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Selling a house in Spain

You own a house in Spain and for one reason or the other you want to sell it, it could be because of an imminent divorce, you're finished with Spain or you simply want to buy a different house.
And guess what, you'll be taxed on any profit you make.


Reinvesting as a resident

If you live here permanently, meaning that you're a resident, you can reinvest the overvalue without having to pay capital gain tax. One condition is that the house must have been in you're possession for at least three years.
If you're not a resident you can claim the 5% that's always collected at a sale back provided you've paid your property tax regularly. This only applies, however, if you've made no profit or if the tax on the profit is lower than the collected 5%. In the latter case there'll be a settlement.

In reality this never happens, two reasons why, nobody sells his house without making a profit and very few people pay property tax.


The difference between residents and non-residents

Currently you turn 35 % of your profit over to the Spanish government, this will probably change to 18, like the Spaniards are paying. That's still being negotiated however. In reality little will change, that 5% of the selling price (Escritura price to be exact) is often less than that 18% so, consequently also less than the 35%. This rule actually came into being because nobody paid property tax and that when a foreigner sold a house it was difficult to collect capital gain tax, the buyer is now the losing party, he has to collect the 5%.
The EU is trying to right this wrong but it isn't easy and might take some time as Spain is not really cooperating.


Property tax

Next, comes paying property tax, local taxes are usually paid in the summer, this includes property tax. You'll be exempt from paying property tax in the UK as Spain has its own form of property tax in place. The double tax treaty between the UK and Spain forbids the paying of double taxes in both 2 countries.

The fact that nobody pays property tax in Spain is irrelevant, de rule exists and as far as the department of customs and revenue is concerned, that's all that matters. If you've paid property tax in the UK you're at an advantage when your profit is low if you sell your Spanish house because for example you're forced to sell.

Second advantage is if the Spanish government wants to collect all outstanding tax payments. Its quite possible that there'll come a time when all their systems function properly and they'll charge everybody with everything that's still outstanding
Property tax is now levied over goods, balances and other properties. Your house is taxed on its fiscal value, this is a great deal lower than its actual worth. Spaniards prefer simple solutions, therefore it could be that they'll charge you a percentage over every year you had the house in your possession unless you can show that you've always paid your property tax.

The fact that 99% of foreigners living in Spain do not pay property tax can not be seen as a common good.




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