Costs of selling property in Spain explained: taxes and hidden costs you need to know

How to sell property in Spain? Details you need to know before selling you property.

1. How much will the seller spend?

When buying or selling a property it is important to consider all the costs. In Spain, costs can vary depending on the residency, age and the type of home (main or second) of the buyer/seller. Previously we have discussed the taxes that you should pay when buying real estate in Spain, so now we can improve our knowledge with fees when selling the property.
Square in spain
We have already covered the fact that the buyer should be ready to spend around 8-15% of the price of the property on all the purchase-related expenses.
How much will the seller spend then? Let's find out.

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2. Land appreciation tax (Plusvalía)

The most important tax on the sale of real estate in Spain, which falls on the shoulders of the seller, is a land appreciation tax, or Plusvalía. This tax is one of the most controversial in today's Spain since this duty is essentially a percentage of the difference in price that was originally paid for the land where the property is built on and the sale price.

How much is the land appreciation tax in Spain?


To calculate this tax, you need to take into consideration the cadastral value of the land at the time of sale and the length of time that the property was owned by the seller. The essence of this tax is to reimburse the municipality for the difference in the value of the land on which the immovable property is located at the time of its purchase and sale. That is to say, the purchase or sale price of the house does not matter at all.

How to calculate this tax when selling real estate?


Many property owners in Spain assume that the estimated base for Plusvalía is the difference between the sale and purchase price of the property. However, it is not.
To find out the exact amount of tax, you need to keep in mind several crucial factors that make up the estimated base of this tax, these factors are as follows:
  • The cadastral value of the land on which the property is located. It can be found in the latest receipt for IBI tax payment or directly in the cadastral office (Catastro).
  • The period that this property is owned by the seller, starting with the date of purchase and ending with the date of sale.
  • The tax rate, which depends on where the property is located, since each municipality in Spain has its own tax rate. This information can be found on the official website of the municipality or at the mayor's office. The maximum rate, in this case, is approximately 30%.
  • The growth rate or tax on revaluation. These two components of the settlement base of the land appreciation tax also depend on where the real estate is located. This information can be obtained from the city hall or cadastral service. The maximum is approximately 3.5%.
Thus, the final formula of Plusvalía is as follows:
From this, it follows that the longer the property is owned by you, the higher the tax base. However, here the state has established some limits, which states that the maximum period of ownership of real estate for calculating the tax cannot exceed 20 years, even if the property sold was owned for a longer period. That is, the tax will be the same if it has been 21 years or 50 years since you bought the house. If not a year has passed, you will not have to pay Plusvalía, although you do have to declare the tax.

Let's make a practical example for the calculation of Plusvalía. Imagine that you bought a house 10 years ago. The cadastral value of the land is € 200,000 (remember, that the purchase price is irrelevant). In accordance with your municipal ordinance, the annual growth ratio is 3.5% and the tax rate is 30%. Then the capital gains tax to be paid will be:
Land appreciation tax = € 200,000 x 3.5% x 10 years x 30% = € 21000

3. Capital gains tax on your profits (IRPF)

When selling the property, a tax is paid on the difference between the purchase price and the sale price. If you make a deal and sell a house more expensive than you bought, the tax is charged on this price difference.

Those, who bought the property before December 1986 are free from paying IRPF (both residents and non-residents).
Non-residents:
The tax rate for non-residents is fixed and accounts for 19%.
Residents:
First and foremost, you need to prove your residency in Spain. To do this, you need to provide the tax office with the tax return for last 3 years, the deed of sale in your name that is more than 3 years old or a certificate from the town hall stating that you have been registered in Spain for the last 3 years.

How to avoid capital gains tax on foreign property (in Spain)

1
If there are invoices on the repairs, agency fees, and other expenses, connected to the property purchase, their sum can be deducted from the IRPF, so you can lower this tax.
2
If you are a Spanish resident, you have to mention this tax in your next year's declaration, and if within 2 years you spend all the revenue on your new primary home, you will be free of paying the tax. The new primary home should be located in EU or EEA.
3
In case the market price of the property fell down, you can request a refund of this tax.

4. Income Tax Provision – Retención

When selling real estate from foreigners, 3% of retention is taken from the seller by the tax authority in order to cover a possible capital gains tax. This type of retención concerns only fiscal non-residents.

It is intended as a guarantee that foreigners will not skip any tax payments. Only the certificate obtained in the tax office is a confirmation of your tax residence, neither NIE nor residency card is valid. This document can be issued only if you have been doing tax returns for several years.
If the capital gain is not confirmed, the seller should submit a petition in order to return the amount withheld. If this difference is higher, the seller must pay the difference to the tax authorities.

The seller has 3 months to claim a refund. Unfortunately, the wait for a refund can be around 1-2 years.

If you are going to continue your residency in Spain, you need to provide the contract for at least half a year rental or a contract that shows your purchase of another property in Spain. Then you or your lawyer will need to apply for the certificate to the tax office asking to be exempt to the retention.

5. IBI or Council tax

Do not forget about the IBI tax. According to the law, it is the seller who pays this annual tax for the year in which the sale is concluded, that is, this council tax is paid by the person who was the nominal owner of real estate on January 1 of the current year. Thus, if you sell a property on December 1, 2017, it is the seller who pays IBI for 2017, and the new owner is responsible for paying this tax for 2018.

The annual property tax in Spain is set by the municipality and is calculated on the basis of the cadastral value as of January 1 of the reporting year. You should bear in mind that the cadastral value can be several times lower than the real one, therefore, on average, owners pay only about 200-800 euros per year. IBI ranges from 0.4 to 1.2 in various regions of Spain.

6. Banking fees

In case you do not have an account in a Spanish bank, you will need to open it. How to do it and which documents you will need, you can read about it here.

If you wish to transfer your money back to the country of origin, you have to know that the bank's commission and exchange rate can be a pure robbery.
Ransfer services or broker companies
That is why we recommend you use transfer services or broker companies.
They usually do not charge a transfer fee and their exchange rate can save you a couple thousand euros. Keep in mind that the organization's activities you are about to give your money to should be regulated by the Financial Conduct Authorities: https://www.fca.org.uk/.

7. Agency fees

The seller should understand that the services of an agent are not free of charge. Therefore, one of the first questions that the seller should ask is the pricing of an agent's services, as well as, any other associated costs.

What is the size of the commission?


Normally, it is around 5-10% of the deal. But there is an exception to the rules. For example, in Malaga and Valencia, the agency commission is not included in the price and is paid by the buyer. Also, the size of the fee is smaller here, only 3%.
Remember, that over the agency fee you should pay IVA tax (VAT), that is 21% of the service cost.

The choice of an agent influences not only the speed of the sale but also the amount that the seller will eventually receive. Therefore, the choice of a real estate agent definitely requires attention and time.

8. Energy Certificate

In order to sell or rent out the property, the Spanish government introduced the obligatory Energy Efficiency Certificate for the real estate owners.

This law came in force on June 1, 2013, and requires this type of certificate, which can be issued by surveyors, architects or house engineers.
Calculations
The price of the certificate is dependent on the size of the property.
For an apartment, the price ranges from about €100 to €200, and for a villa, it can be €200 to €500. In case you fail to provide this certificate, you will receive a fine of €300 - €6,000.
Remember to ask for the invoice, so you can deduct this sum from the CGT.

9. Foreign residents who are aged 65 and over

Those, who are over 65 and have been residing in Spain legally for at least 3 years are free from paying capital gains tax in case of selling the primary residence.

In case you are going back to your country of origin, you should pay 3% retention on the price of the deal and with your following year's declaration, you can ask the tax office to refund this payment.

If you have not been paying taxes in Spain, but are able to prove that you earn less than 11,200 euros annually, then you are exempt from paying IRPF.

In order to skip this tax, you need to sign a life-long rent (renta vitalicia) and re-invest up to 240,000 euros. The amount of sum paid will be free of tax.

10. Sale of a mortgaged home

If the property, that you have planned to sell, was bought with a mortgage, you should make sure that the mortgage obligations are lifted from the Property Registry, even if everything is paid. All in all, mortgage cancellation fees involve costs of Notary's work and Property Registry fees. To do this, you will have to pay up to 1000 euros.

In case there are current mortgage obligations on the property you want to sell, you should cancel the mortgage. The bank will most likely take the cancellation fee. Usually, it is 0.5-1% of the total loan.
If you want your home to really appeal to the buyers, you should tidy it up. This includes, not only the decoration, but everything that needs to be repaired should be repaired.

In case you are selling a house without the furniture, you will need to pay for the loaders and transfer services. However, it is better to calculate in advance if it is profitable to take everything with you to a new place of residence, especially if you are moving far from the current home you are selling.

11. Other Fees

If you want your home to really appeal to the buyers, you should tidy it up. This includes, not only the decoration, but everything that needs to be repaired should be repaired.

In case you are selling a house without the furniture, you will need to pay for the loaders and transfer services.
House sale calculation
However, it is better to calculate in advance if it is profitable to take everything with you to a new place of residence, especially if you are moving far from the current home you are selling.
Community and utility bills
If you are not up to date with payments for water, gas, electricity, community fees or any other utilities, it is your responsibility to resolve this matter. You will need to present the Certicado de Communidad certificate to the Notary and the buyer, confirming you have fully paid the community fees. Furthermore, this certificate may cost you around 20 euros.
Property advertising
When selling the property without using the service of the estate agency, you should be aware of the different type of promotions for your house.

  • You should remember that premium listings are not free, but they allow your property to be on the top of the catalogs.
  • Hiring a professional photographer is highly recommended so that your photos will be bright and of high quality.
Double deposit
In regard to the private sale contract, it is important to keep in mind that, it is commonly stated that if the seller chooses to withdraw from the sale of the property, the buyer receives compensation in the amount of double the deposit. If the buyer refuses the deal, they then lose their deposit.

We recommend weighing all the pros and cons, as well as consulting a lawyer before signing such a document.

12. Conclusion

Despite the apparent complexity of the legislation, compared with other European countries, Spain remains a country with one of the lowest rates on property taxes.
There is a list of documents for your convenience that need to be ready when selling the property.
They are as follows:
  • The title deeds (Título de propiedad/Escritura de compraventa or their copies). If the property is owned by the company, provide powers of attorney from all authorized members of the company/co-founders
  • If there was a mortgage, Certificado de deuda pendiente y Cancelación Registral, that confirms the removal of all mortgage obligations from the property
  • Nota simple
  • Certificate of habitation (La Cédula de habitabilidad)
  • Receipts on paid IBI, IRPF (income tax for non-residents), Basura (rubbish collection
  • Paid utility bills (their copies)
  • Certicado de Communidad certificate
  • The statutes of the Community of Owners (Estatutos de la Comunidad de propietarios, if there is one)
  • Energy Efficiency Certificate
  • A list of furniture and domestics that are included
    in the price
  • Your passport, DNI, residency card, if applicable
  • NIE
When people are going to rent or sell a house or apartment, they often ask themselves how to do it better. The best way is through direct contact or a real estate agency. Well then, we are going to break down both the advantages and the disadvantages of both options and see what each one consists of.

Advantages of a direct selling

  • If you decide to sell your house on your own, you will have greater profits by saving the percentage of commission that the real estate company carries.
  • If you sell your house directly, you can do it your own way in terms of deciding where and how to promote it.
  • You will have direct contact with the person who will buy your property. This can be a great advantage because it helps to avoid misunderstandings and if there are any, they are solved quickly. As a result, the negotiation of the contract will be faster.
  • You know your house better than anyone. If your house has some positive feature to highlight, no matter how small it is, you will be the one that knows it best and can tell about it to possible buyers. Sometimes it is small details that make the purchase decision positive.

Disadvantages of a direct selling

  • Keep in mind that this will take up a lot of time and effort. You will need to promote, view and persuade customers on your own. Do not forget the paperwork!
  • It is not easy to find some good specialists on every step, that you will need to take, whereas agencies offer the full service with their own trusted lawyers, translators, notaries, etc.
  • You may not be aware of the current situation of the real estate market and sell your house for either a cheap price or not sell it at all because of the overcharge.
  • You may miss some important things concerning the whole procedure and especially the legal aspect, that will lead to problems and extra time and effort.

Advantages of sale through an agency

  • A real estate agent knows how to find potential customers. They are usually experienced and have certain tools and knowledge for the process to flow smoothly. For example, they can show different options to the customer to compare to your property so it will look like the best one. With this information on the table, it is much easier for the buyer to make the right decision.
  • Scrupulous agents will answer your questions at all times and help to avoid possible scams.
  • Agents will be able to inform you about the most common market conditions and prices for the type of property you are selling. That way it helps prevent selling your house for a cheap price or putting a price on the property that means you can hardly ever sell it.
  • Real estate agents are aware of the laws related to the sale of houses. This will avoid incurring errors in the contract that may pose a problem in the future.
  • Agents arrange the visits themselves. It is their job, so they have more flexibility than the owners to visit the property with buyers. So, it helps to save time and sell faster.
  • Agencies may carry out the purchase procedures and mortgage processing. They usually offer it as an additional option for extra money.
  • Agents know how to improve your home. For example, it is recommended that if you want to sell a house, it should have as little decorations as possible, and it should be something neutral and simple, without personal portraits or possessions of the owner.

Disadvantages of the sale through an agency

  • You have to pay commission, so you lose 5-10% of the property price.
  • The agency will decide how and where to promote your property, and you won't always be able to influence it.
  • The agency may tend to increase the price of apartments or houses to get better benefits. Therefore, it is important to take this into account and be aware of prices.
  • There is a chance to deal with the scammers. As the licensing of the real estate agencies in Spain is not obligatory, you can check them by formal signs, such as, the office, staff, reviews, membership in any professional association of agents like AIPP, API in Catalonia, LPA, GIPE. All in all, we advise you to act through a lawyer. Their services will include all checks and warranty.
In any case, it is essential that you assess your situation.
When deciding if you are going to sell or rent the apartment yourself or adding it to an estate agent you should see if you have some experience in this regard, assess your time, patience, legal knowledge and opportunities.
For more information please contact the managers of our agency. It is our pleasure to assist you on a way to your dream!

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