Are you considering selling your property? Then you should read this article. Because of the price you get from the buyer, you have to subtract necessary taxes and additional expenses. So it is completely essential to take those numbers into consideration. As well, there may be several tax optimization tactics you could benefit from.
Basically, there are two main taxes you will pay when selling your Spanish property: Plusvalia (in Spanish “Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana” or IIVTNU) and Capital Gains Tax (in Spanish “Impuesto sobre la Ganancia Patrimonial”).
Plusvalía or Added Value
This is a municipal tax which you pay to the local council (“Ayuntamiento“). It is based on the increase of the official value of the land between the purchase and the sale dates.
The increase in the value of the land is calculated by taking the cadastral value of the property at the time of selling (this is a value stated on the Rates bill issued by the local Town Hall). You then multiply this by the annual rate that has been set by the local municipal council, taking into account the number of years you have had the property. Therefore, the factor that most affects the value of the Plusvalía is the number of years that you have owned the property.
Spanish Government passed a decree on the 8th of November 2021, making substantial changes in the way this tax is calculated. The three most significant changes are:
- If the sale price declared in the title deed is lower than the purchase price declared in the purchase deed, there will be no Plusvalía to pay at all.Please note that, for this purpose, the purchase costs and the sale costs are not considered, just the purchase price and the sale price (not even the VAT).
- In cases where the profit obtained is low, but the Plusvalía tax is high, the taxpayer can choose analternative way to calculate the tax, which will take into account the purchase and sale price.
- If you sell within oneyear after the purchase, you have to pay Plusvalía.
Finally, please note that when the seller is a non-resident, and although this is a tax of the selling party, the buyer is responsible of the payment of the Plusvalía, and therefore he/she would like to retain the amount calculated for this tax from the purchase price.
Capital Gains Tax
Let’s now move to the main tax when selling your property.
The exact percentage will depend on whether you are a resident or not and on the number of years you’ve been the owner;ranging from 19 to 23%.
Not being a resident in Spain (but being resident in any other EU country) will make you pay just 19%.
for non-residents in Spain
Non-residents in Spain from outside the European Union will pay a fix 24% rate for their capital gains. Nevertheless, if they are from any other European country, from Norway or Island, that rate is reduced to just 19%.
Non-residents can enjoy a capital gains tax exemption provided that they are legally living in any other European Union country that has a tax agreement with Spain.
for Spanish residents
Just as a reminder, you will be considered a tax resident in Spain if you stay in the country for more than 183 days per year (6 months).
In that sense, if you considered a resident, the capital gains tax to be paid will be:
- 19% for the first 6.000€ obtained as a profit
- From 6.000€ to 50.000€, the tax percentage is 21%
- From 50.000€ onwards, a 23%
Remember that this percentage will be applied to the difference between the price you paid to purchase the property (or any other asset) and the one you receive when you sell it.
There are two different situations in which you won’t need to pay this tax
- If the amount of money that you earn from the sale of the property will be reinvested into the purchase of a new one, and you will use this new house or flat as your new home, you don’t need to pay capital gains tax.
- If you are 65 years old or over, it does not matter if the amount of money you get from selling the property will be reinvested into your new home or not. You won’t need to pay this tax.
Nevertheless, you must bear in mind that there is a crucial condition – the property you are selling must be your habitual residence (a minimum of 3 years lived in the property before selling).
Additional costs when selling property in Spain
Apart from the two beforementioned taxes, there are several other costs you will bear.
- Income tax provision. If you are a non-resident, you will be facing a 3% retention of the selling price. This amount goes directly to the Spanish Tax Office.
- Energy certificate. Issued by an architect or technical house engineer. It will vary depending on the square meters of your house but expect something between 100 and 500€.
- Agency commission. This is the commission percentage you agree with the real estate agency. It is usually around 5%.
Is it really worth bearing the cost of the real estate agency?
While it may be tempting to try selling your home on your own, there are many reasons why you may want to consider working with a professional real estate agency.
A lot goes into listing a home, such as:
- Performing a comparative market analysis to establish a competitive price
- Arranging for photo shoots, sometimes including aerial shots via drone
- Providing staging guidance
- Showing the property multiple times to prospective buyers
- Providing yard signage
- Making sure listings are populated on all major property search websites and MLS platforms
- Helping the seller review and negotiate buyer offers
- When an offer comes in, the listing agent negotiates on behalf of the seller, often presenting one or more counteroffers.
- Prepare agreement for deposit payment and even make inventory list when it´s needed.
- And of course will connect you with the trusted lawyer, if you don’t have one.
So to have a real estate agent by your side, can become your best decision when you are selling a property.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
