Selling Spanish property as a non-resident: 3% withholding

The 3% retention

Article 25.2 of the non-resident income tax law (texto refundido de la Ley del IRNR) provides that, on transfers of Spanish real estate by taxpayers acting without a permanent establishment, “el adquirente estará obligado a retener e ingresar el 3 por ciento, o a efectuar el ingreso a cuenta correspondiente, de la contraprestación acordada, en concepto de pago a cuenta del impuesto”.

The AEAT’s instructions for modelo 211 add:

• the buyer, resident or not, individual or company, files the form;
• one return is filed for each property, with the AEAT office in whose area the property lies;
• the payment is due “en el plazo de un mes a partir de la fecha de transmisión del inmueble”;
• the buyer gives the seller the copy marked for the non-resident transferor, which the seller uses to prove the payment on account when filing the return for the gain;
• no payment is due where the property is contributed to the formation or capital increase of a company resident in Spain.

If the buyer does not pay, article 25.2 says the property stays charged (“afectos”) for the lesser of the withholding and the tax due. The texts read do not say how the deduction is arranged at completion; ask the notary and your lawyer before the signing.

The seller’s tax: 19% on the gain

The 3% is computed on the price. The tax is computed on the gain. Article 25.1.f).3 sets 19% for capital gains arising from transfers of assets. The 24% rate in article 25.1.a applies to rent and imputed income, not to gains. A common mistake is to apply 24% to the gain of an American or Canadian seller.

Article 24.4 says the gain is determined using the personal income tax rules on capital gains, except article 33.2 of that law. In general terms, it is sale value minus acquisition value, which the adviser computes with the allowed costs; this guide does not itemise them.

Worked example (a calculation with assumed figures)

Assume a home bought for €200,000 and sold for €300,000, and ignore purchase and sale costs for simplicity.

• Gain: €300,000 minus €200,000 = €100,000.
• Tax at 19%: €19,000.
• Retention paid by the buyer: 3% of €300,000 = €9,000.
• Balance due by the seller on modelo 210: €19,000 minus €9,000 = €10,000.

If costs lowered the gain to €60,000, tax would be €11,400 and the balance €2,400. If there is no gain at all, tax is zero and the €9,000 retained is recovered by refund. The retention is calculated on the price, so it can exceed the tax due.

Filing the modelo 210 and the refund

The sale return is filed “en el plazo de tres meses una vez transcurrido el plazo de un mes desde la fecha de la transmisión del bien inmueble”, that is, in the three months after the one-month period following the sale. The AEAT says this applies regardless of the result. Where a married couple, both non-residents, own the property jointly, a single return can be filed. The wider mechanics (certificate, Cl@ve, payment routes) are in the modelo 210 guide.

If the 3% exceeds the tax, the difference is recovered through the same return; the AEAT states that returns with an amount to be refunded can be filed within four years from the end of the withholding period. Check with the AEAT for the case of a sale, because the page gives the rule for refunds in general.

Reinvestment exemption: only for EU and EEA residents

Additional provision 7 of the non-resident law allows gains on a former main home in Spain to be excluded from tax if the whole proceeds are reinvested in a new main home. It is reserved for taxpayers “residentes en un Estado miembro de la Unión Europea” and, under paragraph 4, residents of EEA states with effective information exchange. The rule of article 38 of the personal income tax law is applied. A Canadian, American or British seller does not qualify. Retention and filing still apply to those who do.

The plusvalía municipal

The municipal tax on the increase in value of urban land (plusvalía municipal, impuesto sobre el incremento de valor de los terrenos de naturaleza urbana) is a different tax. On a sale, the taxpayer is the seller (article 106.1.b of the local finance law). But article 106.2 says that where the seller is an individual who is not resident in Spain, the buyer is the substitute taxpayer (“sujeto pasivo sustituto del contribuyente”). The buyer pays the municipality, and the amount is normally dealt with in the price negotiation.

Other points from the same law:

• no tax arises if it is shown that the land did not increase in value between the transfer and acquisition dates (article 104.5);
• the municipality sets the rate, up to a maximum of 30% (article 108.1);
• the declaration is due within 30 working days of a transfer between living persons (article 110.2), and a municipality may use self-assessment.

The amount depends on the municipal ordinance and the cadastral value of the land. Ask the town hall.

Which professional to consult

A tax adviser or a lawyer registered with a Spanish bar association (colegio de abogados) can compute the gain and file the return. The notary executing the deed can tell you how the retention and the plusvalía are handled at completion. Your adviser at home deals with the credit for Spanish tax; the treaty position of Canadians is in the Spain-Canada tax treaty and property. For estimates, see the non-resident tax calculator.