Taxes on Spanish property are notorious high – those when you buy can be as much as 12% of the purchase price and capital gains tax can send them soaring when you sell. It’s therefore useful to know how to save money on real estate transactions. In this article, we look at how to save taxes when selling your property in Spain.
What Taxes Do You Pay When You Sell Property in Spain?
But before we turn to ways to save taxes, lets start by listing the main taxes and fees incurred when you sell property in Spain.
Plus Valía Tax
Plus Valía tax (meaning ‘extra value’) is levied by the local council on the change in value of the property since you bought it. It is calculated based on the cadastral value of the property and takes several factors into consideration including:
The length of time you have owned a property – the longer your ownership, the higher the tax.
The size of the property – large properties pay more than smaller ones.
The property’s location within the municipality – properties in areas with more municipal services and facilities attract higher levels of plus valía tax.
Plus valía tax is calculated up to the day you sell. Enquire at the council or ask your lawyer to find out how much the tax will be. If the property is large and you’ve owned it for several years, the bill could be several thousand euros.
Capital Gains Tax
As is the case in most countries, Spain levies capital gains tax (CGT) on the profit made from the sale of assets including real estate. Its rate ranges from 19% for Spanish and EEA residents to 24% for non-EEA residents.
Find out about buying and selling property in Spain.
Real Estate Agency Fees
If you choose to use the services of a real estate agency to sell your property, you will have to pay their fees. These are usually 5% of the purchase price.
Legal and Other Fees
It’s always advisable to use a lawyer experienced in real estate when you sell a property in Spain. Fees are usually 1% of the purchase price.
As the vendor, you are not liable for notary or land registry fees.
Selling your home in Spain now? Find out how to avoid these mistakes.
How to Save Taxes When Selling Your Property in Spain
Unfortunately, the taxes listed above are unavoidable so it’s impossible not to pay taxes when you sell your property. In fact, there are no ways of saving on plus valía tax. However, take professional advice when your council levies the tax to find out if it has been applied fairly and using the right criteria.
Saving on capital gains tax on Spain
The good news is that there are ways of saving on CGT or at the very least, bringing down the cost of the tax.
Exemptions from CGT
The best saving of all is, obviously, paying no tax. You are exempt from CGT in the following circumstances:
- If you are 65 or over, tax resident in Spain and selling your home that you have lived in for at least the last three years.
- If you are tax resident in Spain, selling your home that you have lived in for at least the last three years and reinvest all the profit in your next home (in Spain or the EEA). You must reinvest the profit within two years of selling the property.
Did you know? You are only Spanish tax resident if you are registered with the Spanish tax authorities and have a certificate to prove it. A Spanish residence permit is not proof of your tax residency. Find out about tax representation in Spain
Savings on CGT
If you don’t qualify for exemption from CGT, it’s worth doing all you can to bring down the bill. One of the best ways to do this is to include expenses you have incurred during ownership, for example:
- All fees and taxes associated with the purchase, e.g. legal, notary and land registry fees; property taxes.
- All fees and taxes associated with the sale, e.g. real estate and legal fees, the costs of documentation such as the energy efficiency certificate or Community of Owners certificate.
- All home refurbishments and improvements you carried out while you owned the property such as an extension, new kitchen, swimming pool etc. Note that maintenance costs do not count.
Did you know? The above expenses are only valid if you have an official invoice (including VAT) for the service.
Get Expert Help
The only guaranteed way to ensure that you make all possible savings on taxes when selling your property in Spain is to use professional services for conveyancing and taxes. The expert team at Costaluz Lawyers provides both and we’d be only too happy to help you pay less. Get in touch for a free consultation now.
Maria Luisa Castro
Hi there I’ve just sold my house in spain and I lost alot of money because of the estate agent she told me I have to pay taxes and when I sold my property they took €9000 I don’t know why so much but I was told I could claim it back as long I’m up to date with paying taxes every year and they will deduct it and they will refund it to my bank account but I have not heard nothing from my lawyer it was abit strange what went on with my property but what done is done and I would just like to claim some money back as my lawyer is not answering me
Dear Stuart:
I’m sorry to hear about your challenging experience with the property sale in Spain. It sounds like you’ve faced some complications, and the lack of clear communication from your lawyer is understandably frustrating.
Here’s a brief overview of the situation and some potential steps forward:
Retentions for Non-Residents: If you are not a resident in Spain, when selling a property, the buyer is obliged by law to withhold 3% of the purchase price and pay it to the Spanish Tax Office on behalf of the seller as an advance payment towards any potential capital gains tax liability. If you’ve sold at a loss, you should be able to claim a refund of this amount, or a portion of it.
Documentation: For any refund claim, you will need all relevant documentation related to both the purchase and sale of the property, including any costs incurred in both transactions.
Seek Assistance: Given that your lawyer is not responding, you might consider seeking assistance from another legal professional or gestor (an administrative agent) in Spain who can guide you through the tax claim process.
Tax Return for Non-Residents: To claim the refund, you’ll need to file a tax return. This is the “Impuesto sobre la Renta de No Residentes” (IRNR). The refund process can take several months.
Local Taxes: Ensure you’re up to date with local taxes, like the Plusvalía Municipal tax, which is based on the increase of the land’s value and is payable to the local town hall. If you’ve sold at a loss, there might be provisions for a reduction or exemption.
Contact with Lawyer: It might be worth sending a formal letter or email to your lawyer expressing your concerns and the need for prompt action. If there is no response, you may consider filing a complaint with the local bar association or seeking advice from another attorney.
Alternative Communication: Sometimes, reaching out to your lawyer’s office by phone or visiting in person (if possible) can yield quicker results than emails or messages.
In conclusion, while the process can be intricate and potentially lengthy, you have avenues available to potentially reclaim some of the money you feel you’re owed. Due to the intricacies of Spanish property and tax law, it’s advisable to have a professional on your side. If your current lawyer isn’t responsive, considering alternative professional help might be a wise step. We will be pleased to help you with this and offer to you our terms and conditions
Best regards
Maria L. de Castro
General Director
Costaluz Lawyers