When selling a property in Spain, there is a tax retention that is available. You must be a Non-Fiscal Resident and you could receive up to 3% back. Keep on reading to see if this would apply to you.
Table of Contents
- Capital Gains or Loss Tax Calculated
- What is the end result of the Calculation?
- And what happens if there is a Capital Loss?
- The deadline to request the refund has passed, what can I do?
- Have you sold your property and still have not requested the refund of the retention?
- Questions about a digital certificate?
- Contact Us – We are here to help you with buying or selling a property in Spain!
Before answering this question, it is necessary to clarify various points.
- First, this retention is only applicable to a sale of a property by a Non-Fiscal Resident. If you have any doubts as to whether you are or are not a fiscal resident keep reading.
- Secondly, the object of this tax, is so that the Hacienda (Tax Office) can collect an estimated interim sum of tax until the seller does the proper Capital Gains calculations later, said calculations could result in either a profit or a loss on the sale of your property.
- Thirdly, the 3% is applied to the sale price, and will be retained by the buyer upon the payment of the property at the Notary’s office. This means that the check you will receive will already have this sum deducted from it.
- And lastly, we are not going to get into the case of reinvesting the proceeds of the sale because this topic would need a more in depth article.
Now that the above has been clarified, we will continue with the explanation of whether the 3% retention can be recovered or not.
Capital Gains or Loss Tax Calculated
Once the sale has been completed, you have the obligation to file a tax declaration with the calculations of a possible gain or loss on the sale of the property. You have 4 months from the day of the signing to do this tax return (really it is between the 2nd, 3rd and 4th month after the sale because the first month is the time span the buyer is given to pay the tax in to the Tax Office that then deducted from the purchase price).
Usually, we do this calculation for our clients way before the completion, so that they have a better idea of the amount of money they will have left after everything relating to their sale has been paid.
In compliance with this tax obligation, you have to calculate if there has been a GAIN or a LOSS on your sale. To do this, you must take into account the sum that you paid for the property when you purchased it, plus all of the costs and taxes that the purchase generated.
Very Important Advice!
Always keep all the official bills and tax documents from the purchase together with your Deeds, they will be needed in the future.
The cost of the sale must also be taken into account, plus all of the costs and taxes that the sale has generated.
What is the end result of the Calculation?
If the result is a positive one, you must compare whether it is more than or less than the 3% that was retained at the signing of the sale.
- If it is more that the retained figure, then you must pay the difference into the Tax Office.
- If it is less, the good news is that a refund of the difference can be applied for.
And what happens if there is a Capital Loss?
Well, that is great news!! You can request the refund of the entire retention that was withheld!
IS IT A JOKE THAT THE TAX OFFICE WILL REFUND THIS TAX OR DO THEY REALLY REFUND IT?
Please believe me when I tell you YES, THEY DO REFUND IT.
But please take note of the following points:
- There are times when they don’t check the documentation or the calculations that have been filed and give the order to do the refund very quickly.
- There are other times, that they do a full check and request to see the proof of how the calculation was arrived at. If you send the requested documents and everything is in order, they will give the order to refund the requested sum.
- Please note, if you don’t answer the request for information …… your refund request will be filed away and cancelled, and you won’t receive anything. PLEASE NOTE Every letter or request that they send to your address appears in the Tax Office data base. You may be wise to read the POST that I have written on FISCAL ADDRESSES.
- It is also possible now for the refund to be sent to a bank account in another country, so it won’t be necessary to keep your Spanish bank account open. Having said that, from my experience, if you can keep it open to receive the refund, do so, because they usually pay out much quicker when the bank account is a Spanish one.
The deadline to request the refund has passed, what can I do?
Well, more good news! The truth is that you can file the refund request within 4 years from the date that you were obliged to do it. However, the only drawback is that you will have to pay a fine for submitting it after the deadline.
Therefore, it would be advisable to consult with your lawyer about how much the fine could be, so that you can evaluate if the retention refund is more than the fine would be. (In most cases it is)
As you can see, it is possible to obtain a total or partial refund of said retention.
At AF Consulting Pro Lawyers, we do this constantly for our clients when they sell their properties and believe me when I tell you that they are pleasantly surprised when they see a payment of a large sum in their bank account.
Have you sold your property and still have not requested the refund of the retention?
Have you calculated whether you are entitled to the refund or, on the contrary, have to pay even more?
Contact us now and we will do the calculations for you free of charge. And if the result is that you are entitled to a refund, we will request it immediately.
Questions about a digital certificate?
Our local lawyer helps answer some of the most common questions we have as foreigners in Spain. This topic is going to cover the digital certificate Spain! He can get one for you.
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About the Author: Fran has been a lawyer in Spain for more than 20 years and is based in the Costa Tropical. He is fluent in English and Spanish and can facilitate you buying a property in Spain. While he is located on the Costa Tropical, he can assist with any properties in Andalucia and eastern Spain. You may read more about his services and what offers he has for free consulting, see lawyer in Spain.
Read more How To posts on Almuñécar Info, full of tips and tricks for you to live in Spain.