Case Study – Selling in Spain

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Selling in Spain

We were recently approached by a lady who decided to ask us about selling her property in Spain that she had owned many years, but as a non resident.

What Taxes does she need to think about for Selling in Spain?

Capital Gains Tax

Capital Gains is a tax calculated on the difference between the purchase price of the property on the deeds and the sale price of the house now. She will be taxed on any gain but some expenses can be deducted but they must be evidenced by legal invoices.

The lady needs to find the invoices or receipts for the payment originally of Notary Costs, Land Registry Costs, Purchase Tax Certificate. Plus any invoice of Solicitors or Gestoría office who dealt with the purchase. The amount left after valid deductions is taxed. What happens for a non resident is that 3% of the sale price is retained at the Notary.
The Tax office will (after some time) return any difference, after inspecting taxes owed in Spain. If the Capital Gains Tax amount is more than what is retained this needs to be paid in the months after the sale.

Plusvalía

Plusvalía Tax is a town hall tax paid when a property changes hands. Based on the increase of the value of the land on which the property sits. It varies depending on the area and amount of years accrued. It is only paid when ownership changes (probate, sale, etc.)

In addition the council tax (SUMA or IBI) will need to be paid up to date

Paperwork Needed For Selling in Spain

Our lady, before putting the property for sale, needs certain paperwork as below, which her solicitor will help her with:

• copy of her deeds
• recent copy of her SUMA or IBI council tax bill (this will need to be paid up to date)
• recent bills of all utilities
• details of the community administrators as she will need a community certificate of no debts owing for the sale
• we will need copies of passport and NIE,
• Also details of the agents, the buyer’s solicitor (if there is one) and how much the property is being sold for.

With the above, we can obtain an up to date extract from the Land Registry to check the situation of the property. And then advise on the way forward with contracts. Also with the more complicated paperwork, as below:

• Up to date Habitation Certificate – A habitation Certficate proves that the property meets the standards of the local Town Hall as fit for habitation. Although a property owner may have one, it needs to be up to date.
• Energy Performance Certificate – This is a certificate which details how efficient your property is for energy and is essential now.
• If there is a mortgage on the property there will be mortgage cancellation costs. Even if it was paid off in the past, it may not have been removed from the Land Registry.
• End of building certificate: If a property is still shown as under construction when a Land Registry extract is obtained, then this certificate is needed.
• Legalisation Certificates: this might be needed if there has been an extension or pool for example that was never legalised. This will require some study and advice on how to proceed with the individual circumstances of the legalisation before selling. But it can be done simultaneously.

Derecho de tanteo y retracto (Right of First Refusal and Withdrawal)

In addition in the Valencia Community there is now a confusing new issue called Derecho de tanteo y retracto.

This new regulation states that the region of Valencia is entitled to exercise the right of first refusal and withdrawal. This is for any property transaction made within the region.

• If a house was bought before 21/04/2005, an owner need do nothing.
• Then if a house was bought after 21/04/2005 and it was not owned by a bank, the owner needs a certificate from the Land Registry Office to prove it.
• And if a house was bought after 21/04/2005 and it was owned by a bank, the owner needs to apply for the authorisation from the government of Valencia

A solicitor will help with all of this, but it is important to have someone who knows what they are doing. Otherwise a lot of problems could arise on completion. They will help coordinate all the paperwork, liase with buyers, seller and the agent and ensure that all is completed correctly. Also paying the relevant taxes, and applying for a refund of the 3% retention for a non-resident.

We can of course assist with selling a property in Spain and with all advice on this issue.