The expenses that an owner has to face at the time of sale are:
- Real estate agent’s fees.
- Property expenses.
Estate Agent’s fees:
Agency fees are usually a percentage of the sale price and can vary according to the agency and according to the price of the property. On the Costa del Sol this is usually around 5% of the sale price plus VAT. In most cases the commission is paid by the owner, (although it can also happen that a buyer hires the services of an estate agent to search for a property and negotiate the purchase. In this case, which is not so common, the commission will be paid by the buyer).
The property expenses comprise of I.B.I (municipal tax), rubbish, community expenses, electricity, water, telephone, etc. until the day on which the public deed of sale is signed in favour of the new owner. In the event that these expenses cannot be accurately calculated on that date, the buyer or his legal representative may withhold from the final payment an amount to cover them.
Taxes on the sale of a property:
The plusvalía municipal is a tax on the increase in the value of the land since the last transfer. Since 1 January 2013, it is compulsory to present proof of payment of the plusvalía in order to register the sale and new ownership in the Land Registry. Likewise, it has been recently modified according to Royal Decree-Law 26/2021 of 8 November and although the non-obligation of its presentation in the case of a sale at a loss is maintained, there are two important new features:
1.- Sales made within the first year of ownership of the property are now subject to taxation.
2.- Two calculation formulas are established and the taxpayer will choose the most convenient one:
- a. Objective system (similar to the old one). The taxable base will be determined by the cadastral value of the land and the years of ownership.
- b. Direct estimation. Here the taxable base is determined on the basis of the purchase and sale prices, the years of ownership and a reduction coefficient that can be applied by each Town Hall with a maximum of 15%.
Even though the taxpayer can choose the most favourable option, it should be noted that once the taxable base has been determined, the local councils have regulatory freedom in terms of the tax rate to be applied (maximum 30%) and the allowances (maximum 95% of the tax liability).
Non-residents: When a non-resident sells a property in Spain, he/she is obliged to pay a tax based on the profit obtained from the sale (the difference between the sale price and the purchase price plus all expenses, including improvements to the property). This is the Non-Resident Income Tax (IRNR) and is payable at a flat rate of 19% of the tax base if resident in the EU and 24% in all other cases. The law provides that the buyer must withhold 3% of the sale price of the property and make a deposit on account of this amount with the State Tax Administration Agency to ensure collection of the tax. If the 3% withholding is higher than the tax payable, the seller is entitled to claim a refund of the overpayment. If, on the other hand, the withholding is less than the total tax due, the difference must be paid to the tax authorities within 4 months of the date of sale.
Residents: If the seller is a tax resident or a company that pays its taxes in Spain, the 3% withholding tax will not be levied.
Natural person, tax resident: in this case, at the time of making the tax return, you will pay a percentage between 19% and 26% depending on your profit (since 2021 there is a special rate of 26% for profit over 300,000 euros).
Spanish limited company: Spanish limited companies are currently taxed at a rate of 25%, but in these cases the result will vary depending on whether the limited company has other properties and activities.
Over 65s who sell their permanent residence are exempt from payment of personal income tax. To be considered ‘permanent residence’ it must be the person’s habitual place of residence and owned for a minimum of 3 years prior to its sale.
Reinvestment in property within a maximum period of 24 months: The gain obtained on the sale of the permanent residence is exempt from taxation as long as it is reinvested in a new property within the two years prior to and/or after the date of sale (taken from date to date).
Please do not hesitate to contact DM Properties | Knight Frank for further information and we always recommend that you consult a qualified professional to plan your investment from a legal and tax point of view according to your personal circumstances once you have found the property of your dreams and before completing the transaction.
Information revised in February 2022.
The contents of this guide are for information purposes only; they are subject to errors, omissions or changes and should not be considered a substitute for the advice of a legal and/or tax professional. Accuracy is not guaranteed.