3.- PERSONAL TAX SITUATION – CAPITAL GAINS TAX
CALCULATION OF CAPITAL GAINS
Sales of Spanish properties derive Capital Gains liability to vendors.
Caiptal Gains Tax to pay is the 19 % of the «Net profit» of the sale.
To obtaining what is the «Net profit» of the sale you need to follow up this formula:
Price of the sale – Price of acquisition – Expenses and Taxes on acquisition – Cost of «structural reforms» made on the property
Example of Capital Gains calculation:
- You bought a resale property in 2015 for a price of 200.000 EUR.
- On that moment, you paid 24.000 EUR, which is the 12 % of expenses: 10 % Transfer tax + 2 % notary, land registry, solicitor fees, etc.
- Then, you made internal reforms for 17.000 EUR (change of tilling of the floor, repairing the pool, and new windows).
- Some years later you built a garage for a value of 20.000 EUR
Then, you decided to sale now for a price of 260.000 EUR.
What is the Capital Gains derived from this sale?
NOTE: Before we make the calculation, we need to inform that the Spanish administration will consider all the above concepts to reduce the tax, except the one for «internal reforms» for 17.000 EUR value. The reason of this is because «internal» reforms which are not «structural» reforms are not considered for tax benefits.
We use the formula:
260.000 (Price of the sale) – 200.000 (Price of acquisition) – 24.000 (Expenses and taxes on acquisition) – 20.000 (New Garage) =
This is the «Net profit» to be obtained with the sale
As the rate for Capital Gains is 19%, then, the amount of the tax for Capital Gains will be:
16.000 * 19 % = 3.040 EUR
WAY OF PAYMENT OF CAPITAL GAINS
1.- FOR SPANISH NON TAX RESIDENTS
Being you NON tax resident in spain, the way in which you pay Capital Gains is the following:
- ON COMPLETION OF THE SALE: 3 % RETENTION: On completion of the sale, the Spanish administration forces the buyer to make a RETENTION of the 3 % from the value of the Price of the sale. So, you do not receive the full agreed price. The buyer keeps the 3 % of the total price and he has the obligation to deposit it at the Tax office. This is done «the same day of completion of the sale».
NOTE: Following the above example, in case the price of the sale was 260.000 EUR, the retention tlo be made by the buyer would be 260.000 * 3 % = 7.800 EUR.
- BEFORE 6 MONTHS AFTER COMPLETION OF THE SALE: DECLARATION OF CAPITAL GAINS (19%): After completion of the sale, you have 6 months to present the «Capital Gains Declaration» to the Spanish tax office. In this declaration, you (or your lawyer), must calculate the tax following the above example. In this case, the amount that you have to pay is of 3.040 EUR.
NOTE: As explained here, the CG derived from this transaction is of 3.040 EUR. As you were retained with a higher amount (7.800 EUR), then, you have a «credit» with the Spanish administration for the difference.
So, if the Spanish administration holds from you 7.800 EUR for CG Tax, as the final result of the tax is only 3.040 EUR, then, the Spanish administration must «refund» you the difference: 7.800-3.040 = 4.760 EUR.
How to claim for this refund? Your lawyer has to include this fact on the same Capital Gains Declaration, to present to the Tax office.
2.- CAPITAL GAINS IN CASE OF SPANISH TAX RESIDENTS:
In case that you are considered as «Spanish Tax Resident» (which means that you are paying your income tax in Spain as a Spanish resident), then, once calculated the Capital Gains, you will have the following benefits on the tax:
- NO CAPITAL GAINS FOR PERMANENT RESIDENCE: In case the property you are selling is your permanence residence (you have bee using it for more than 3 years as your «permanent home»), then you will have the following benefits:
- If you are younger than 65 years old: You do not pay CG for the amounts of the sale obtained «reinvested» in the acquisition of a new property to be used as your permanent residence. You have 2 years to practice this «reinvestment» (passed 2 years without invest those amounts, you will be taxed in full).
- If you are older than 65 years old: You do not pay CG for the amounts obtained on the sale. And this even if you do not «reinvest» in a new property.
- NO 3 % RETENTION: On completion of the sale, you receive the full amount of the price from the buyer with no retention applicable.
NOTE: Usually owners confuse the “Spanish Tax Residence”, with the “Spanish Residence”.
In other words, people think that the «Spanish Residence Card, or «Residence Certificate» obtained in the Spanish National Police, is enough to demonstrate that they are «Spanish Residents for Taxes», and, unfortunately, this is not the case.
The “Spanish Residence Card” (or “Spanish Residence Certification“), is not the valid document to change your Tax consideration as «Tax Resident».
The Spanish Residence Card (or Certificate) only serves to declare that you are “living” in Spain, in order to facilitate the Police to have a better control over the residents in a determinate area.
In order to become Spanish resident for taxes, and then start to pay your Taxes in Spain as a normal Spanish citizen, you must obtain the SPANISH RESIDENT TAX CERTIFICATION issued by the Spanish Tax Office or Spanish Customs, and then you will start to pay your taxes in Spain, and not in your country of origin.
And, also, once you need to declare to the Tax of office from your country that you are Spanish Tax Resident, and that you do not wish to continue as Tax Residence on your country-
So, please, check with your tax adviser the taxes that you are currently paying because, even if you are not Spanish Resident, you should be declaring and paying the INCOME TAX NON RESIDENTS.
So, once explained all the above, when you have decided to SALE your Spanish property, please, take this into account that you need to obtain/present the following documents before selling:
- Title deeds of the property (Escritura): If possible, the ORIGINAL ones. With the correct and updated description of the constructions.
- Council Tax Bill (IBI – SUMA) .- With the correct description of the constructions.
- Water and electric bills.- the most recent ones.
- Habitation Certificate also called “LICENCIA DE PRIMERA O SEGUNDA OCUPACIÓN”.
- No Infraction Certificate .- This is called “Certificado de No Infracción Urbanística”.
- Community of Owners Certificate (if the case) showing you are up to date on Community Charges.
- Original NIE & Original Passports
- Energy Performance Certificate
TAXES : You have to present the following tax documents:
Models 210 or 214 from the previous 3 years. If non Spanish Tax resident
Model 100 from the 3 previous years. If Spanish Tax Resident