NIE NUMBER
All foreigners with any kind of fiscal obligations or interest in Spain (e.g. when buying property) are required to obtain a foreigner’s identification number, called an NIE (Número de Identificación de Extranjero). NIE certificates are issued by the Foreigners’ Department and the National Police, and they become the holder’s fiscal number in Spain.
You will need this NIE certificate when purchasing a property or a car, when selling and for other actions you wish to carry out in Spain.
It is vital therefore that you obtain your NIE number as a matter of priority. Please note that it is not possible to register the purchase of a property in your name without presenting this original document at a Notary.
TITLE DEEDS
The Title Deeds contain a detailed description of the property, the identity of the parties, as well as other conditions of the purchase-sale and the price of the property, it is signed by all parties involved in front of a Notary. The Notary is a highly qualified legal person who authenticates legal documents and sets on public record that the Title Deed has been signed in his/her presence.
Finally, the Title Deed needs to be inscribed in the local Land Registry. This takes several weeks from the date of completion at the Notary.
TAXES FOR RESIDENTS SELLING A PROPERTY
There are two tax obligations on property sales:
• Capital Gains Tax
Capital Gains Tax is due on the profit made on all property sales in Spain. A Resident is someone who is a Fiscal Resident of Spain (namely a tax-payer living more than 185 day in Spain a year).
Capital Gains Tax for Residents is charged at a maximum of 19% of the sale profit, after deductions. There are additional variables which affect the final calculation for Residents.
Exemptions from Capital Gains Tax apply to:
– Residents over the age of 65 who declared the property as their main fiscal residence for a minimum of 3 years
– Any Fiscal Resident under 65 re-investing the profit of the sale proceeds from their main residence (where they have lived for a minimum of 3 years) into another Spanish property that will be his new main residence, or in a lifetime financial product (with a proportional exemption if a portion is re-invested)
Remember that because Spanish taxes are paid for the previuos calendar year, the details of your property sale are declared on the annual Tax Return the month of May/June of the following year.
• Plus Valía
This tax is charged on the increase in the official assessed value of the land, rather than the market value, since the real estate was last sold. The rate may vary according to location, land size and the time elapsed since the last transfer of ownership. This tax applies to both new and resale properties. However, there is a recent ruling from the Constitutional Court that allows appeals when applicable and recommends that the Spanish Administration changes the Law to continue charging this tax establishing a new Land Tax calculation.
TAXES FOR NON-RESIDENTS SELLING A PROPERTY
There are two taxes on property sales:
• Capital Gains Tax
Capital Gains Tax is due on the profit made on all property sales in Spain. There is an initial 3% of the current sale price retained by the solicitor/bank acting on behalf of the buyer and paid to the Spanish Tax Office. Therefore the seller receives 97% of the agreed price. The retained 3% offsets potential Capital Gains Taxes.
The actual Capital Gains Tax rate is established by Law, calculated on the profit made on the sale. To calculate this profit we take into account your original documents regarding the purchase price and some of the costs which you incurred in the purchase, to prepare it in a more advantageous result.
Also, certain costs of major structural alterations that have a direct effect on energy performance you have made to the property can be deducted – but only if you can produce the formal invoice showing the VAT.
The 3% retained by the Tax Office can be claimed back when the result is that no profit is made, and when the tax-payer is up-to-date with his/her fiscal obligations in Spain.(Non-Resident Taxes)
• Plus Valía
This tax is charged on the increase in the official assessed value of the land, rather than the market value, since the real estate was last sold. The rate may vary according to location, land size and the time elapsed since the last transfer of ownership. This tax applies to both new and resale properties. However, there is a recent ruling from the Constitutional Court that allows appeals when applicable and recommends that the Spanish Administration changes the Law to continue charging this tax establishing a new Land Tax calculation.
NON-RESIDENT TAX (Imputed Income Tax)
The owner(s) who holds a dwelling for personal use is subject to a simplified tax return form that needs to be submitted electronically by a fiscal representative:
-Imputed Income Tax for the estimated revenue of the dwelling.
Tax form to be used is form number 210: Simplified tax return for non-residents in the case of a dwelling for the personal use of the taxpayer.
The liability takes effect on the following year, and it takes into account how many days the property has been owned during that year.
Filing period: The calendar year immediately after the one which the tax refers to.
Place of filing: Your fiscal representative submits electronically the tax liquidation to the applicable regional Tax Office (Delegación Provincial de la Agencia Estatal de la Administración Tributaria), where the estate is located.
COUNCIL TAX / IBI (Through the SUMA Office in the province of Alicante)
This is a local rate that the local municipality requires from real estate owners.
Every property in each municipality is included in a census and a value is assigned (Cadastral value). Based on the cadastral value and on a tax scale established by the municipality, the amount to be paid is obtained.
Assessment period: Annually, for each property included in the census, the municipality sends a bill with the amount due, or a notice of the date of charge by standing order.
Payment period: The period for payment varies according to the municipality, but is usually around the months of August, September and October every year.
