Congratulations!…So you have found a buyer for your nice property in Ibiza, you now should consider what you might owe the friendly but insatiable taxman and what taxes and costs you are likely to be liable for.
These costs and tax rates are subject to change and you should always consult a tax advisor.
The costs you need to consider-
The Plusvalia Tax– This is a municipal tax based on the incremental value of the land on which the property is located, and determined by size and location and the years transcended. This tends to be a very small percentage of the overall value.
Legal Fees– The lawyers handling the sale for you generally charge anywhere between 0,5% and 1,5% plus VAT, currently 21%, depending on the complexity and value of the property.
Broker/Agent Fees– If you are using a broker for the sale, a 5% plus VAT fee is usually applied and paid by the seller, who can then deduct the amount from the capital gains tax on the property.
Energy Certificate– If the property does not have the certificate it must be obtained from a qualified technician. The costs can be between €200-500. This is required by law.
Capital Gains Tax– Ok, this is the most important tax you will have to pay and is based on your net gains,if any, made on the sale.
You need the purchase price, as per the title deed-escritura-, plus the costs you incurred with the purchase such as VAT, Transfer tax -ITP-, notary & legal fees and all with supporting documentation.
The selling price minus costs incurred during the sale, notary & legal fees, brokers fees, and any refurbishments made to the property with all the relevant receipts for materials & work carried out.
The amount due depends on whether you are a resident or not.
If not
You are liable for a 19 % capital gains tax. In addition the buyer is obliged to retain a 3% and pay to the Spanish Treasury as a deposit for the sellers potential capital gains tax liability. The seller then settles with balance or claims a refund.
If non EU, Norway or Iceland you are liable for a 24% CGT.
If you are
Your net gain would then be taxed in the following manner
19% for the first €6,000 then
21% for €6,000 to €50,000 then
23% for €50,000 to €200,000
26% for €200,000 plus
Some things to note
If it is your primary residence and you are over 65, you may be exempt from the capital gains tax.
or
You may be exempt f you use the entire proceeds to acquire another primary residence.
or
If your house was purchased before 1994 you may be able to adjust with a reduction coefficient which increase the purchase value and decreases your liability
or
if your home was purchased between 12 May 2012 and 31st December 2012 you may be entitled to a 50% discount.
Spanish Tax Law is quite intricate and we strongly recommend you consult with a good tax advisor
Let´s look at an example.
You bought a nice place on the coast in early 2001 for €1,000,000 spent €200,000 doing it up and €200,000 in taxes,costs & fees.
You now have a buyer for your house and need to do some numbers.
You have a firm offer at €3,000,000.
What are you tax liability’s as an under-65 resident in Spain, and what costs should you consider?
Back of the envelope calculation
Purchase
Cost €1,000,000
Taxes & Fees €200,000
Refurbishments €200,000
Total €1,400,000
Sale
Selling price
Sale €3,000,000
Costs & Fees
Legal €30,000
Broker Fees 5% € 150,000 plus 21% VAT €31,500 = €181,500
Plusvalia €1000
Energy Certificate €500
Total €2,787,000
Capital Gains Tax
Net Gain €1,387,000
First €6000 Tranche €1,140
Second €50,000 tranche €9,240
Third €200,000 tranche €34,500
Fourth tranche €200,000 plus 308,620
Total Tax Due €353,500
Ouuchh! ours partners at the state treasury department recieve a nice risk free dividend!
This is only an indicative example
Please consult with your tax advisor
