Taxes when Selling Spanish Property

[Ian Carter]

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]

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 PlusvalÃ*a 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 LarraÃ*n Nesbitt

[Lawbird Lawyer]

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 LarraÃ*n Nesbitt

[Unregistered]

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]

You're welcome.

Here you go:

http://www.boe.es/aeboe/consultas/ba...E-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 LarraÃ*n Nesbitt

[eric dixon]

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]

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 LarraÃ*n Nesbitt

[Hickman]

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]

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 LarraÃ*n Nesbitt

[us home]

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.?