3% CAPITAL GAINS RETENTION ON HOUSING SALES TO NON-RESIDENTS IN SPAIN
Let’s start by saying this post is about a matter that arouses great interest and doubt in those non-residents who are considering selling a property is Spain. We are talking about the 3% WITHOLDING TAX.
This withholding arises from the obligation of a non-resident in Spain to pay the Non-Resident Income Tax (IRNRL) included in Article 14 of Royal Decree 1776/2004 of July 30, which approves the Regulation of the Non-Resident Income Tax.
Sometimes, foreigners ignore their tax obligations, and as they usually change their address, the Tax Agency cannot send them the notification to fulfill their responsibilities.
It is due to this circumstance that the buyer, whether a resident or not, must bear the 3% withholding on the purchase price on the property as set in the notarial deed.
This retention must be entered by the buyer in the Tax Agency through Model 211, and a copy must be given by the non-resident seller.
Now the big question CAN THE SELLER RECOVER THE RETENTION?:
WHAT IS THE CAPITAL GAIN?
The answer is yes, as long as the 3% retained exceeds the taxes due, the vendor can expect a refund once all taxes have been paid. In the previous example it would have to be more than 5.700,00 Euros.
We will start by defining what is the Capital gain or loss: it is the difference between the Transmission Price and the Acquisition Price.
Let’s break these concepts down:
– TRANSMISSION PRICE: calculated by subtracting the expenses that have been incurred in the sale (expenses of the notary’s office, fees of the real estate agent, attorney’s fees …) from the Sales Price.
– ACQUISITION PRICE: calculated by adding all the expenses of the purchase management (Notary fees, registration fees …) to the purchase price.
We will see it clearer with an example where there are no purchase or sale expenses:
In summary, when there is loss of assets on the part of the non-resident seller or the capital gains requires the payment of an amount lower than the taxes withheld, in that case the 3% withholding is reclaimed. The amount reclaimed is calculated by subtracting the retention practiced from the profit obtained. Following the previous example would it be:
The recovery must be done through the 210 model which must be presented at the Tax Office. The following documentation is needed:
– SELL SCRIPT
– COPY OF MODEL 211, which the buyer delivered to the non-resident seller.
IMPORTANT!: IF THE PRICE OF THE PURCHASE THAT THE NON-RESIDENT SELLER DOES NOW IS LESS THAN THE PRICE FOR WHICH YOU SOLD IT, YOU WILL ALSO NEED:
- Invoices of the lawyers who managed the purchase or the inheritance and the sale.
- Invoices of the notary in which the purchase or inheritance and sale were signed.
- Registration invoice for the registration of the purchase or inheritance.
- Invoices from the real estate agency that intervened in the purchase and sale.
- Transmission or inheritance tax model.
- Plusvalía: Tax that taxes the increase in value
The reimbursement of the amount by the Tax Office can take around six months.
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