Financial Considerations and Sales Taxes

Financial Considerations

Factoring in your margins

A golden rule of setting an asking price is to ensure that a reasonable margin for negotiation has been included. An inflexible asking price will result in a very short period of offer and more than likely a refusal if the vendor sets their absolute bottom price as the original asking price. During the negotiation process both vendor and buyer wish to feel as if they have achieved a desired result.

A vendor must ensure that when speaking to an agent that the asking price is also the “Gross” price as agency commissions can vary. In a scenario where a vendor lists their property with several agents simultaneously without setting a gross price there is a very real danger of the property being advertised at different prices. This will serve to confuse a potential buyer and undermine the vendor without the property even being viewed.

Selling Fees, taxes and retentions

Speak to your lawyer or a tax consultant in order to confirm current tax legislation as tax rules are subject to change.

Real Estate Agency Fees - Before instructing an agent ensure that their fee structure has been set out clearly you.

Legal Fees – Before instructing a lawyer ensure that their fee structure has been set out clearly to you and which services they will provide. Arranging a Power of Attorney and application for NIE may incur additional fees

• Capital Gains tax for non-residents from EU/EEA countries is set at 19% whereas non - residents from non-EEA countries is 24%. Capital gains tax in Spain for residents (remember, you will be considered a tax resident in Spain when you reside in the country for more than 183 days per calendar year). The amount of capital gains tax that residents pay is incremental. Therefore, as a resident, the Spanish capital gains tax applicable is: 19% for the first 6.000 € profit, 21% from 6,000 € to 50.000€, 23% from 50,000€ upwards, 26% from 200.000€ onwards. Tax relief is available if you have lived in the property for at least 3 years before selling and are reinvesting the profits in the purchase of a new main residence.

Retention. All non-resident sellers, regardless of when they acquired the property, are subject to 3% retention of the sales price, paid to the Tax Office by the purchaser on account of the seller, and applied against the seller’s capital gains tax. If the seller’s liability is less than the 3% withheld at the time of the sale, the seller can claim it back from the tax office. If higher, the seller will have to pay the difference to the tax office.

There is one exception regarding the 3% retention: when the property has been owned by the vendor, at the date of 31st of December 1996, for more than 10 years and when the vendor is an individual (not a non-resident company). Also there is no retention when the vendor is subject to the normal income tax for residents or to companies’ tax.

Notary fees are fixed by law on the basis of a scale.

Plusvalia - is a tax to be paid by the seller, although it may be subject of negotiation with the purchaser. It is a municipal tax on the increase in value of the land alone. Note that if the seller does not pay this “plusvalia” tax, it will fall on the property.

Other property taxes - such as I.B.I, garbage collection tax, community fees if any as well as normal running costs such as electricity, telephone, water, etc. should be paid by the vendor up to the date when the property is transferred to the new owner. If these cannot be calculated exactly on that date, it is customary that the buyer or his/her legal representative requires that an amount of money is left in deposit to guarantee these payments.


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