Taxes when Selling a House in Spain

Estimated reading time: 10 minutes

Selling house taxes Spain: Selling a property is not always easy. Certainly not in foreign countries where, in addition to other legislation, language can be a stumbling block. In this blog, we explain the following: what taxes you should or should not take into account, wealth tax exemption in 2023 and calculating wealth tax.

Costs when Selling a Property in Spain in 2023

Once a potential buyer is found, you need to consider various costs to successfully complete the sale. In 2023, these costs include three specific aspects:

1. Preliminary Purchase Contract

This document, known in Spain as a “contrato de arras,” while not mandatory, is highly recommended. This is because a preliminary sales contract protects both the seller and the buyer in the event that either party withdraws before signing the final sales contract.

The preliminary sales contract contains all the terms agreed upon during negotiations between the two parties, such as the final sales price, the deadline for signing, cost sharing, penalties for breach of contract, etc.

The cost of drafting a preliminary sales contract in Spain varies depending on who is responsible for drafting it. If you draft the contract yourself, there is no cost. If a brokerage firm does it for you, these costs are included in their sales commission. If a lawyer arranges this for you, the cost can usually be around €100.

2. Notary fees

This is the cost of notarizing the deed, including the fee for the notary himself. Generally, these costs are borne entirely by the buyer, although the Civil Code dictates that the seller is responsible for the cost of the public sale deed; the buyer pays for the first and any subsequent copies.

The final amount of notary fees depends on the selling price of the property. Notary fees, also called rates, are regulated by the government, and all notaries charge the same rates for the same services. To execute the public sale deed, prices usually range between €600 and €875, depending on the value of the property.

3. Brokerage commission

If you have engaged an estate agent to guide the sale of your home in Spain, you will need to pay the associated fees. The amount of these costs is highly dependent on market conditions (type of property, geographic location, etc.) and the sale price of the property. Generally, a real estate agent charges a predetermined percentage of the final sale price of the property.

When selling a property in Spain in 2023, it is crucial to take these costs into account to get a clear picture of the financial aspects of the transaction.

Sell house taxes Spain

When selling a house in Spain, there are several taxes to consider. Selling house taxes at a glance:

1. Profit Tax (Plusvalía Municipal): This is a local tax calculated based on the increase in value of your property since the last sale. The fee varies depending on the municipality in which your home is located. Be sure to check the exact rates in your community so you know what to expect.
2. Income Tax (Impuesto sobre la Renta de las Personas Físicas – IRPF): As a non-resident, you must also pay income tax on the profit you made from the sale of your home. The rate varies between 19% and 24% of the capital gain realized, depending on the amount of the gain.
3. Non-Resident Tax (Impuesto sobre la Renta de No Residentes – IRNR): If you are not a tax resident in Spain, 3% of the sale price is withheld as a provisional tax. This can later be offset against any outstanding taxes.
4. Capital Gains Tax (Impuesto sobre el Incremento de Patrimonio de la Venta de un Inmueble – Plusvalía Municipal): This is a local tax that is calculated based on the profit you made from the sale of property. Again, the rate and calculation vary by municipality.

More about Income tax in Spain

When it comes to discussing profits and their taxation in Spain, a multifaceted approach is needed. Three essential elements come into play: “complexity” (perplexity), “changeability” (burstiness) and “unpredictability” (predictability). Let’s delve into these concepts to better understand the intricacies of profit tax for the year 2023 according to the Spanish tax authorities.

Income tax for 2023 in Spain:

• Profits up to €6,000: Subject to a tax rate of 19%.
• Income between €6,000 and €50,000: subject to a 21% tax rate.
• Income between €50,000 and €200,000: subject to a tax rate of 23%.
• Income between €200,000 and €300,000: is taxed at a rate of 27%.
• Income above €300,000: Face a 28% tax rate.
• It is worth noting that these rates are applied progressively, creating a dynamic tax structure. For example, the first €6,000 of profit is taxed at 19%, the portion between €6,000 and €50,000 is taxed at 21%, and so on.

Exceptions

However, there are certain exceptions to reduce income tax when selling property in Spain:

• If you are 65 or older and sold your primary residence or took out an annuity when the property sold was a secondary residence.
• If you plan to reinvest the proceeds of the sale in the purchase of a new home that will become your primary residence.
• In cases of debt settlement (dación en pago), where the property is returned to the bank because you are unable to meet mortgage payments.
• If you are a person in a situation of severe dependency or high dependency, in accordance with the Spanish law to promote personal autonomy and care for people in a situation of dependency.
• If the purchase of the property took place between 12/05/2012 and 31/12/2012, in which case you are entitled to a 50% exemption on the realized capital gain.

Exemption from Wealth Tax in 2023

Spain has some exemptions from wealth tax that may be applicable in 2023 house selling taxes:

1. Home equity exemption: If you used your home as your primary residence and you meet certain conditions, you may qualify for an estate tax exemption. This may vary depending on the region where your property is located.
2. Exemption for small amounts: Some regions of Spain have an exemption for small amounts, which means you may not have to pay wealth tax if your assets are below a certain threshold.

Calculating Wealth Tax

Wealth tax in Spain is calculated based on the value of all your assets, including real estate, bank accounts, investments and other assets. Here are some steps to calculate capital gains taxes when selling home taxes:

1. Make a list of all your assets: Gather information about the value of your real estate, bank accounts, stocks, bonds and other assets.
2. Determine applicable exemptions: Check your eligibility for any exemptions based on your personal situation and the region in which your property is located.
3. Calculate the taxable base: Subtract the exemptions from the total value of your assets to determine the taxable base.
4. Determine the rate: The rate varies depending on the value of the taxable base and the region. Consult tax authorities or a tax advisor for exact rates.
5. Calculate capital gains tax: Multiply the taxable base by the applicable rate to calculate the capital gains tax.

It is important to remember that tax laws and rates can change in Spain, so it is advisable to always consult up-to-date information on house selling taxes and seek professional advice if necessary (this is recommended to avoid surprises as calculating wealth tax is not straightforward). Selling property in Spain can be a challenging task, but with the right knowledge and guidance you can ensure that you are tax compliant under Spanish law.

FAQ

1. How much tax do you pay when selling house in Spain?

If you are planning to buy a house in Spain, paying taxes may not be the first thing on your mind. But it is important to know the tax rules before you proceed with the purchase. Spain’s tax authority, Hacienda, has a special tax rate for people selling a house. There are two taxes related to the sale of a house: a capital acquisition tax and a rental tax, depending on the purpose of the house sold and the period for which it was rented. When you sell a house, you will usually pay a capital acquisition tax, and it amounts to one percent of the sale price. If the seller has rented out the property, he may also be required to pay a rental tax. Depending on the circumstances, it can continue up to 19%, and tax rates can vary depending on the autonomous region in which your home is located. If you have to pay taxes when you sell a house, it is important to get the right information about your tax position before you proceed with the sale.

2. How high is wealth tax in Spain?

In Spain, wealth tax is levied on properties and contents. The tax is 0.2% to 0.3% of the value of your property, with a maximum rate of 2.5%. The rate depends on the year of purchase and the value of the property. There are also several exceptions to estate taxes. For example, low-income people for whom the value of their property is less than €43,253 are exempt. Family members dependent on estate taxpayers also receive a tax rate reduction. Although wealth tax in Spain is lower than in other European countries, it is important to know which rate applies to you.

3. What taxes and costs are involved in selling a house in Spain in 2023?

If you are planning to sell a house in Spain in 2023, you probably have many questions about what taxes and fees are involved in the transaction. There are some important factors to keep in mind when it comes to selling a house in Spain. First, potential sellers in Spain face a tax charge when they sell their property. This tax, instituted by the Spanish government, depends on the state in which the owner is located and can range from 4-13%. There are also other costs, such as attorney fees, notary fees, transfer taxes, registration fees and costs for both the seller and buyer that can vary depending on the state in which the transaction takes place. There may also be mortgage closing costs involved if you finance the sale of your home with a mortgage. All in all, it is wise to gather as much information as possible about the various taxes and fees in Spain before selling your home to ensure that the transaction goes smoothly and economically.

4. What taxes apply to non-residents when selling property in Spain?

If you want to sell a property as a non-resident in Spain, you need to consider different taxes. First, you pay a transfer tax, the rate of which has increased in recent years. Second, you are subject to transfer tax after selling the property, with rates ranging between 8% and 11%, depending on the autonomy. You also have to pay a capital gains tax when you sell property. This fee depends on the amount collected. Finally, there is a capital gains tax in Spain, whose rate varies between 0.2% and 2.5%.

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