Selling a house in Spain : Plusvalia and Capital Gains tax
Jos Deuling, Tuesday, 28 May 2013
This article is part of a series of seven articles about selling a property in Spain. The other articles in the series cover the following topics:
Plusvalia tax
The Plusvalia, literally 'more value', is a municipal tax levied on the sale of a home. It is calculated on the basis of the cadastral value (Valor Catastral) of the property and is also based on the number of years the property has been in your possession. In the heyday of the Spanish housing market, the Valor Catastral was often significantly lower than the market value of the house. After the collapse of the Spanish property market, the cadastral value is often higher than the market value.
The Plusvalia is actually a tax on the value of the land on which the house stands. The municipality argues that the land value has increased because during the years a variety of infrastructure improvements has been made in the area. For example, the maintenance of existing roads, the building of new roads, construction and maintenance of the sewerage, street lighting etc. Through the Plusvalia, the seller contributes to these infrastructural improvements.
The amount of Plusvalia also depends on the cadastral value and the period in which you were the owner: the longer the period, the higher the amount of tax. The amount can really add up. It is, therefore, wise to find out beforehand how much Plusvalia you have to pay. Ask your agent or lawyer to find out. At the town hall, they can precisely calculate how much Plusvalia you have to pay. The officials calculate it on the basis of the cadastral value registry. After the collapse of the Spanish housing market, you can perhaps negotiate the lowest possible cadastral value.
When drafting the contract you agree on who will pay the Plusvalia, the buyer or the seller. In the past, when the Spanish housing market was still booming, the buyer usually paid the tax. Today, the roles are reversed, and the seller pays the Plusvalia tax.
The Plusvalia has to be paid within 30 days after the sale of the house. You can pay at the town hall. The buyer may also require the Plusvalia to be deducted from the sale price. If the seller leaves without paying, the buyer has to pay the tax.
Capital Gains Tax
If you sell your house at a profit, you have to pay a Capital Gains Tax in Spain. This tax is officially called Impuesto sobre Incremento the Patrimonio de la Venta de un Bien Inmeuble. For this tax, it is important whether you are a resident or non-resident. In some cases, you are exempt from this tax.
How is the Capital Gains Tax calculated?
The profit is the difference between the selling price and the purchase price. An inflation correction will be applied to the purchase price The inflation correction is calculated using official tables of the Spanish government. All kind of costs can be deducted : Lawyer fees, estate agent fees and the costs of remodeling or renovation.
Capital Gains Tax resident
21% on the portion between € 0 and € 6,000
25% on the portion between € 6,000 and € 24,000
27% on the portion above € 24,000
The tax is charged on the income tax. You have to pay the tax in the year in which the property is sold.
Capital Gains Tax non-resident
A non-residents pays 21% tax on the sales profit.
If you sell a property in Spain as a non-resident, then a standard 3% of the selling price is retained as capital gains tax. You should realize that as a non-resident, you only receive 97% of the selling price.
Because of the collapse of the Spanish housing market, fewer people will make a profit on the sale of their home. If you are eligible for a refund of overpaid capital gains tax, then you can apply at the local tax office (Delegación the hacienda) until 3 months after the transfer of the property. To apply for the refund you need to fill in the 210 form.
The Spanish tax authorities will refund the overpayment in the next financial year. Non-residents need a Spanish legal personality or Spanish legal resident to act as fiscal representative.
Exemption from capital gains tax
In the following cases, you do not have to pay capital gains tax:
Tax evasion
In the past buyer and seller sometimes specified a lower price than had actually been agreed to. This was done to pay less capital gains tax and transfer tax. This practice is no longer that easy. The tax authorities keeps records of the value of a property. Nowadays If you specify an incorrect selling price, the tax office will contact you.
After the collapse of the Spanish housing market, selling price and valuation by the Tax Office will often diverge. You can ask the local tax office how much your property is worth according to them. So you can take that into account.
This article is part of a series of seven articles about selling a property in Spain. The other articles in the series cover the following topics:
Plusvalia tax
The Plusvalia, literally 'more value', is a municipal tax levied on the sale of a home. It is calculated on the basis of the cadastral value (Valor Catastral) of the property and is also based on the number of years the property has been in your possession. In the heyday of the Spanish housing market, the Valor Catastral was often significantly lower than the market value of the house. After the collapse of the Spanish property market, the cadastral value is often higher than the market value.
The Plusvalia is actually a tax on the value of the land on which the house stands. The municipality argues that the land value has increased because during the years a variety of infrastructure improvements has been made in the area. For example, the maintenance of existing roads, the building of new roads, construction and maintenance of the sewerage, street lighting etc. Through the Plusvalia, the seller contributes to these infrastructural improvements.
The amount of Plusvalia also depends on the cadastral value and the period in which you were the owner: the longer the period, the higher the amount of tax. The amount can really add up. It is, therefore, wise to find out beforehand how much Plusvalia you have to pay. Ask your agent or lawyer to find out. At the town hall, they can precisely calculate how much Plusvalia you have to pay. The officials calculate it on the basis of the cadastral value registry. After the collapse of the Spanish housing market, you can perhaps negotiate the lowest possible cadastral value.
When drafting the contract you agree on who will pay the Plusvalia, the buyer or the seller. In the past, when the Spanish housing market was still booming, the buyer usually paid the tax. Today, the roles are reversed, and the seller pays the Plusvalia tax.
The Plusvalia has to be paid within 30 days after the sale of the house. You can pay at the town hall. The buyer may also require the Plusvalia to be deducted from the sale price. If the seller leaves without paying, the buyer has to pay the tax.
Capital Gains Tax
If you sell your house at a profit, you have to pay a Capital Gains Tax in Spain. This tax is officially called Impuesto sobre Incremento the Patrimonio de la Venta de un Bien Inmeuble. For this tax, it is important whether you are a resident or non-resident. In some cases, you are exempt from this tax.
How is the Capital Gains Tax calculated?
The profit is the difference between the selling price and the purchase price. An inflation correction will be applied to the purchase price The inflation correction is calculated using official tables of the Spanish government. All kind of costs can be deducted : Lawyer fees, estate agent fees and the costs of remodeling or renovation.
Capital Gains Tax resident
21% on the portion between € 0 and € 6,000
25% on the portion between € 6,000 and € 24,000
27% on the portion above € 24,000
The tax is charged on the income tax. You have to pay the tax in the year in which the property is sold.
Capital Gains Tax non-resident
A non-residents pays 21% tax on the sales profit.
If you sell a property in Spain as a non-resident, then a standard 3% of the selling price is retained as capital gains tax. You should realize that as a non-resident, you only receive 97% of the selling price.
Because of the collapse of the Spanish housing market, fewer people will make a profit on the sale of their home. If you are eligible for a refund of overpaid capital gains tax, then you can apply at the local tax office (Delegación the hacienda) until 3 months after the transfer of the property. To apply for the refund you need to fill in the 210 form.
The Spanish tax authorities will refund the overpayment in the next financial year. Non-residents need a Spanish legal personality or Spanish legal resident to act as fiscal representative.
Exemption from capital gains tax
In the following cases, you do not have to pay capital gains tax:
- If you buy a new house with the proceeds of the sale. On the condition that you have lived at least three years continuously in your current home, you are a resident and your new home is your principal residence.
- If you are resident, over 65 years and have at least three years continuously lived in your current home.
Tax evasion
In the past buyer and seller sometimes specified a lower price than had actually been agreed to. This was done to pay less capital gains tax and transfer tax. This practice is no longer that easy. The tax authorities keeps records of the value of a property. Nowadays If you specify an incorrect selling price, the tax office will contact you.
After the collapse of the Spanish housing market, selling price and valuation by the Tax Office will often diverge. You can ask the local tax office how much your property is worth according to them. So you can take that into account.
Spanish property for sale. Appartements, villas and houses for sale on the Costa del Sol, Costa Brava and Costa Blanca. For sale by owner and by agent.
The penalty clause in the provisional purchase agreement is primarily an important point because the buyer can lose the amount he pays, but the seller
could also lose the same amount.