When selling property in Spain, it is essential to understand the tax considerations involved. This includes the taxes you will need to pay as the seller, as well as the tax deposit the buyer may need to pay (which comes out of the sale price you receive).
You will also need to be aware of your NIE (Numero de Identidad de Extranjeros) and when this will be needed during the sale.
Having a clear understanding of Spanish property sales taxes can help to ensure you are not caught out with any unexpected costs and that you can budget effectively.
Our Spanish property lawyers can advise you on:
- What taxes you will need to pay when selling Spanish property
- How tax deposits for buyers work
- When you will need your Numero de Identidad de Extranjeros (NIE)
- Any possible tax exemptions you may be eligible for (e.g. the main residence exemption)
- Any liability for UK Capital Gains Tax (including the rules around double taxation)
You can find out more about Spanish property sales taxes below or you can speak to a member of our team for personal advice tailored to your situation.
For your convenience, we have put together a list of useful Spanish legal terms and their English translations, to help make navigating legal issues in Spain a little easier.
For specific advice on selling property in Spain and the tax implications of doing so, please get in touch with our friendly, expert Spanish property lawyers in the UK.
Taxes for selling property in Spain explained
There are generally two taxes that you may need to pay when you sell a property in Spain – Plusvalia and Capital Gains Tax.
This is a local property sales tax that you will need to pay to the Town Hall for the area where your property is located. Plusvalia is based on the increase in the value of the land (the ‘Valor catastral del Suelo’ which translates as the ‘rateable value of the land’) and the length of time you owned the property.
The valor catastral for a property increases every year and is not connected to the market value of the property. This means that, in the past, even if the property had lost value since you purchased it, you would still be liable for plusvalia. However, following legal challenges, Town Halls can no longer recover Plusvalia if the value of the land when sold is lower than when it was purchased.
Spanish Capital Gains Tax
If you are not a Spanish tax resident, then you may need to pay Capital Gains Tax on any profits you make from selling your property. Even if you are a Spanish tax resident, you will still need to pay Capital Gains Tax if the property is not your main home.
How much Spanish Capital Gains Tax you will pay is calculated based on the price that you declared when you purchased the property versus the price that you declared when you sold it. If the property sold for more that you paid for it, this difference is the gain. It is this gain on which you will pay tax, rather than the total sale price.
Non-residents from EU and EEA countries will normally pay a Capital Gains Tax rate of 19% while those from outside the EU/EEA will pay 24%.
It is worth keeping in mind that you may be able to deduct various costs from the gain before calculating your Capital Gains Tax liability. Deductible costs may include expenses associated with the sale, any cost of major work to the property (providing that you have documentation to back up your claim) and an allowance for inflation.
Since 2015, residents of any EU and EEA country that has entered a tax information exchange agreement with Spain will be able to claim a ‘main home’ Capital Gains Tax exemption. This would apply if the property you are selling was your main home and you are using the proceeds to purchase a new main home. Unfortunately, due to the impact of Brexit, this exemption may no longer be available to UK residents in the future.
If you are resident in the UK, you will also have to declare the Capital Gain back home as part of your Worldwide Capital Gains. The tax paid in the UK will be based on the UK Capital Gains rules and rate. As Spain and the UK have a Treaty relating to Double Taxation you can offset any tax that you have paid in Spain against any tax Capital Gains Tax due in the UK.
Tax deposits for buyers when selling a Spanish property
If you are not resident in Spain and haven’t owned the property since 1985 then the buyer of your property must lodge 3% of the sale price with the tax authorities and you only receive the balance of 97% at that stage.
Contrary to common perception, this is not a tax but is actually a retention made by the tax authorities. The tax authorities will retain this money until they are satisfied that you have paid all your taxes. If you have paid your taxes, you will get that money back. If you haven’t then they will keep the amount of unpaid taxes.
You must apply for the return of the money and the authorities regularly take up to a year to return the money. It is the buyer’s obligation to pay this amount to the tax authorities.
NIE (Numero de Identidad de Extranjeros)
The NIE (Numero de Identidad de Extranjeros, which translated literally is your Foreigner’s Identity Number) is your Tax Identity Number in Spain.
There are several times when you are likely to be required to produce your NIE number;
- When you buy or sell a property
- Opening a bank account
- Dealing with the utility companies
- Taking out insurance
- Dealing with the tax authorities
- Buying or selling shares, bonds and stocks
- Buying a car
If you bought many years ago, you may not have realised that you needed an NIE but will need one in order to sell. The rules on NIEs change regularly and between geographical areas. Sometimes you have to obtain this yourself and sometimes it can be done by somebody on your behalf. We will therefore advise you how this is working and costs at the time that you contact us.
Need help selling property in Spain?
Our UK-based team of property lawyers are highly experienced in helping clients to buy and sell property in Spain, as well as handling a whole range of related issues, such as advice on tax matters.
With a thorough understanding of both UK and Spanish law, we can provide clear, reliable legal guidance in plain English, giving you the confidence to deal effectively with property in Spain.