The tax you pay when buying a property from a non-resident in Spain
Here's what you need to know about tax obligations if you're a Spanish resident buying a property from a non-resident in Spain.
If you want to buy a property in Spain from a non-resident who is not permanently established in the country, there are a couple of things about the purchase that differ from the normal process and you need to keep in mind.
The most likely scenario that this might happen is if you wanted to buy a property from a non-resident who uses it as a holiday home, for example.
READ ALSO: How to avoid paying Spain's ITP tax when buying a second-hand home
In a sentence, the main difference is how the taxes work. This is because the Spanish treasury wants to make sure that it can still collect the taxes that it normally does from the seller, and for this reason it imposes some extra obligations on the buyer.
Fortunately, Spain's main consumer watchdog, La Organización de Consumidores y Usuarios (OCU), has provided analysis of the main differences when buying a property from a non-resident in Spain.
Here's what you need to know.
Taxes
The two taxes that sellers normally pay in Spain are income tax and capital gains. However, when the seller is a non-resident and therefore not subject to personal income tax or have the same tax obligations in Spain, there's a few things things you need to do.
The 3 percent rule
In the case of paying income tax for a transaction with a non-resident, the tax is called Impuesto de la Renta para No Residentes (Income Tax for Non-Residents, or IRNR). It is calculated in the same way as when the seller is a resident (and they will still pay it) but as in this case you are buying from a non-resident, the treasury imposes extra tax obligations onto you, the buyer.
So, what do you have to do?
Well, when the deed of purchase is granted the buyer must make a retención (basically a deduction or withholding) of 3 percent of the sale price. Then, within a month, you must pay that 3 percent sum to the Spanish treasury as payment on account of the Non-Resident Income Tax (IRNR), through form 211.
After filing that paperwork, the buyer must give the seller a receipt of the ejemplar para el transmitente no residente (copy for the non-resident transferor, in English) so that the seller can make an IRNR self-assessment in which he declares the profit obtained in the transaction through form 210.
You, the buyer, would keep the ejemplar para el adquirente (copy for the buyer) form 211, as a supporting document to prove you've done it.
It is worth noting that if the property is owned by resident and non-resident persons or companies (for example, sibling co-owners of the property who do not reside in the country), only the amount of the purchase that proportionally corresponds to the non-resident owners must be recorded.
READ ALSO: Ten acronyms you need to know to buy a property in Spain
Plusvalía (capital gains)
The second tax you need to know about is the 'plusvalía' - usually referred to capital gains or valued added tax in English. In Spain, the plusvalía is a municipal tax, meaning that you pay it at the local level down at the town hall.
The plusvalía basically taxes how much your property has grown in value (something known as the valor catastral) and how long you've had it, and is usually paid by the seller.
Bu unlike when buying from a resident, when property is bought from a non-resident it is the buyer who must pay this municipal capital gains tax on behalf of the seller. The buyer effectively becomes the "substitute taxpayer" and must pays the tax before the local town hall within a month from the date of the deed of sale.
The responsibility to declare or self-assess the capital gains tax also falls on the buyer. That's why, when signing the deed of purchase, the amount of the capital gains tax must be calculated and the buyer must retain that amount in order to make the payment to the town hall, and clearly reflect it in the deed. If you don't do this, you may have problems further down the road recovering that money from the non-resident seller, if you have made an arrangement to that end.
Often, people in this situation negotiate a reduction of the purchase price that takes into account this non-resident capital gains payment quirk.
Too calculate the plusvalía, the taxable base is found by comparing the deeds of purchase and sale. Take this into account when asking the seller for a copy of the deed of acquisition. The OCU also recommends asking the seller if they were given a value inspection of the property because this could increase the acquisition value to be taken into account and therefore reduce or in some cases even eliminate the capital gains tax.
The Local's journalists are not tax or property experts, and recommend consulting an estate agent or property lawyer.
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If you want to buy a property in Spain from a non-resident who is not permanently established in the country, there are a couple of things about the purchase that differ from the normal process and you need to keep in mind.
The most likely scenario that this might happen is if you wanted to buy a property from a non-resident who uses it as a holiday home, for example.
READ ALSO: How to avoid paying Spain's ITP tax when buying a second-hand home
In a sentence, the main difference is how the taxes work. This is because the Spanish treasury wants to make sure that it can still collect the taxes that it normally does from the seller, and for this reason it imposes some extra obligations on the buyer.
Fortunately, Spain's main consumer watchdog, La Organización de Consumidores y Usuarios (OCU), has provided analysis of the main differences when buying a property from a non-resident in Spain.
Here's what you need to know.
Taxes
The two taxes that sellers normally pay in Spain are income tax and capital gains. However, when the seller is a non-resident and therefore not subject to personal income tax or have the same tax obligations in Spain, there's a few things things you need to do.
The 3 percent rule
In the case of paying income tax for a transaction with a non-resident, the tax is called Impuesto de la Renta para No Residentes (Income Tax for Non-Residents, or IRNR). It is calculated in the same way as when the seller is a resident (and they will still pay it) but as in this case you are buying from a non-resident, the treasury imposes extra tax obligations onto you, the buyer.
So, what do you have to do?
Well, when the deed of purchase is granted the buyer must make a retención (basically a deduction or withholding) of 3 percent of the sale price. Then, within a month, you must pay that 3 percent sum to the Spanish treasury as payment on account of the Non-Resident Income Tax (IRNR), through form 211.
After filing that paperwork, the buyer must give the seller a receipt of the ejemplar para el transmitente no residente (copy for the non-resident transferor, in English) so that the seller can make an IRNR self-assessment in which he declares the profit obtained in the transaction through form 210.
You, the buyer, would keep the ejemplar para el adquirente (copy for the buyer) form 211, as a supporting document to prove you've done it.
It is worth noting that if the property is owned by resident and non-resident persons or companies (for example, sibling co-owners of the property who do not reside in the country), only the amount of the purchase that proportionally corresponds to the non-resident owners must be recorded.
READ ALSO: Ten acronyms you need to know to buy a property in Spain
Plusvalía (capital gains)
The second tax you need to know about is the 'plusvalía' - usually referred to capital gains or valued added tax in English. In Spain, the plusvalía is a municipal tax, meaning that you pay it at the local level down at the town hall.
The plusvalía basically taxes how much your property has grown in value (something known as the valor catastral) and how long you've had it, and is usually paid by the seller.
Bu unlike when buying from a resident, when property is bought from a non-resident it is the buyer who must pay this municipal capital gains tax on behalf of the seller. The buyer effectively becomes the "substitute taxpayer" and must pays the tax before the local town hall within a month from the date of the deed of sale.
The responsibility to declare or self-assess the capital gains tax also falls on the buyer. That's why, when signing the deed of purchase, the amount of the capital gains tax must be calculated and the buyer must retain that amount in order to make the payment to the town hall, and clearly reflect it in the deed. If you don't do this, you may have problems further down the road recovering that money from the non-resident seller, if you have made an arrangement to that end.
Often, people in this situation negotiate a reduction of the purchase price that takes into account this non-resident capital gains payment quirk.
Too calculate the plusvalía, the taxable base is found by comparing the deeds of purchase and sale. Take this into account when asking the seller for a copy of the deed of acquisition. The OCU also recommends asking the seller if they were given a value inspection of the property because this could increase the acquisition value to be taken into account and therefore reduce or in some cases even eliminate the capital gains tax.
The Local's journalists are not tax or property experts, and recommend consulting an estate agent or property lawyer.
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