they may be subject to a higher rate
of tax due to Brexit, if the UK and Spanish government do not enter into a
specific arrangement. This is not a retaliatory measure by Spain, but these
pre-existing rates could apply because the UK unilaterally opted to become a
third country by leaving the EU.
3. Retentions
applicable to non-resident sellers
If a seller is not tax-resident in Spain, which is the case
for holiday home owners who reside more than half the year outside the country,
the buyer has the legal obligation to retain 3% of the purchase price. This
main retention levy is known as the 211 retention (per the tax form number) and
consists of a security levy paid to the tax office.
The 211 retention is made at source; this means that in
practice the seller receives 97% of the purchase price and the buyer pays the
3% retention to the tax office “on behalf of the seller”. Failure to retain or
to pay the taxes under form 211 to the tax office would result in penalty for
the buyer.
This retention is not a tax as such, but a security levy
paid to the tax office to guarantee the payment of any tax debts and
liabilities of the seller. As a result, it can be recovered in full in the
event that:
(i) The property is sold at a loss (so no CGT applies); and
(ii) the seller has no tax liabilities with the tax office
(namely, no debts in regards to IBI council tax or the non-resident owner´s tax
known as the form 210 tax).
Unfortunately, the recovery of the 211 retention can take a
couple of months or even years, but it is advisable for sellers to request it,
because it can be a significant amount. The recovery process of the 3%
retention is administrative in nature, so owners or their representatives need
to file the relevant form and supporting documents.
In addition to the 211 retentions, buyers have the
obligation to retain the plusvalia municipal sales tax when the seller is not
tax-domiciled in Spain. The value of the plusvalia retention is the same as the
estimate of the tax office. In the event that the seller sold at a loos, the
plusvalia is also recoverable pursuant to the 2019 judgement mentioned in
section 1 above.
4. Commissions
The commission payable to estate agents in Costa del Sol
tends to be 5% of the purchase price plus VAT in most instances. This rate of
commission is paid by the seller and forms part of the price. The best practice
is for the commission to be shared between the listing agency and the buyer´s
agency if there are multiple agents involved (this increases the chance of selling
the property considerably).
In some instances, an owner would pay a higher rate of
commission such as 6 or 7% plus VAT in order to incentivise agents to push for
their property, especially if there is a market downturn or many competing
properties in the area.
These rates of commission are justified on the basis that
the market in Costa del Sol is one of the most competitive in the world and
agencies have to invest considerably in marketing in Spain and abroad, because
most buyers are not locals. In addition, it is not a very “liquid” market with
lots of activity as in large cities like London, New York, Singapore, etc.
Therefore, it is important to attract as many potential buyers as possible
because most properties simply “do not sell themselves”.
5. Other costs to consider
Notary: The
Spanish Civil Code states that the seller is liable for the costs of the notary
“unless the parties agree otherwise”. However, 99% of the time, parties agree
for the buyer to pay for the notary costs, because it is standard practice and
it is best for the buyer to choose the notary to protect his interests.
Legal fees: In
view of the applicable retentions, non-resident sellers are generally
benefitted to instruct a local lawyer to advise them. The applicable rates
should be in the region of 1% of the sale price + VAT in accordance with the
recommended rates of the Malaga Bar Association (although in some instances
lawyers can offer a discount based on the scope of work and property price).
Certificates:
Some minor costs could apply if owners need to obtain an energy certificate
(this may require a site visit by a certified architect) or if the community
administrator charges to issue a community certificate of no-debts. These costs
are minimal but should also be taken in consideration.
Warning: Please note that this article is a general guide on costs and taxes. If you require specialist advice or require clarifications, please feel free to contact us.
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