December 17th, 2013
since its introduction has been that the 3% tax retention on Spanish property
sales by foreign owners is applied only to non- Spanish resident sellers.
Conversely, Spanish resident sellers should not suffer the same deduction.
However, the recent
tightening of the rules and practice guidelines in this area has meant that in
many cases, sellers who are Spanish residents are falling into the traps for
the unwary; meaning they are also losing 3% of the proceeds of their Spanish
property sales, in tax retention.
The reclaim process in
applicable cases can be very lengthy and convoluted. So, many Spanish property
sellers end up simply ‘writing off’ the 3% even though really, they should be
entitled to have the tax retention refunded, hence the reference to the loss of
the 3% in practice.
It is important to
appreciate that in this context, Spanish residency has two component elements.
The first is legal or factual residency (generally evidenced by a Certificate
of Residency). The second aspect, which is of equal importance, is that the
positive step must also be taken to become fiscally resident in Spain; and
annually to file the corresponding tax declaration in Spain. (In most cases,
this is an obligation of Spanish property owners, in any event).
Provided that these
fiscal obligations have been complied with in all respects and for the
requisite period; when a Spanish property sale is agreed, the Spanish Tax
Authority should issue a Certificate of Fiscal Residency. This, combined with
the evidence of factual residency, should satisfy the Notary and the Spanish
Authorities that no 3% tax retention should be made.
It should be noted
though, that even for non-Spanish residents, a later tax assessment can be made
following the sale, and capital gains tax charged, depending on the facts and
figures of the case in question.
sellers (Spanish resident and non- Spanish resident alike) still have to pay
‘Plus Valia’, the municipal tax on Spanish property sales. This is calculated
by reference to Catastral (rateable) value and the period of ownership.
In conclusion, it is
essential to have reliable professional guidance on tax issues and
transactional costs, before agreeing terms for a Spanish property sale.
Otherwise, there is no certainty as to the net sale price which will be
received. Please speak to our team at Legal 4 Spain, for clear advice and
competitively priced legal representation on Spanish property sales.