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Taxes when Selling Spanish Property

marbella-lawyers.com
2nd of May 2002

Capital Gains Tax (non-residents)

A non-resident seller is liable for payment of a 35% Capital Gains Tax on the profit of the sale of their property unless it was bought before January 1st 1.987. However, there are exemptions available for those who have owned their property since 1.994 and before. Also, the vendor can offset against the gain made on the sale other costs.

A vendor will be able to mitigate his tax exposure by three different ways:

Reductions on when the property was purchased

• Those who bought a property after the 31st of December of 1.994 will not be entitled to any reductions.
  
• Those who bought in 1.987 of after will enjoy of a reduction of 11.11% on the net gain for every year they have owned the property before the 31st of December 1996 after taking the first two years. This means that a seller starts benefiting from this reduction, his first 11.11%, if he bought in 1.994, 22.22% if he bought in 1.993 and so on.
  
• Those who bought before the 31st of December 1.986 will be pay not tax, as the cuttoff point is 1.996.
  

Reductions on the inflationary movements

This reduction is obtained by applying a percentage to the l purchase price, raising the original price to the level of the value of the peseta today. This inflationary correction factor is applied to the entire purchase price, as well as to all costs surrounding the purchase. Likewise, improvements and extensions on the property will have to be updated inflation-wise.

The correction factor to be applied will be the following:





Reductions on the inherent costs of the purchase, works done on the property and others.

• Costs of the purchase: these would include VAT or Transfer Tax, Plusvalía Tax (where paid by the buyer), Land registry and Notary fees, lawyer´s and real estate agent´s fees, where applicable.
  
• Extensions and improvements done on the property: These should not be confused with maintenance and conservation costs, as these are not deductible. In practice, there is no clear cut distinction between one and the other.
  

Examples of not deductible costs are repair or maintenance works, such as painting, repairs on heating systems, lifts, plumbing and so on.

Examples of deductible costs are the installation of iron bars, doors, double glazing windows and similar improvements on the property.

We've put together this Capital Gains Tax calculator so you can determine how much Cgt you will attract when you sell your spanish property.

Plusvalía Tax (Municipal Tax on the increase of the value of the land over the years)

From a little as a few thousands pesetas for small properties recently purchased to as much as a few million pesetas for larger estates purchased many years ago. This tax is calculated on the basis of two variables; ratable value of the property and number of years of ownership by the vendor. The market value or the sales price does not have an effect on this tax.

It is recomendable for the seller/legal representative to find out with the Town Hall the amount of tax they will demand.

Discuss this Article

• M Vaughan Says:

  Tue, Dec 30th 2008, 05:40

  Surely, the EU law reduced this unfair tax and Spain complied this year 2008 with the new law, therefore you need to update your site.

• Lawbird Lawyer Says:

  Tue, Dec 30th 2008, 10:57

  Dear Sir, You are absolutely correct. After a protracted process grounded on discrimination the European Commission forced Spain to equate the Capital Gains Tax for residents and non-residents alike leaving it at 18% as from the 1st of January 2007 not as from 2008 as you mistakenly write. We don't update old articles; we publish new ones with the new laws that are passed and we always include the date when they are published. The reason is that we have been publishing articles for over a decade and we can ill afford the time to amend each and every legal article every time a new fiscal law is passed, which occurs almost on a monthly basis as new laws are enacted every day and published in Spain's Official Law Gazette (BOE). What really matters is that the companys' lawyers are aware of the changes in law and are always up-to-date. In any case I confirm we will be writing a new updated article on this matter within the next weeks so as to avoid any further confusions in this important matter. Which is why it is a good idea to always ask a lawyer to confirm if the tax rates you've read in legal articles dating back years -such as the one you quote- are correct and updated. Quite often it will not be the case. Yours faithfully, Raymundo Larraín Nesbitt

• tricia Says:

  Mon, Jul 13th 2009, 15:14

  Do all pensioners have same rights when selling i.e Spanish and English etc? Does a pensioner pay tax when selling a property? If a pensioner has residencia, PADRON, NIE is this sufficient not to pay tax? Do they need to opt out of Ingles tax system and become fiscal tax resident in Espana? Kind regards

• Lawbird Lawyer Says:

  Mon, Jul 20th 2009, 13:00

  Dear Madam, Owners > 65 years old qualify for a CGT tax exemption on selling their primary dwelling in Spain (must be their main residence, not a second residence). Owners < 65 y.o. qualify for a roll-over benefit. They will not pay CGT taxed at 18% within the following 2 years subject to them reinvesting the sales proceeds in another property in Spain (or elsewhere) which must be used as their main residence (they must have lived in it the 3 previous years and wil lbe required to prove it providing conclusive evidence i.e. utility bills). On you speding more than 183 days in Spain you will become a fiscal resident and are subject to be taxed on your Worlwide income. This includes your UK pension, yes. A pensioner pays taxes on selling property, yes, Capital Gains Tax and Plus Valía tax with the exception above. Having residencia, NIE and Padrón makes no difference in you being liable to pay taxes on selling property. It will however affect your IHT bill. Being tax resident in Spain will make it unnecessary the buyer retains 3% of the sales proceeds on account of your CGT liability. In any case foreigners who live in Spain should join the Padrón: Embassy encourages foreigners to register on local ‘padrón’ Benefits of registering include tax reductions, access to social care and discounts 26.08.09 - Yours faithfully, Raymundo Larraín Nesbitt

• Jenny Says:

  Tue, Sep 15th 2009, 15:44

  Can you tell me please, if you have owned your property for less than 3 years when you sell (non-resident), are you liable to pay higher tax? By that I mean, is there a set number of years defined where if a seller has owned the property for less than that number of years (as a non-resident) when he/she sells, are they liable to pay higher tax?

• Lawbird Lawyer Says:

  Wed, Sep 16th 2009, 11:31

  Dear Jenny, No, it is not the case. You pay 18% CGT. Yours faithfully,

• John Connor Says:

  Mon, Oct 12th 2009, 00:32

  If I were to sell my property in Spain I understand I'd have to pay CGT. I live in the US now, so when I pay CGT in Spain, the US can't tax me on any of the money if I send it over here over a wire transfer, right?

• Lawbird Lawyer Says:

  Tue, Oct 13th 2009, 11:37

  If I were to sell my property in Spain I understand I'd have to pay CGT. I live in the US now, so when I pay CGT in Spain, the US can't tax me on any of the money if I send it over here over a wire transfer, right? Dear Sir, That is incorrect. In the case of UK citizens, with which I'm more familiar, they may have to pay CGT twice on selling Spanish property. Both to the Spanish Tax Office and also to the HMRC depending on how much is their UK tax rate. I'm unaware of the IRS but I suggest you query a US lawyer in the state where you live on this matter as you may be required to pay CGT twice (taxed on the difference in the US). Yours faithfully, Raymundo Larraín Nesbitt

• carole Says:

  Tue, Nov 10th 2009, 14:48

  i am non-resident in spain i brought holiday home in 2000.in2007 i brought a larger house but could not sell holliday home,i now have buyer for holiday home,can the profits and taxes be offset against property brought in 2007. yours faithfully carole

• Lawbird Lawyer Says:

  Tue, Nov 10th 2009, 17:51

  Dear Madam, You are querying in relation to post number 4? This will not be your case as it was not your main residence following your own post, it was a holiday house. The roll-over benefit wouldn't apply to you as it was not your main residence. Yours faithfully, Raymundo Larraín Nesbitt

• Sue Price Says:

  Thu, Feb 4th 2010, 13:05

  When I bought my finca it cost 42000euros. The valor catastral is now 39,847,89 pesetas. I make that about 239000 euros. Ihave extended the property to a large villa. What plusvalia would I be paying if I sell?

• Lawbird Lawyer Says:

  Thu, Feb 4th 2010, 13:24

  Dear Madam, You can request an estimation of the town hall where the property is located. You will need the original Title deed and the intended sales price and date of sale of the property. As a sidenote, I hope you registered the extension, otherwise your buyer may run into problems: Buying Property In Spain Part I. Buying Resale: Avoiding the Pitfalls - 31st January 2010 Quoting an excerpt: 2. Has the Property Been Registered Properly? It is commonplace that extensions on properties are unregistered at the land registry. You will only find out on requesting a mortgage loan when the bank either turns you down or else offers significantly less money than what you were expecting because the extensions remain unregistered i.e. a 4 bedroom villa which has only 2 bedrooms registered at the Land Registry. This problem can be easily overcome by signing a New Build Deed at the Notary and paying the associated local tax levied by the Town Hall for the extension. This deed is then registered and the property description is amended accordingly adapting it to reality. This ought to be done by the vendor prior to the sale, unless agreed otherwise. This case is especially true of rural properties. Other cases, such as illegal rural properties, may be fraught with legal problems i.e. the property had only been given a licence to build a small tool hut of 3x3 m2 to plough the fields and yet a villa has been built instead. Rural properties can be a legal quagmire and it is essential you retain a lawyer to act on your behalf and best advice you on the matter, from the very beginning. In other cases, for perfectly legitimate reasons, properties remain unregistered or they lack the Title Deed (escritura). i.e. property inherited from one generation to another. There are different legal ways to overcome this minor problem: Acta de Notoriedad or else following an Expediente de Dominio. Yours faithfully, Raymundo Larraín Nesbitt

• Senga Says:

  Tue, Feb 9th 2010, 20:46

  i live in the UK but we have a holiday apartment in Lanzarote which is in my husbands name only does this mean i have no rights to the property

• Lawbird Lawyer Says:

  Wed, Feb 10th 2010, 11:00

  Dear Madam, What nationality do you and your husband hold? Did did you marry in the UK? Yours faithfully,

• Paul Says:

  Thu, Feb 11th 2010, 10:38

  We bought a property in 1984 for the equivalent of 16.000 euros. We want to sell it to our son for a reduced price of 80.000 euros thought the real value is twice as much. Can you tell me if we will have CGT to pay and if so how much?

• Lawbird Lawyer Says:

  Thu, Feb 11th 2010, 11:24

  Dear Sir, The answer to your query is in the article which starts off this very thread: Taxes when Selling Spanish Property 2nd of May 2002 Capital Gains Tax (non-residents) A non-resident seller is liable for payment of a 35% (as from the 1st January 2007 this has been lowered to 18%) Capital Gains Tax on the profit of the sale of their property unless it was bought before January 1st 1.987. However, there are exemptions available for those who have owned their property since 1.994 and before. Also, the vendor can offset against the gain made on the sale other costs. A vendor will be able to mitigate his tax exposure by three different ways: Reductions on when the property was purchased Those who bought a property after the 31st of December of 1.994 will not be entitled to any reductions. Those who bought in 1.987 of after will enjoy of a reduction of 11.11% on the net gain for every year they have owned the property before the 31st of December 1996 after taking the first two years. This means that a seller starts benefiting from this reduction, his first 11.11%, if he bought in 1.994, 22.22% if he bought in 1.993 and so on. Those who bought before the 31st of December 1.986 will be pay not tax, as the cuttoff point is 1.996. Yours faithfully, Raymundo Larraín Nesbitt

• Christine Dalton Says:

  Fri, Mar 19th 2010, 00:04

  We sold our apartment in La Manga last October and although below the market price we thought ourselves lucky to sell as the market was not brilliant.We paid all our dues and more and were actually shocked at the amount of fees and taxes we eventually had to pay. OK we said we have at least brocken even...sort of. Then we are told that the government holds back another 3%.....for what??? We have been told that this will be reinbursed within 12/18 months when they can prove we dont have any debts etc on the property!! This is rediculious, before we sold the lawyer had to pay all bills etc and we owed nothing,if anything we now have lost money also when we do eventually receive this 3% it will be subject again to lawers fees and transfer fee's to our bank in the UK. Come on... where is the EU in all this,this would not and could not happen in the UK.What about the interest on my 3% for 12/18months...do the Spanish government get this...who pays for my lawyer etc. Not fair,..lets get our act together,there are so many people buying abroad and they should ot be ripped of!!!!

• Lawbird Lawyer Says:

  Fri, Mar 19th 2010, 11:36

  Dear Ms Dalton, On selling a property in Spain you are liable for two taxes only: 1. Capital Gains Tax: taxed at 19% for all sales after the 1st of January 2010 for both residents and non-residents alike. 2. Plusvalía tax: which is a tax levied by your Town Hall where the property sold is located and taxes the imputed increase in value of the land since you purchased it. The 3% you mention is not a tax. People often make this mistake. The 3% is a retention withheld by the buyer and paid into the Spanish Tax office on account of your Capital Gains Tax liability as a non-fiscal resident. CGT is paid normally on the following year after the property has been sold. The problem with non-residents is that the Spanish Tax office runs the logical risk that on selling-up in Spain you will vanish into thin air and never pay the CGT owed on the following fiscal year. This happened frequently with non-residents whether on purpose or not. Which is why this system of a retention was brought into place whereby a retention is applied on the buyer on account of the vendor's fiscal liability (so they do not run off to their homecountry without paying taxes on the sale of the property). The way it works out is as follows: CGT is taxed on the profit you make between what you paid for the property on buying it and what you have sold it for. So three scenarios are possible: 1. You make a profit. In which case you will be taxed at 19% on the said profit. the 3% withheld is used to pay this off. If there is a balanace it will be refunded to you providing your lawyer lodged tax model 212. 2.- You make a loss or you break even: you are entitled to a full refund of the 3% plus legal interests. The taxable base in tax model 212 can never be negative so it will be zero (break even). This refund normally takes on average between 12-20 months and will be paid into the Spanish bank account you designated. So bottom line, it is not a God-given right to be entitled to a full refund on the 3% withheld before the Tax office, this is also a common mistake. The refund will hinge on your CGT liability as explained above. I hope this clarifies the matter for you. If you're still in doubt just post your queries on this thread. Yours sincerely, Raymundo Larraín Nesbitt

• L Davies Says:

  Thu, Apr 8th 2010, 16:31

  Hi. We bought an apartment in Mallorca in 2005. We paid 240,000 eur however 60,000 was in "black" money. We have now received an offer to sell of 300,000 eur. We are non-residents. Will we have to pay 19% tax on the difference of 60,000 or would it be 120,000? We found out a year after we bought that the solicitor we used was dodgy (they were recommended by the estate agent who are no longer trading!) Many thanks

• Lawbird Lawyer Says:

  Thu, Apr 8th 2010, 16:54

  Dear Sir, That is exactly the reason why we always recommend not to underdeclare, besides being illegal of course. As you have offically paid and declared €180,000 you will now be held liable for the difference: 19% on the profit (€120,000) = €22,800. You can always offset expenses and invoices to bring the taxable profit down so as to pay less CGT. In your case you saved yourself by underdeclaring paying 7% on the €60,000 = €4,200 But you will now have to pay 19% on the underdeclared €60,000= €11,400 So basically you've lost €7,200 on having underdeclared. Yours faithfully, Raymundo Larraín Nesbitt

• Mr Roberts Says:

  Fri, Apr 16th 2010, 18:28

  Dear Sir/Madam We bought our Spanish property in 1999, but it was purchased by an non resident Company registered in the Republic of Ireland (Eire). Would the Spanish taxes be any less if we sold the Company, rather than the actual property and what would the taxes be? Many thanks

• Lawbird Lawyer Says:

  Mon, Apr 19th 2010, 10:46

  Dear Sir, If you sell the companies shares the taxes would be less than selling the property itself, yes. I don't have enough information to give you more details. This matter can become a whole lot more complicated. Yours faithfully,

• Richard Byrne Says:

  Wed, May 5th 2010, 11:11

  Is there an agreement on tax debtors from Spain returnng to ther country of origin. My pensionista sister 67, lived in Spain for 6 years but returned to Wales due to the continuing ill health of husband 67. Although she was registered on Padron and for NIE plus residencia, she did not become a fiscal tax resident. A 3% retention was, therefore, paid on a capital gain of 120,000 € in November 2009. Things are bad at present and she is paying for additonal care. ( By the way, she should not be payng ths tax because the lawyer and builder underdeclared the value of house by 100.000€. I think this contributed to stress and heart problems. Is she likely to be pursued by the hacienda for non payment of remaining capital gain as I would rather pay this for her f I can by instalments. How much would it be. Where do I go to pay and when? Please can you help us

• Lawbird Lawyer Says:

  Wed, May 5th 2010, 11:52

  Dear Mr Byrne, I would find it highly unlikley she will be pursued abroad, whether the UK or elsewhere, for this. That is exactly the whole purpose of the 3% retention practised on account of vendor's CGT; so if they sell on and "run away" back to their home countries at least the Spanish tax man has recouped part of the CGT liability. If you want to discuss this privately with me free of compromise, just for your reassurance, contact me. Yours faithfully, Raymundo Larraín Nesbitt

• Richard Byrne Says:

  Wed, May 5th 2010, 18:18

  Thank You so much for your help with my sisters problem. A great weight has been taken off the family. Your website is fantastic for those of us who are completely ignorant of the Spanish legal system. My sister was taken in when she bought the house and I advise all out there to take nothng forgranted . Check your lawyer is properly registered like lawbird and do your research. Thank you once again Richard and famly

• Lawbird Lawyer Says:

  Thu, May 6th 2010, 09:18

  You are welcome Mr Byrne.

• Mr Tron Says:

  Mon, May 17th 2010, 13:25

  Hi, I purchased a property in Spain in 1996 as a holiday home for the family- However as it's not being used I am looking to sell the place. During that time I have moved to Spain and become a resident as off 1 year ago ( previous to that I was uk resident). I am living in a different part of Spain to where my holiday house was and am building a new place here to which I have already purchased the land. What are the tax implications of selling the house I bought in 1996, taking in mind that I am now a resident and also that I have another property in Spain now? Thanks, Mr Tron.

• Ian Carter Says:

  Mon, May 17th 2010, 14:34

  My parents bought an appartment in Majorca in 1981 and are now looking to sell.As they have owned the appartment for so long,my undestanding is that they will not have any CGT to pay in Spain (though they will in the UK),but will they still have the 3% Retention/Withholding Tax deducted even though they have no CGT liability in Spain and then have to wait for 12/20 months for a refund.

• Lawbird Lawyer Says:

  Mon, May 17th 2010, 15:49

  Dear Mr Tron, It basically means you will not be able to benefit from tax allowances of any kind. You will be liable for 19% CGT and Plusvalía tax just like a non-resident. Unless you are able to produce a certificate from your Tax Office stating that you are a fiscal resident, in addition a 3% of the sales proceeds will be withheld by your buyer and paid into Tax office on account of your CGT liability. The roll-over benefit you are probably inquiring on CGT must be on your main residence, which is not your case. Besides, you nee to be resident to benefit from it and you may noit qualify either, at least yet. Anf finally you need to have lived in that property for teh last 3 years as your main residence and be able to demonstrate it. However there is an exception with an amendment that was brought in recently, providing you are resident in Spain, whereby prior to selling on your main residence you have bought another property in 2006, 2007 or 2008 exceptionally the deadline for this roll-over relief was extended over to the 31st of December 2010. Maybe you could qualify for that. You need to have purchased another property in the interim prior to the sell of your own main residence. Yours faithfully, Raymundo Larraín Nesbitt

• Lawbird Lawyer Says:

  Mon, May 17th 2010, 15:53

  Dear Mr Carter, Your understanding is correct. Regrettably unless they are able to produce at completion before the Notary public a certificate from the Tax office stating they are fiscally resident in Spain the 3% of the sales proceeds will be withheld regardless if they are almost exempt from paying CGT after holding the property for so long. They will of course be able to claim back the 3% after completing and lodging tax model 212. Yours faithfully, Raymundo Larraín Nesbitt

• Unregistered Says:

  Tue, May 18th 2010, 16:30

  Thanks for your response Raymundo. Where can I find out more information about this amendment? I was lead to believe that if I sold my property in order to buy another property there would be less tax to pay? This new place that i'm currently building in spain will be my main residence. Thanks, Mr Tron

• Lawbird Lawyer Says:

  Tue, May 18th 2010, 16:47

  You're welcome. Here you go: http://www.boe.es/aeboe/consultas/bases_datos/doc.php?id=BOE-A-2008-19437 This amendment simply extends 2 more years (capped at 31st December 2010) the normal roll-over relief of 2 years on selling your main residence on having purchased a second property (which will become your next main residence) in 2006, 2007 or 2008. Yours faithfully, Raymundo Larraín Nesbitt

• Highlander Says:

  Tue, Jun 1st 2010, 15:56

  I'm non-resident and purchased property in Tenerife in November 1989 and with all the tax changes things have become complicated so could anyone give me guidance on what I'd pay if selling. Let's say as a basic example I bought for £40,000 and sold now for £180,000. Further to this what happens if your total tax bill is greater than the 3% retention, do you pay anything above this. Am I right in thinking my CGT will be reduced by 66.66% i.e. 1994 11.11% 1993 22.22% 1992 33.33% 1991 44.44% 1990 55.55% 1989 66.66% I'd really appreciate any help.

• Lawbird Lawyer Says:

  Thu, Jun 3rd 2010, 10:07

  Hi, Yes you are right. Yes, you will be expected to pay above the 3% retention if your CGT liability exceeds it on the following year. The 3% retention withheld at completion by the purchaser and paid into the Tax office is on account of your CGT liability. This is explained in great detail in this post: http://belegal.com/forums/showthread.php?t=118&page=2#18 Yours faithfully,

• eric dixon Says:

  Tue, Jun 8th 2010, 17:43

  We are just in the process of selling our apartment We were told that a 10% deposit would go into our bank account this has not happened, the Lawyer has a cheque which is 6%. Also the exchange date has been brought forward a week.From start to finish the sell will have only taken 4 weeks is this normal. We have a lawyer but the estate agent used his one. Regards Eric Dixon

• Lawbird Lawyer Says:

  Tue, Jun 8th 2010, 18:07

  Dear Sir, It will depend on whatever was agreed. Normally on re-sale property you first pay a reservation deposit amounting to say €6,000 and then on exchanges you are paid 10% of the value of the property (less the initial reservation deposit). The third step would be completion in which the balance due is paid before the Notary Public and the Title deed is signed. You can of course skip the second step and jump straight to completion cutting down timelines as necessary to a couple of weeks, or even less. You really ought to query your lawyer on what's going on. You should be aware of everything that's happening during the whole conveyance procedure. After all, that's what you are paying for. You can read our re-sale conveyance overview: Buying Property from a Private Seller - 15th March 2000 If you have further legal queries, just post them here. Yours faithfully, Raymundo Larraín Nesbitt

• Hickman Says:

  Tue, Jun 8th 2010, 21:21

  Dear Sir, We sold a villa in Mallorca Oct 2008. We sold it totally legally (no black money) and made no profit. We handed over 3% retention of approx 700,000 euros, now after over a year and a half the Town Hall Tax people have decided that the villa was worth 1.2million euros and we not only do not get 3% back but we owe them over 6,000euros as well. All documents showing purchase, sell price and bank statements have been lodged but they are adamant that we owe them. This seems like theft what can we do?

• Lawbird Lawyer Says:

  Wed, Jun 9th 2010, 09:46

  Dear Mr Hickman, This is fairly common. You may want to read our blog post on the matter: Careful With the Tax Office When Selling or Buying at a Discounted Price - 26th November 2008 Before selling a property, you ought to make sure that the sales price is not below the value that appears lodged in the Tax office's books. You may request a binding valuation prior to selling, in which case you will NOT be sanctioned or taxed if you sell above or equal to this value, which is their value. If you sell below their assesd valuation for your property you will be held liable to pay extra tax. The Spanish Tax office is oblivious to the current economical environment of firesales, distressed assets, BMV sales etc...it just doesn't care. All it knows is that if you sell real estate below the value they have on their books they will request the shortfall in tax from you, period. However, the tax man is not always right and you have a right to challenge their valuations or tax assesments by what's known as a "tasación pericial contradictoria" or alternative appraisal. In fact, I can tell you from our personal experience that on challenging legally the Tax office's valuations we've been fairly successful. i.e. in one of our recent cases a Marbella villa with an assesed value of 1.8 million euros was sold on for 1.3million. The Tax office claimed from our clients (the buyers) 7 p.c. Transfer tax on the shortfall, half a million euros (some €35,000 in tax). We lodged the appeal and the tax bill came to zero. We charged €1,000 plus VAT and a further €1,000 plus VAT for the architect's report. Total expenses for our client: €2,320; total savings= €32,680. This was done under 5 months. So bottom line, even if you did not take the advisable precaution of requesting this assesd value from the Tax office prior to selling your villa you may still be able to successfully obtain a tax rebate, not all is lost. Yours faithfully, Raymundo Larraín Nesbitt

• us home Says:

  Tue, Jun 15th 2010, 21:28

  We recently sold a property in Spain and are planning to use the proceeds to buy a property in the U.S. Upon sale, we paid capital gains taxes in Spain. Will we have to pay capital gains taxes on the remaining amount in the United States before purchasing a new property in the U.S.?

• Lawbird Lawyer Says:

  Wed, Jun 16th 2010, 09:54

  Dear Sir or Madam, You would need to seek the advice of a US lawyer specialised in tax issues, specifically on the state where you intend to buy. This may well be the case if Spain charges less CGT than the US estate where you're relocating to. It is reasonable to expect to be charged for the balance if you're tax resident in the US. Yours faithfully,

• Mo Chapman Says:

  Wed, Jul 7th 2010, 22:12

  I am hoping you can help. My mum purchased a property in Spain in 2004 and paid 210,000 euros she thinks that they may have paid part cash (is this called "black money")? but is unsure currently how much and needs to look back at the records. She is now looking at selling and has had an estimated valuation of 145,000 euros. She is a UK resident and will be bringing the money back to the UK so please could you give me some indication of how much in taxes and any additional charges she may have to pay. Many thanks

• Lawbird Lawyer Says:

  Thu, Jul 8th 2010, 10:31

  Dear Sir or Madam Black money means underdeclaring. For example If I buy a property for an agreed price of €300,000 ina Private Purchase Contract but only end up declaring in the Title deed that I'm paying €200,000 I have effectively underdeclared €100,000. The reasons why a buyer would do this are many i.e. money laundering, saving yourself 7% or 8% (depending on whether it's a resale or a new build property) on the underdeclared amount etc. This practice, which used to be rife in the boom days, is illegal and in fact most of the times only benefits the vendor, not the smug buyer who mistakenly believes he's being smart but is actually being outsmarted by the vendor on not having done his Maths. As a buyer you are saving yourself either 7% on a resale (Property Transfer Tax) or 8% (VAT) on a new build but when you sell the property later on you will be taxed for the "profit" you've made (difference between what you declared you paid for and what you are receiving now). And this is taxed by Capital Gains Tax (CGT, for short): If you are non-resident in Spain, CGT is 19% If you are tax resident in Spain it's 19% for the first €6,000 profit and a flat rate of 21% for what exceeds said amount. So effectively you are going to pay much more taxes on selling than what you were trying to elude initially on buying; in some cases even double the amount of taxes (21-7 = 14% tax difference). So basically on underdeclaring you are actually paying, in the future, for the vendor's taxes, you are actually subsidizing the vendor's taxes! You can pay for a property part cash at a Notary Public and this does not mean its underdeclaring or "black money" so long as its declared (meaning tax is paid on this cash element). It would only be underdeclaring if this cash element was not declared in the Title deed which means that no taxes are paid on this cash element as it has gone undeclared before the Notary witnessing the transaction. I cannot give you an estimation because you are not giving me the facts correctly. One thing is what your mother paid, 210k, and a different matter altogether is what she actually declared in the Title deed which can be 210 or less. Vendors are liable for both Plus Valía tax (local tax levied by the Town Hall) and for Capital Gains Tax. I would advise you to hire one of the British currency exchange companies to send back your money to England, they have excellent rates and your mother will save considerable money. If you want names, just register and PM me. When you have your figures right come back here and ask me again and I'll give you an estimation. Yours sincerely, Raymundo Larraín Nesbitt

• bobby Says:

  Thu, Jul 8th 2010, 23:15

  Can you help please, I agreed to sell my spanish house in may 2008, A 6 month contract was agreed before completion was to take place and a 20,000 euros deposit was received by me, after 6 months the buyer could not get a mortgage but stayed in the house and paid rent along with another deposit of 25,000 euros, the contract was extended till dec 2009 where a further 13500 euros was given, this left a balance of 135,000 euros which is the mortgage amount, they buyer did not renew the sales contract but continued to pay rental with covered the mortgage, unfortunately the rental monies have not been recieved and the bank are wanting there money, but the buyer is still in the house, i have been informed that the buyer has got a mortgage but doesn't want to pay the arears, sale price was 193500 euros, my purchase price was 140,000 euros + purchase costs, i also spent 35000 euros updating the property, what tax would i be liable for or what can i do. Kind Regards

• GILL MORGAN Says:

  Tue, Jul 13th 2010, 23:25

  Re: July 20th reply above : Does the age 65 still apply if you are already in receipt of the UK State Pension ? I am now 63. I have residencia, and am taxed in Spain.

• lynne hamilton Says:

  Wed, Aug 25th 2010, 06:15

  I have a company automonus here in spain, am a resident, I have read above that to sell my house, it is 19% on the first 6000 capital gains, and 21% flat on the balance, which would equate to a hefty sum of 52000, approx, taking into account the amount we paid for the villa, and the costs and subtracting these from the sale price, would I still pay the same taxes if I waited until I am 65 years of age in spain, and what happens if I do not want to roll over the money in another property here in spain, but want to go back to the U.K. Also another problem, one of my family has not paid his mortgage for 6 months and the bank, even after we agreed to restart the payments sold it on to another company without informing them. It is now 11 months and we sought legal advice today and they say we should restart the payments and back payments of some 10,000 euros as when this company go to the judge to reposes the house, the payments will be up to date, and the courts will not allow them to take the house as from December 2009 the clause in the hipoteca is deemed abusive by allowing them to sell this mortgage on. The people who have bought the mortgage are not in communication with us at all, at this stage, and I am worried that if this solicitor is not right, we have paid the 10,000 euros into their account for nothing, please give me your views, as we can ill afford as a family to lose this money.

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