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Sale and purchase of real estate by foreign or Spanish persons not resident in Spain 

ODICE LAWYERS

The purchase and sale of real estate by foreigners or Spaniards who are not resident in Spain is a completely viable activity. In fact, a foreigner or non-resident Spaniard has the same rights as a Spanish citizen or foreigner resident in Spain when purchasing a property, an office or a parking space, among others.

However, in the case that they have the status of seller, there are certain particularities: taxes payable by the seller3% on the value of the sale corresponding to the Non-Resident Income Tax (IRNR) and the amount corresponding to the Municipal Capital Gains Tax-., must be retained and paid to the corresponding bodies by the Spanish or foreign buyer, whether or not the buyer is resident in Spain. 

In order to clarify possible doubts in relation to the expenses arising from the purchase of a property by foreign or Spanish persons not resident in Spain, we will deal with this issue in a comprehensive manner.

When is a person considered a non-resident in Spain?

Article 9 of the Law on Personal Income Tax and partial amendment of the laws on Corporate Income Tax, Non-Resident Income Tax and Wealth Tax.The Commission shall, in the absence of proof to the contrary, regard the following as resident personand, therefore, not subject to the particularities discussed below, to those persons who:

  • Stay more than 183 days a year in Spain.
  • Have the core of their economic activities in Spanish territory, directly or indirectly.
  • Your spouse or children are habitually resident in Spain.

Sale and purchase of real estate by foreigners or non-resident Spaniards

Who pays tax on the sale of a property?

The purchase and sale of a property implies a series of tax payments when the transaction has been carried out. Based on this premise, we will analyse the two scenarios that may arise in a situation of purchase and sale of real estate by foreign or Spanish persons not resident in Spain and explain who is liable to pay the taxes on the transaction.

Scenario 1: foreign or Spanish non-resident buyer

Once the obligatory documentation has been submitted, the buyer will have the same rights as a Spanish resident citizen to purchase the property.

If it is a second-hand propertyin Andalusia the purchaser will assume:

  • The Property Transfer Tax (I.T.P.)currently 7% on the sale price.
  • The IRPF in the next income tax return campaign, in the event that it is not destined for the main residence.

If it is a new building, the buyer shall be responsible for:

  • The Value Added Tax (V.A.T.)10 % for dwellings and attached garages, 21 % for premises and detached garages.
  • The Tax on Documented Legal Acts (I.A.J.D.)1.2% on the selling price.

In both cases, the seller, if resident in Spain, must pay the local capital gains tax within the first 30 working days of the sale of the property to the corresponding body (Town Hall or Patronato de Recaudación Provincial). 

Scenario 2: foreign or non-resident Spanish seller

Non-resident income tax:

As discussed above, el comprador español o extranjero, residente o no en España, está obligado a practicar una retención del 3% del valor de la venta and pay it to the tax authorities in the name of the non-resident seller - within one month from the date of the sale of the property - by presenting the Model 211.

In addition, the buyer must provide a copy of the Form 211 to the seller and the seller, in turn, must submit a copy of the Form 211 to the seller. model 210The taxpayer must declare the capital gain and deduct the withholding tax within a maximum period of four months from the date of the sale of the property in order to be able to declare the capital gain and deduct the withholding tax.

In this way, the State Tax Administration Agency ensures that the tax is collected and will refund, if applicable, the excess part of the amount withheld and paid by the purchaser.

Municipal Capital Gains Tax (Plusvalía Municipal or Impuesto de Incremento de Valor de los Terrenos de Naturaleza Urbana)

On the other hand, the buyer must also pay the corresponding amount of the Municipal Capital Gains Tax (Impuesto de Plusvalía Municipal or Impuesto de Incremento de Valor de los Terrenos de Naturaleza Urbana) to the Town Hall or Patronato Provincial de Recaudación (Patronato Provincial de Recaudación) where the property is located.

"The natural or legal person, or the entity referred to in article 35.4 of Law 58/2003, of 17 December, General Taxation, who acquires the land or in whose favour the real right in question is constituted or transferred, when the taxpayer is a natural person not resident in Spain, shall be considered as a substitute taxpayer for the taxpayer", (article 106.2, Law of Local Taxes).

However, the purchaser may claim reimbursement of the tax paid from the foreigner or Spaniard. and, if the seller refuses, a claim can be made through the courts.

To avoid this situation, at Ódice Abogados we recommend agreeing and including a clause in the deed of sale of the property, where both parties agree that the buyer withholds the amount corresponding to the capital gain from the seller, in order to pay it to the corresponding body, thus avoiding future legal claims in the event that the seller refuses to pay the amount to the buyer.

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