There are two taxes on property sales:
Capital Gains Tax (Incremento de Patrimonio)
Capital Gains Tax is due on the profit made on all property sales in Spain. For Non Residents 3% of the current sales price is retained by the lawyer acting on behalf of the buyer and paid to the Hacienda Pública (Tax Office) in the name of the seller on Tax Form 211. This is a legal requirement when Non-Residents sell property. The Non-Resident seller therefore receives 97% of the agreed price. The remaining 3% is a deposit against the Capital Gains Tax
For Non-Residents, the Capital Gains Tax rate is 18% of the profit made on the sale. To calculate this profit we need firstly to ascertain your original purchase price - and we do this by adding to the purchase price as written on your Title Deed the costs which you incurred in the purchase (VAT, Land Registry fees, Notary fees, Transmission Tax, Legal fees etc). This gives us a true purchase cost.
We then take your current selling price and deduct from it the costs incurred in the sale (legal fees etc), thereby reducing the final sale price. We can also deduct certain costs of major structural alterations you have made to the property - but only if you can produce the official receipts for the materials and/or work involved (not applicable if you paid by cash and have no VAT receipt).
Now we have your original purchase price and your final sale figure, so we can work out your net profit and calculate your Capital Gains Tax liability.
However, once we have ascertained your profit, certain other deductions can also be taken from it, if applicable: for example, if you purchased your property before the 31st December 1996, 11.11% can be deducted from the calculated profit figure for each year from the third year of ownership onwards up to the cut-off date of 31 December 1996 (i.e. this is not deductible for the first 2 years of ownership) for property up to the 30th November 2006. After this date then only part of the gain made before the 20th January 2006 is susceptible to the reduction
The 3% retained by the Tax Office will either be more than or less than the sum of tax to be paid. In either case, Form 212 is submitted to the Tax Office, either claiming the outstanding balance or enclosing payment for the sum owed.
Plus Valía
Officially called the Impuesto Sobre el Incremento del Valor de los Terrenos, this is a tax charged on the increase in the official assessed value, rather than the market value, of the land since it was last sold. The rate may vary according to location, land size and the time elapsed since the last transfer of title. This tax applies to both new and resale properties.
