As it happens when buying a property, Spain has no restrictions for someone who is a foreigner or doesn’t reside in the country to sell their home. However, the process is not the same: Taxes when selling your home in Spain if you are a non-resident are different than when you are a resident.
This is the fourth article in our series for foreigners and non-residents who want to buy or sell their home in Spain. If you haven’t read them already, we recommend that you take a look at the three previous articles:
- I’m a foreigner and I want to buy a house in Spain: 2019 Guide
- Non-resident with a house in Torrevieja: What taxes do you need to pay?
- How to obtain the residence permit in Spain in 2019?
With that out of the way, if what you want to know is what taxes must be paid by a non-resident who wants to sell their house in Spain, more specifically in Torrevieja, read on.
Who is non-resident?
Although we already explained it in this post, it never hurts to brush up for new readers. Non-resident and foreigner are different concepts, since you can be a resident in Spain without having the nationality and vice versa. The Tax Agency (Agencia Tributaria) specifies that in order for someone to be considered a resident in the country, they must meet one of these three characteristics:
- Live in Spain 183 days or more throughout the year.
- Directly or indirectly, it has the basis of its activities or economic interests in Spain.
- Your spouse not legally separated and the minor children who depend on him or her are residents in the Spanish territory.
With this explained, we’re going to talk about the two taxes that affect a seller who does not reside in Spain.
Non-Resident Income Tax (IRNR)
Regardless of whether you reside abroad, the seller of a property must declare the profits obtained from the sale of a house in Spain to the Spanish Tax Agency.
When a property is sold, the IRNR is calculated upon the difference between the transmission value and the acquisition value of the property. Calculating this is a bit more complicated than seeing the difference between the price for which the house was bought and the price for which it was sold.
In the case of the acquisition value, the expenses inherent to the acquisition (such as notary, agency, lawyers, etc.) and the expenses for investments and improvements, all justified with invoices, must also be taken into account. On the other hand, you must also deduct the payback obtained if the property was leased at some point.
In the case of the transmission value, this consists of the value for which the property has been sold, unless the market value is greater. From here, expenses that one may have had (such as real estate or notary fees) are deducted.
Once these values are obtained, a rate of 19% (since 2016) is applied to the difference between them for residents of the EU, Iceland or Norway, and 24% for the rest.
It is worth mentioning that for homes acquired before 12/31/1994, reducing percentages apply if the home has been sold for less than 400.000 €.
Additionally, we must point out that for EU citizens, Iceland and Norway, since 2015, the profits obtained from the sale of a home can be excluded from being taxed provided that the total amount is invested in acquiring a new habitual home in the country the seller resides in.
Plusvalía or IIVTNU
Plusvalía, or the Tax on the Increase of Value of Urban Nature land, is a tax that both residents and non-residents have to pay when selling their home, and assumes that all property increases in value during the years that It has been owned by the seller.
Given that we’ve already talked about how to calculate and claim it in case there has not been an increase in value, here’s the link to the article that explains the Plusvalía tax in Torrevieja in detail here.
Keep in mind that as a non-resident, the buyer or their representative (maybe their real estate agency, or their lawyer) might withhold the plusvalía tax to make sure it’s paid, as well as the IBI and the urban residues tax.
What about the withholding of the 3%?
The withholding on sale of the property, or withholding of the 3% as it’s popularly known, stems from the IRNR mentioned above. It’s done because many times, non-residents are not aware of their tax obligations, and therefore do not pay the IRNR tax. Because the Tax Agency often has trouble finding non-resident people, and cannot notify them, a withholding of 3% of the selling price is done as a preventive measure so that taxes can be collected.
This withholding must be done by the buyer, or whoever is representing the buyer (for example, the real estate agency with which they work), and is presented through model 211 within 30 days from the date of sale.
If the seller ends up having to pay the Tax Agency less than this amount, they must submit form 210 to claim the difference. The seller must possess all the documents that prove that what they say is true. On the other hand, if the total to be paid is more than this 3%, the seller should pay the difference to the Tax Agency.