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What taxes must a non-resident person in Spain pay on a property sales?

In Spain, there are no restrictions for foreigners or non-residents in Spain to buy or sell a property, even though they have to comply with their tax obligations, depending on whether the person who is obliged to pay the tax is resident in Spain and whether it is a new or second-hand property.

In this article we will briefly analyze the taxes that a foreigner or non-resident in Spain has to pay when making a purchase through a public document before a notary.

According to Spanish law, a person is legally resident if one of the following conditions applies:

  • You stay more than 183 days in Spain, unless you prove your tax residence in another country.
  • That you have the nucleus of your activities or economic interests in Spanish territory.
  • The non-legally separated spouse and minor children who depend on him / her reside in Spain.

Having clarified the condition or not of legal resident in Spain, we must distinguish whether the foreign or non-resident person is the buying or selling party.

For those cases in which the foreign or non-resident person is the purchasing party, prior to the act of public deed of sale before a Notary Public, it will be required to obtain the Foreigners Identification Number (NIE), being also the recommendation of this Legal Office  to open a bank current account in case of not having one in national territory.

Once these procedures have been completed, it should be noted that both the legal resident in Spain and the foreigner or non-resident pay exactly the same taxes for buying a house, the only difference being the taxes to pay for the sale of a property.

At this point, there are two different taxes that are applied depending on whether the home is new or second hand.

In the case of the sale of a new home, the taxes levied on this operation amount to 12% of the price at which the sale is made; corresponding 10% VAT and 2% Tax on Documented Legal Acts (AJD).

If the purchase is on a second-hand home, the tax levied on said operation is the Property Transfer Tax (ITP) that varies depending on the Autonomous Community where the property is located. In the case of the Valencian Community this tax is 10% of the price for which the sale is made.

It should be remembered that in the event that the Treasury considers that the home is worth more than what has been paid for it, it can claim a higher payment through a complementary tax demand.

On the other hand, regarding the taxes to be paid in case of sale of property by a foreign person or non-resident in Spain, it will also be required to obtain the Foreigner Identification Number (NIE) as well as the recommendation to open a bank account in Spanish territory.

In this case, when the seller is a foreign person or non-resident in Spain, he will be subject to the Non-Resident Income Tax (IRNR) and the Tax on the Increase in the Value of Urban Land (IVTNU or Municipal Tax).

To guarantee the payment of Non-Resident Income Tax (IRNR), the purchaser of the property will be required to withhold 3% of the purchase price at the time of granting the public deed before a Notary, and must enter the said amount in a term not exceeding one month to the Treasury through the corresponding Form. Once this procedure has been carried out, the buyer must deliver the payment receipt to the seller within a period not exceeding 4 months. They can claim to the Treasury the refund of the surplus that results.

As for the Tax on the Increase in the Value of Urban Land (IVTNU or Municipal Tax), the way of proceeding is similar to that described above. Thus, the buyer must take the precaution of withholding the amount resulting from the tax to pay it within a month. This precaution is important because in the event that such tax is not paid, the property sold will be responsible for its payment, assuming a clear damage for the buyer.

Each sale has its own characteristics and special features that require a detailed study so if you have any questions you can contact us.

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