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Taxes associated with Buying & Selling Property

- Updated: 19/03/2012
Taxes associated with Buying & Selling Property

When buying a house in spain it is important to give some thought to the taxes you will have to pay. Of course, as in the uk, there are also on-going costs and taxes to consider and these will largely depend upon the overall (declared) value of your property aswell as your local Ayuntamiento.

Taxes to be paid upon purchase

Re-sale purchase tax: buyers of re-sale property (as opposed to new or offplan property) are required to pay the Impuesto de Transferencia de propiedad - transfer tax - 8% of the declared value

New properties purchase tax: buyers of brand new houses in spain are liable to paying 4% iva (vat) if the house is finished or is being built at the time of the purchase, plus an extra 1.2% stamp duty. However, if you are buying, commercial premises or parking spaces & garages, then the vat due rises to 16%.

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Capital gains tax payable to spanish treasury: when a property sale in spain takes place, a capital gains tax must be paid by the seller. According to Spanish fiscal law, the buyer withholds 5% of the total purchase price to make sure that the seller does not fail to make this payment. This sum is calculated on a capital gains tax on the profit made by the seller at the time of the sale (the difference between the current (official) sale price and the price paid when he originally purchased the property + the value of any reforms and improvements carried out since then).

The capital gains tax is payable to the spanish treasury (Tesoro P˙blico) and is 5% of the profit for for non residents and 3% for residents. The estimated amount retained at the moment of the sale is payable once everthing has been presented to the local registry and the new deeds are available. This means that property sellers not living in spain will have to arrange for their lawyer to see to the necessary paperwork and to formalise the full tax payment a few months after the sale. The final amount could be as much as 30% the profit you make on your sale, so if there is a very big difference between the price you are selling for and the price you originally paid, it might be worth applying for residency before you sell (nationals of eu member states are automatically granted residency, although the paperwork can be a bit tedious) in order to be elegible for the reduced percentage for residents. Please note also that you need a NIE to pay this tax. Any seller who is over 65 and has been a legal resident in spain for the last three years does not have to pay this tax. Residents and non-residents who purchased the property they are now selling before december 1986 are also exempt from the capital gains tax.

In order to minimise these taxes it is common for sellers to ask for a sum to be paid in cash in order to keep the official declared value of the property down to a minimum and keep the resulting taxes down. Be sure to take advise from your lawyer before agreeing to this.

PlusvalÝa tax: the local authorities determine the amount of plusvalÝa to be paid for each purchase of property in spain, depending on the area where the property is located

Overall cost of purchasing property in Spain

Generally the taxes and costs associated with buying a property in Spain will be around 10% of the value of the property your are buying.

Further details on changes to transfer taxes, capital gains taxes and stamp duty as from 16.03.2012 can be read about by clicking HERE.

Comment on this Article

 
We would like to claim back the 3% which was retained when we sold our property in Jan 2012. Although we were fiscal residents we did not have the certificate ( the hacienda would only deliver it to the house, not give it to us personally, we were not living in the house at the time.) We are both over 65 and had lived in the house for 10 yrs, so no capital gains to be paid. My husband receives a Spanish pension for the years he worked in Spain. Thank you
Veronica Flitney - Fri 18th Jan 2013