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What taxes and costs must I pay if I sell my property but don’t live in Spain?

You decide to sell a property you own in Spain, where you are not a resident. Well, in this case, and after putting your property up for sale, either through an estate agent’s or privately, you need to take into account the any taxes and costs attributable to you as seller.

First of all, we must point out the legal obligation (unless the parties have agreed not to) of paying what is known in Spanish as the “Impuesto sobre el Incremento del valor de los terrenos de naturaleza urbana” or “Plusvalía Municipal”, which is basically capital gains tax on urban land. This tax depends on the local council where the property is located. It is calculated by multiplying the number of years the property has been owned, by the value of the land that appears in the Real Estate Tax, and then by applying rates which vary depending on each municipal district.

This tax has been questioned over the last few years given that some law courts in Spain disagree with the way this Law is interpreted, since they consider that for the application of capital gains tax, there must have been a real increase in land value, something that does not reflect the situation over the last few years where the drop in market prices has been more than evident. Therefore, the calculation does not reflect any actual gain or loss that arising through the conveyance, rather the increase in land value determined by a mathematical procedure. Either way, if you have made a loss as a result of the sale of your property, our advice is that you pay the tax and, a posteriori, weigh up the possibility of appealing and taking it to court, always following your lawyer´s advice.

Secondly, you need to know that on signing the deed of sale, the buyer has the obligation of withholding 3% of the purchase price, which he is then responsible for paying to the Spanish Tax Agency through the submission of Tax Form 211, within a one month period.

At a later date, you will have to declare the financial benefit obtained, if any, or you will be entitled to claim the reimbursement of the 3% withheld (or part of that amount) in the event of making a loss on your sale.

Finally, we would like to mention here another series of costs attributable to the seller, such as the Energy Performance Certificate, which must be handed over to the buyer on signing the deed of sale and, moreover, must be duly registered, or the costs incurred on cancelling a mortgage (Notary fees and registration costs), where appropriate.

All these matters will be under control if you contact the services of a professional law firm in Spain which will take care of handling your transactions and can offer you advice throughout the whole process of your property sale, with the tranquillity and confidence that you are fulfilling all your obligations.

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