Selling property in Spain as a non-resident: the 3% and how to get it back.

The 3% retention

If the seller lives outside Spain and has no permanent establishment here, article 25.2 of the Non-Resident Income Tax Act requires the buyer to hold back 3% of the agreed price. It is worked out on the whole price, however small your profit and even if you make a loss. Sell for 400,000 euros and the buyer pays 12,000 to the tax office and the rest to you.

The buyer has one month from the deed to file form 211 with the tax office for the area where the property is. If they fail to, the property remains answerable for the amount, which is why no properly advised buyer completes without withholding. Ask for your copy of the 211: you will need its reference number for your own return.

If you are in fact already tax resident in Spain, there should be no retention. To avoid it, bring to completion a certificate from the Spanish tax office confirming that you pay Spanish income tax (IRPF).

What you pay: 19% of the gain

Gains on selling Spanish property are taxed at 19% for every non-resident, whether you live in France, the UK or the United States. The gain is the difference between two figures:

• Sale value: the price less the selling costs and taxes you pay yourself, such as the estate agent’s commission or the municipal plusvalía.
• Purchase value: what you paid, plus improvements you can prove with invoices, plus the costs and taxes of buying (notary, Land Registry, transfer tax or VAT and stamp duty, fees). Repairs and upkeep do not count.
• If you let the property, the depreciation for those years is taken off the purchase value, and at least the minimum the law allowed, whether or not you ever claimed it. That pushes the gain up.

An example. You bought in 2015 for 250,000 euros and paid 20,000 in taxes and fees. You now sell for 400,000 and the sale costs you 15,000 in agency fees and plusvalía. Your gain is 115,000 euros and the tax 21,850. The buyer has already paid in 12,000, so you owe another 9,850. Had the gain been 30,000 euros, the tax would be 5,700 and you would get 6,300 back.

Since 2015 the purchase price is no longer adjusted for inflation. If you bought before 31 December 1994 you may be entitled to a reduction, which only applies to the part of the gain built up before 20 January 2006 and is capped once your cumulative sales pass 400,000 euros.

Form 210: when to file

You report the sale on form 210 in the three months after the end of the buyer’s one-month window for paying the retention. Complete on 10 March and the buyer has until 10 April for the 211; you have until 10 July for the 210. It has to be filed whatever the result: tax to pay, money back or a loss.

Each owner files their own return for their share of the property and deducts their share of the retention. A representative can file it for you. Keep the purchase and sale deeds and the invoices for costs and improvements to hand, as the tax office may ask for them.

Every Spanish double tax treaty lets Spain tax this gain. Your home country may tax it too; how double taxation is avoided depends on the treaty and on the rules where you live.

When the overpayment comes back

If the 3% is more than your tax, form 210 shows a refund. The tax office has six months from the end of the filing period to order it. After that it owes you late-payment interest as well, without you having to ask. If you file late, the six months run from the day you file.

The refund can go to an account in your name in Spain or abroad. Before paying out, the tax office may ask for proof of the purchase value or the costs, so keep the deeds, invoices and payment records.

The municipal plusvalía tax

The plusvalía (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana) taxes the rise in the value of the land while you owned the property, over a maximum of twenty years. Each town hall sets its own rate, up to 30%. You owe it as seller, but if you are an individual living outside Spain your buyer pays it instead of you and takes it off the price. It must be declared within 30 working days of the sale.

It can be calculated two ways: from the cadastral value of the land and a coefficient for the years owned, or from the real gain on the land, which applies if you ask for it and it comes out lower. If you sell for less than you paid, comparing the figures in the two deeds, nothing is due, but you still have to declare it and provide both deeds.

If you live in the EU or EEA and it was your main home

Residents of another EU country, or of Iceland, Norway or Liechtenstein, can have the gain exempted if the property they sell was their main home in Spain and they reinvest the proceeds in a new main home. Reinvest only part, and only that part of the gain is exempt. This typically helps someone who lived here for some years and has since moved to another European country.

The buyer still withholds 3% and you still file form 210. If the new home is bought after the filing deadline, the refund is claimed on a separate application form.

How we help

• We work out your tax before you sign the deposit contract, so you know what you will walk away with.
• We gather the deeds and invoices that bring the gain down.
• We check at the notary’s that the 211 and the plusvalía are calculated correctly.
• We file your form 210 and follow the refund until it is paid.
• We review the plusvalía and appeal it if it was not owed.

This guide is general information. Before making a decision about your own case, speak to a lawyer.