3% Retention
When selling a Property, there are certain financial (tax) obligations about which the owner needs to know.
When setting the price of the sale, the owner should be aware that they will ‘lose’ 3% of the declared value in what is called the ‘Retention’. This is a sum which, although it is the responsibility of the seller to pay, in order to ensure that this takes place, the buyer actually registers the forms with the Treasury Department, usually by using a Fiscal Representative
The Fiscal Representative of the Buyer will complete a tax form detailing who bought the property, and who has sold the property. The amount to be paid will be retained by the Buyer´s Fiscal Representatives on completion and paid when the form is processed by the Treasury Department.
If the Seller has not paid their annual taxes whilst owning the property, the 3% retention will be retained by the Treasury Department. (If the seller is selling at a loss, then they are able to claim the 3% retention back as long as they have paid their taxes up to date (Non-Resident Tax for example). After retention is claimed it takes about 8-12 months to be refunded from the Treasury.
However, if the Seller is up to date on all tax payments, there is the opportunity to reclaim this amount when filing for Capital Gains Return.
Capital Gains Return
This is a tax calculated on the difference between the purchase price of the property originally, and the sale price of the house in this transaction. The difference between these two amounts is the profit which has been made. To gain a true figure, you must also deduct any expenses which can be demonstrated (i.e. by official invoices). If the expenses cannot be demonstrated by justified paperwork, it cannot be deducted from the profit. Also, expenses on the purchase (solicitors fees, Notary, Land Registry, etc) can be used to increase the original purchase price.
The type of expenses which can be deducted are:-
• Notary Costs (with receipt of same)
• Land Registry Costs (with receipt of same)
• Purchase Tax Certificate (Certificate of taxes paid on purchase where applicable, where applicable)
• Details of Costs of Selling i.e. Estate Agency Invoice of Same
The amount left after deductions is generally subject to tax when the sellers are Non-Residents of Spain. If the Capital Gains amount is more than the 3% Retention, the difference needs to be paid (19% of the difference). If the Capital Gains is less than the 3% Retention, the difference should be returned from the Treasury (assuming that all annual tax returns are in order).
A Fiscal Representative will calculate the paperwork for this and advise the Seller of their obligations, however, the responsibility is for the Seller to actively pay the amount. In order to make things easier for both buyer and seller, it is normal to pass all paperwork to your Fiscal Representative to collate and liaise with the Representatives of the Buyers. We can assist with this.
Habitation Certificate
If you are intending to sell your property in Spain you must have a current Habitation certificate “Cedula de Habitabilidad”.
These are issued by the town hall to a builder on completion of new properties, stating each property has been passed as habitable. Once obtained, the Habitation Certificate has a validity of five years (the certificate says 5 years but legally is valid for 10 years) and states that the building conforms to the original plans submitted to the town hall.
When the five years expires, the owner of the property should renew the certificate via the town hall, who will issue the new certificate, a Licencia de Segunda Ocupación in the name of the owner of the property.
If any refurbishments are made to the property (including the closing in of patio areas, paving of gardens, adding additional rooms etc.) permission should be obtained from the town hall prior to starting the works.
The representatives of any buyers will now ask for a certificate that in date, and many clients are finding that they need to get this before selling their property. Unfortunately, this is also when the Town Hall will become aware of any minor works made without permission. Of course, if the property is on a Community, then there must be a required Community consent certificate to add the extra metres built to the title deeds.
Sellers should also be aware that they are liable to pay for reconnections of utilities so if meters have to be reconnected, they will need to pay for this.
Spanish Solutions Service
We provide the following services when dealing with a sale –
• Preparation of Utilities Contracts, Community Charge and Suma Invoices to be given to the new owner
• Liasion throughout the transaction with Purchaser´s Representatives and Notary
• Prepare the Notary Appointment and all related Paperwork
• Accompany you on day of the sale to the Notary
• Translation at the Notary
• Calculation of the 3% Retention
• Verification from Buyers of Payment of 3% Retention
• Calculation and Advice re Capital Gains Tax
• Completion of all Tax Related Paperwork
• Provide Fiscal Representation throughout the process
Please contact us if you have any queries regarding the above or if we can be of any assistance in representing you in the sale of your property.