TAXES WHEN SELLING A PROPERTY IN SPAIN
- Alexandre Strumeyer
- Nov 29, 2023
- 5 min read
Updated: Jun 24
When a property is sold in Spain, the seller has to pay the following taxes:
Local PLUSVALIA Tax:
The so-called municipal capital gains tax is actually called the Tax on the Increase in the Value of Urban Land (IIVTU) and is a tax paid to the corresponding municipality, that is, the municipality where the property is located.
This tax is only payable if there is a capital gain. Otherwise, the sale of a property will be exempt from paying this tax.
There are two different calculation methods for obtaining the taxable base for the Municipal Capital Gains Tax. These two methods are the objective and the direct. The seller chooses the method that gives the lowest amount to file their Municipal Capital Gains Tax return.
The amount of this tax depends on the number of years the property has been owned, the cadastral property value and the land value, and a coefficient depending on the municipality and the length of ownership.
Here is a link to calculate this amount. To do this, you will need the cadastral values, which you can find on the IBI (property tax) payment receipts:
To give you an idea, the result is usually between 2 and 9% of the difference between the selling price and the purchase price.
Profit tax:
In addition to this municipal capital gains tax, all property owners who sell a property will be subject to paying Personal Income Tax (IRPF) if they reside in Spain. And if they are not Spanish residents, they will have to pay Non-Resident Income Tax (IRNR), which must be filed within two months of the sale.
The sale of the main residence is free of taxes if the money of the sale is destined to the purchase of another house within a maximum period of two years, but this intention must be notify in the income statement of the year in which you have sold to enjoy that tax benefit.
The part of the amount of the sale used for the amortization of the capital of the outstanding mortgage on the day of the sale computes for the calculation of the income tax. The same applies to any portion of income that is not reinvested in the purchase of a new primary residence.So it means that the tax exemption for reinvestment will be applied in proportion to the money that has been allocated effectively to the purchase of the new house.
In the declaration of the incomes it will be necessary to declare the patrimonial gain that is obtained by the sale of the property. This real profit is equal to the difference between the house's sale price and its purchase price. This profit is reduced by the costs associated with the purchase and resale transactions: taxes (ITP, VAT, AJD), notary and property registry fees, agent and lawyer fees, and agency commissions.
If you have used a mortgage, all associated expenses are also deductible, such as the AJD (Spanish Property Tax) on legal acts, notary fees, property registration and appraisal fees, and property manager fees, but not the interest paid.
In certain cases, the tax authorities will take into account the cost of a major renovation carried out less than a year before the resale.
The profits are taxed according to the following sections:
up to 6,000 euros -> 19% rate
Profit between 6,000 and 50,000 euros -> 21% rate
Profit between 50,000 and 200,000 euros -> 23% rate
Profit between 200,000 and 300,000 euros -> 27% rate
Profit over 300,000 euros -> 28% rate
For non-residents in Spain, the NIRNR tax rate is 19% for residents of the European Union, Iceland, and Norway, and 24% for residents of other countries.
3% Withholding tax:
When a non-resident sells a Spanish property, the buyer must withhold 3% of the purchase price and pay it to the tax office. This tax is an advance on the taxes the seller will pay after the sale. Once the tax returns are filed, any excess withheld will be refunded to the seller.
Over 65 years
There is an exception to the general norm for people over 65 years of age or people in a situation of great dependency. In these cases the transmission of the habitual residence will always be exempt from taxation. If one of the two vendors is under 65, you will have to pay for half of the gain value.
In the case of non-habitual housing, the earnings obtained after 65 are exempt, with the condition that the income is reinvested in a life annuity, which must have a periodicity less than or equal to the year. You must make this reinvestment in the maximum period of six months and the amount reinvested with the right to exemption may not exceed 240,000 euros
Mortgage cancellation expenses
The mortgage cancelation procedures have a cost of around 500 euros if you do it yourself up to 1000 euros if the bank is in charge of it.
When you sell a house and you are still paying a mortgage for it, the fact of canceling the mortgage will give an additional bank commission payment, as it is included in all the contracts.
If the mortgage has been formalized from the 9th of December of 2007 to the 16th of June of 2019 the commission are the following:
0.5% of the early amortization, if it occurs within the first five years of the operation's life.
0.25% of the early amortization, if it occurs after the fifth year.
If the mortgage has been formalized from to the 16th of June of 2019 the commission are the following:
For a variable rate mortgage, 0.25% of the early amortization, if it occurs within the first three years of the mortgage's life; or 0.15% if it occurs within the first five years.
For a fixed rate mortgage, up to 2% of the early amortization, if it occurs within the first ten years of the mortgage's life, or 1.5% after the first ten years.
Estimated amount of taxes to pay
If you are considering the sale of your property in Marbella or on the Costa del Sol, we are able to provide you with a comprehensive analysis of the taxes that will be applicable to the transaction. Furthermore, we will offer a thorough explanation of the various stages involved in the process of selling a property in Spain.
Should our tailored service proposal pique your interest, we are prepared to provide you with guidance and protect your interests to make this sale a successful experience.
Feel free to reach out to me anytime! I would be more than happy to help you with any questions you may have about selling your home.
Alexandre Strumeyer
+34 622 22 70 78, Tel y Whatsapp.
Real estate agent, EMBASSY Costa del Sol , Marbella
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