When selling a property in Spain, it’s important to be aware of the taxes that apply. As a seller, you are liable for two main taxes: Capital Gains Tax (CGT) and Plusvalía Tax. Here, we explain the key aspects of these taxes and how you can minimize your tax burden when selling property.
Capital Gains Tax (CGT) on Property Sales
Capital Gains Tax is a tax levied on the profit you make from selling property in Spain. This tax is paid to the Spanish Tax Agency (Agencia Tributaria) and is calculated on the difference between what you paid for the property and what you sell it for, after taking into account improvements and acquisition costs, including taxes.
- EU and EEA residents pay 19% in Capital Gains Tax.
- Non-EU residents pay 24%.
For non-residents, a 3% retention is applied by the buyer at the time of sale, which is paid directly to the Spanish Tax Agency. This amount acts as an advance payment toward the tax you owe.
Tax Rebate on the 3% Retention:
Depending on whether you make a profit or a loss on the sale, you may be entitled to a tax rebate on the 3% retention. If you sell the property at a loss or break even, you can get the full amount back. If you make a profit, the 3% retained by the buyer will go towards the amount you owe in Capital Gains Tax.
How Can a Lawyer Help Minimize Capital Gains Tax?
Hiring a lawyer when selling property in Spain can be crucial to minimizing your Capital Gains Tax. By accurately accounting for all improvement costs and acquisition expenses, as well as any other allowable deductions, a lawyer can significantly reduce the tax you need to pay. In some cases, you may even qualify for a full rebate of the 3% retention withheld by the buyer.
The actual Capital Gains Tax, after deductions, can be as low as 5-7% on the actual profit from the sale. To ensure the correct tax is calculated and all deductions are properly made, we recommend hiring a lawyer with expertise in Spanish property taxes.
Plusvalía Tax – What Is It?
Plusvalía Tax is a tax levied by the municipality where the property is located. The tax is calculated based on the increase in the property’s value from the time you purchased it to the time you sell it. The tax is calculated on a sliding scale, which varies according to the municipality’s regulations.
It is common practice for the buyer to retain part of the sale price to cover the Plusvalía Tax. This ensures that the tax is paid, as the buyer becomes legally liable for it if the seller fails to pay.
Important to Note:
In Spain, all debts and unpaid taxes follow the property. This means that if the seller does not pay the Plusvalía Tax, the buyer will be responsible for it. For this reason, it is common for the buyer or their legal representative to pay this tax at the completion of the sale.
Hire a Lawyer to Avoid Legal and Tax Issues
Selling property in Spain can be complex, especially when dealing with taxes and legal obligations. By hiring an experienced lawyer, you can avoid potential problems and ensure that all taxes and obligations are handled correctly. Your lawyer will also conduct a thorough due diligence on the property’s title, preventing future legal complications.
For both non-resident sellers and buyers, we strongly recommend using a lawyer for property transactions in Spain to avoid unnecessary tax and legal issues.
Conclusion – Selling Property in Spain
As a seller in Spain, it’s important to understand the taxes you are liable for when selling your property, including Capital Gains Tax and Plusvalía Tax. By hiring a qualified lawyer, you can minimize your tax burden and ensure that the entire selling process is handled correctly and smoothly. At [Real Estate Agency Name], we are here to help you navigate the process and provide the best advice and service when selling your property in Spain.
Feel free to contact us for more information on taxes when selling property and how we can assist you in optimizing your tax handling.
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