Selling your property in Spain? You have to read this!

The sale of a property in Spain can result a complex process, particularly if you don’t have the right information in advance. If you are planning to sell your property, the following information will help you to be prepared for that moment and will help you to avoid unpleasant last minute surprises.

Firstly, let’s see what TAXES you will have to pay when selling a property in Spain, as non resident:

Plusvalía. This is a municipal tax payable to the local council (“Ayuntamiento“), based on the increase of the official value of the land between the purchase and the sale dates.The increase in the value of the land is calculated by taking the catastral value of the property at the time of selling (this is a value stated on the Rates bill issued by the local Town Hall). You then multiply this by the annual rate that has been set by the local municipal council, taking into account the number of years you have had the property. Please note that when the seller is a non resident, and although this is a tax of the selling party, the buyer is responsible of the payment of the Plusvalia, and therefore he/she would like to retain the amount calculated for this tax from the purchase price.

Capital Gains Tax (CGT). This tax is collected by the National Tax Office (Agencia Tributaria). Unlike the Plusvalia, this tax is fairer because it is based exclusively on the actual profit obtained. Currently, Non Residents in Spain have to pay a 19% flat rate on the profit obtained (in this case we can deduct both purchase and sale costs). However, it is important to know that even if you are making no profit at all, due to you being a Non Resident, the buyer of your property will always be obliged to retain 3% of the sale price, and pay that amount to the Tax Office on account of your possible tax liability. Of course, if you have no tax liability at all because you are losing money with the sale, or your liability is less than the 3% retained, later on, you will be entitled to a total or partial tax rebate, depending on the case. Please note that: 1) The Tax Office will take between 6 to 10 months to pay the refund, and 2) Before paying the refund, the Tax Office will check that you have been paying your Non Resident Income Tax.

If you are making a substantial profit with the sale of the property in Spain, this 3% may not be enough to cover your tax liability. In this case you will have 4 months to pay the balance to the tax Office.
Please note that the tax is not 3% of the sale price + 19% on the profit. The tax is only the latter; the 3% retention is a payment on account of the tax, to put it bluntly, it is a way to avoid non residents selling and going back to their country without paying.

Let’s see how it works with an example:
You bought an apartment for 140.000 Euros and you sell it a few years later for 195.000 Euros.
The buyer will retain 5.850,00 Euros (3% of the sale price)  and will pay this to the Tax Office.
Once we add the purchase costs to the purchase price and we deduct the sale costs from the sale price, the final profit is 22.000 Euros, so your Capital Gains tax would be 4.180 Euros (19% of the profit).
As 5.850 Euros (the 3%) were already paid to the Tax Office on account of this, you will be entitled to get a refund of 1.670,00 Euros, which the Tax Office will pay into your bank account (approximately 6-10 months after the sale.)

A typical mistake is to believe that you will always get the full 3% back, and, as you can see, in the example above, that is not true. In fact, if the profit is higher, you will not receive anything back, and you will still have to pay an additional amount, to complete your tax liability (19% of the profit).

Finally, please note the following:

1. 1. The age of the seller is not a factor for Capital Gains Tax purposes (for Non Residents).
   2. The possibility to reinvest the sale proceeds is for residents only.
   3. You can not deduct the cost of reparations, refurbishments, etc. You can only deduct the costs of the improvements in the energy performance (change of windows, cooling/heating system, etc,.) and major reforms declared before the Notary, with building license, etc.

Estate Agency fee.  Most of the property agents in the Costa del Sol charge a commission between 4% and 6% + IVA.  This will come off the sale price, so you won’t be requested to make any payment on account (only a few Agencies will ask you to pay some money to list your property in their magazines).

Lawyer fee. The standard fee that most lawyers charge for advising clients during the entire process of selling a properly in Spain is 1% + IVA on the sale price, and most of them applies minimums and, sometimes, maximums. Some law firms, like ourselves,  offer better rates when the sale price is high. It is advisable to contact a lawyer at the early stages of a sale. They will confirm their fees and will also inform you about taxes, etc.

Certificate of Energy Performance. This has been compulsory in Spain since 2013, this is something you need to arrange BEFORE you put your property on the market. You can be fined for advertising your property for sale (or long term rent) without this Certificate. It can cost between 80 and 180 Euros for an apartment and between 180 and 300 for a villa (approx,). You can ask your property agent to organise this for you.

Mortgage cancellation costs. If there is a mortgage charge on the property that you want to sell, even it you paid it off years ago, you need to make sure that the charge has been lifted from the Property Registry. This involves Notary and Land Registry fees, and you should allocate approximately 800,00 Euros for this. Remember: even if you have paid the mortgage totally, you still need to remove the charge from the property in the Land Registry, and unless you instruct the bank to do it, that will not be done.

Finally, some tips from Bravo Legal, for those thinking of selling their property in Spain:

1. 1. 1. Prepare a set of documentation for the property that must, at least, include: A copy of the title deeds (escritura de compraventa), a recent receipt of the Council Property Tax (IBI) and the Certificate of Energy Performance. Don’t wait until the estate agent phones you to say that he has a buyer for your property! If you don’t have any of these documents, it might take weeks to gather everything together and delays may cause the buyer to feel anxious. The time to prepare all this is when you put your property on the market.
      2. Make sure you are up to date with: the Council Taxes (IBI and BASURA), the contributions to the Community of Property Owners (if applicable), and with the Income Tax for Non Residents.
      3. If you have a mortgage, find out how much is still pending and remember what we said above about lifting the charge in the Land Registry.
      4. Ask for an appointment with a lawyer that specialises in Conveyance and ask for an estimate of your costs and taxes. This will help you to set your sale price and will avoid unpleasant surprises later on. You will need to produce a copy of your title deeds and the receipt of the Council Property Tax (IBI).
      5. Finally, once you have an offer that you are happy with, don’t sign anything until talking to your lawyer, otherwise you might be committing yourself without being aware of all the consequences and risks involved. And remember: in Spain verbal contracts are as binding as written ones, although obviously more difficult to enforce.

If you would like to receive a no-obligation quotation for our services in relation to the sale of your property in Spain, please fill out the following form, providing us with some information about the sale you are planning (price, conditions, location of the property, resident/non-resident status, etc.) and we will get back to you immediately.

The responsible of the Conveyancing department of Bravo Legal is Miguel Angel Bravo, Lawyer, registered in the Illustrious Bar of Malaga (“Colegio de Abogados”) with number 8.410.