What taxes does the seller of a flat pay?

Question

José Manuel Alburquerque · Accepted Answer

You pay personal income tax, the “IRPF”, on what you make from the sale, which is the difference between what you obtain and what the flat cost you, including its expenses. You also pay the “plusvalía municipal”, the municipal capital gains tax, a town council tax calculated on the value of the land. You owe the local property tax, the IBI, for the year of the sale, as you were the owner on 1 January, although, unless otherwise agreed, you can charge the buyer for the part of the year in which the flat already belongs to them. If you are not resident in Spain, instead of the IRPF you pay non-resident income tax (the “impuesto sobre la renta de no residentes”) and the buyer has to withhold 3 % of the price. The buyer pays the “impuesto de transmisiones”, the property transfer tax, or VAT if the home is new. Income tax on the gain Tax is not paid on the price but on what you have gained. The gain is the sale price, minus the costs of the sale, minus what the flat cost you, which includes the expenses and taxes of the purchase and any improvement works. If the flat was inherited, what it cost you is the value declared for the “impuesto de sucesiones”, the Spanish inheritance tax. The gain is added to the interest and other gains for the year and is taxed in bands, from 19 % to 30 %. It is declared in the income tax return filed the following year, between April and June. Nothing is paid on it at the notary's office. You do not pay tax on the gain, or you pay less, in these cases: If you sell your principal residence and use the proceeds to buy another principal residence. If you are over 65 and sell your principal residence. If you are over 65 and, within six months of the sale, use the proceeds to take out a life annuity with an insurer, up to a maximum of 240.000 euros. If you bought the flat before 31 December 1994, the part of the gain corresponding to the years up to 19 January 2006 is reduced. Each of these cases has its own conditions. Municipal capital gains tax It taxes the rise in the value of the land attributable to the flat while you have owned it and you pay it as the seller. It is calculated on the cadastral value of the land, shown on the IBI bill, according to the number of years you have owned the flat, or on the actual gain in the value of the land if that works out lower. It has to be filed with the town council within thirty working days of the deed. If the land has not gained in value, nothing is payable, but this has to be declared within the same time limit, with the purchase and sale deeds. The IBI and special cases The IBI for the whole year is owed to the town council by whoever was the owner on 1 January, even if they sell in February. Unless otherwise agreed, you can charge the buyer the share corresponding to the days on which the buyer is the owner. There are also special cases: If you are not resident in Spain, you pay non-resident income tax, at 19 % of the gain. The buyer withholds 3 % of the price and pays it to the tax authorities on account of that tax. The buyer also pays the municipal capital gains tax on your behalf and deducts it from the price. If the flat belongs to a company, the gain is taxed under the “impuesto sobre sociedades”, Spanish corporation tax. If the seller is a developer or a builder selling a new home, the seller charges VAT to the buyer, who is the one who bears it.