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Retention fees
Retention fees
by George & Brenda » Mon Aug 29, 2016 8:03 am
Morning All
When purchasing property from a resident in Spain do you still need to retain the 3% tax from them .
Thanks for your replies
George.
When purchasing property from a resident in Spain do you still need to retain the 3% tax from them .
Thanks for your replies
George.
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Re: Retention fees
by Jan » Mon Aug 29, 2016 8:16 am
George & Brenda wrote:Morning All
When purchasing property from a resident in Spain do you still need to retain the 3% tax from them .
Thanks for your replies
George.
A good solicitor will retain the necessary funds and sort out any Taxes and debts on a property before releasing the funds to the seller.
It's not something that should be done personally - All property sales need a solicitor on-board and they will deal with these things legally.
As in the UK, property selling and buying should always be supervised by a solicitor.
Sorry if you actually meant 'does the solicitor still hold a retainer'. If so the answer is yes, as far as I know. This money is refunded to the seller eventually when all checks are made.
Jan
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Re: Retention fees
by freddo » Mon Aug 29, 2016 9:47 am
http://www.spanishpropertyinsight.com/t ... residents/
There is no retention it the seller is a tax resident of Spain
From Mark Suclin
A Synopsis of the Spanish capital gains tax retention on property sales by non-residents, often referred to as the 3% withholding tax.
When a non-resident sells property in Spain, they buyer is obliged to retain 3% of the price and pay it to the tax authorities to cover the vendor’s Capital Gains Tax (CGT) liabilities.
If the 3% retained exceeds the taxes due, the vendor can expect a refund once all taxes have been paid. On the other hand, if the vendor’s tax bill is greater than the 3% retention, the Spanish tax authorities may chase the vendor back home, though it is unlikely.
If the vendor is due a refund after taxes have been settled, it can take years to get paid (see link to forum discussions below for more information on how long it takes to get refunded).
Various terms in English and Spanish are used to name this tax retention. In Spanish it is known as the ‘retención (sobre la venta de inmuebles) a cuenta del impuesto de la renta de los no-residentes’, whilst in English it is referred to as the capital gains tax retention on property sales. Some people also talk about a withholding tax or money withheld, deducted, or kept back on a property sale in Spain.
The 3% retention is meant to cover CGT liabilities. GGT rates on real estate assets sold in Spain by EEA/EU-residents have changed over the years as follows (tax rate at time of sale):
PERIOD Up to 31/12/06 Up to 31/12/07 2008 2009-2011 2012-2014 2015 2016
RATE 35% 25% 18% 19% 21% Up to 11-Jul 20%
From 12-Jul 19.5% 19%
+ Agencia Tributaria reference page (English)
The 3% retention does not cover the vendor’s ‘plusvalia’ tax liability, which is paid to the town hall at the time of sale.
After the sale, the buyer has one month from the date of sale to pay the 3% retention to the local tax office using the form (modelo) 211. A copy of the submitted form should then be given to the vendor or his lawyer, so a refund can be claimed.
Capital Gains Tax Reclaim
If the vendor believes he is owed a refund (that the tax liability is less than the 3% retention), he has 3 months to present form 212 requesting a refund. This step is done at the local tax office (delegación de hacienda).
If a refund is due, how long does it take? It depends upon the tax office; some are quicker than others. In theory it shouldn’t take more than a few months, though some people report it taking up to 16 months. Around a year seems to be quite common according to comments in our Spanish property forum dicussions on the 3% retention tax, though some people report it takes more than two years to get a refund.
Be warned that if there are any minor errors in the documentation the tax authorities will jump on them as a reason to delay any refund. So make sure all the information in your 212 reclaim form is correct.
In some cases, the vendor’s tax liability is greater than the retention. What then? Depending upon the size of the liability, the Spanish taxman may try and come after you for it back home.
So, for example, if a British person living in London sells a holiday home in Spain for 200,000 Euros, the vendor will retain 6,000 Euros and pay it to the tax office. Say the vendor originally bought the home for 100,000 Euros, meaning a capital gain of 100,000 Euros, and a capital gains tax of something in the region of 18,000 Euros (there will be some relief for inflation). In this case the vendor will not be entitled to a refund, and may be pursued for 12,000 Euros back home by the Spanish taxman.
But if you don’t hear from them within 4 years you know you’re safe, as that is the legal deadline for the tax authorities to take action.
Note: This issue only applies to vendors who are considered non-resident by the Spanish tax authorities, i.e. fiscal non-residents. To be considered a fiscal resident you have to get a certificate from the tax office (hacienda) certifying that you are a fiscal resident. You will get this if you have been doing tax returns (declaración de la renta) for several years. Do not make the mistake of thinking you are fiscally resident just because you have an NIE number, or once had a residency card (tarjeta de la residencia). A notary will only accept a certificate from the tax office.
Tax & fiscal
3% withholding tax, Capital gains tax (CGT), Tax
There is no retention it the seller is a tax resident of Spain
From Mark Suclin
A Synopsis of the Spanish capital gains tax retention on property sales by non-residents, often referred to as the 3% withholding tax.
When a non-resident sells property in Spain, they buyer is obliged to retain 3% of the price and pay it to the tax authorities to cover the vendor’s Capital Gains Tax (CGT) liabilities.
If the 3% retained exceeds the taxes due, the vendor can expect a refund once all taxes have been paid. On the other hand, if the vendor’s tax bill is greater than the 3% retention, the Spanish tax authorities may chase the vendor back home, though it is unlikely.
If the vendor is due a refund after taxes have been settled, it can take years to get paid (see link to forum discussions below for more information on how long it takes to get refunded).
Various terms in English and Spanish are used to name this tax retention. In Spanish it is known as the ‘retención (sobre la venta de inmuebles) a cuenta del impuesto de la renta de los no-residentes’, whilst in English it is referred to as the capital gains tax retention on property sales. Some people also talk about a withholding tax or money withheld, deducted, or kept back on a property sale in Spain.
The 3% retention is meant to cover CGT liabilities. GGT rates on real estate assets sold in Spain by EEA/EU-residents have changed over the years as follows (tax rate at time of sale):
PERIOD Up to 31/12/06 Up to 31/12/07 2008 2009-2011 2012-2014 2015 2016
RATE 35% 25% 18% 19% 21% Up to 11-Jul 20%
From 12-Jul 19.5% 19%
+ Agencia Tributaria reference page (English)
The 3% retention does not cover the vendor’s ‘plusvalia’ tax liability, which is paid to the town hall at the time of sale.
After the sale, the buyer has one month from the date of sale to pay the 3% retention to the local tax office using the form (modelo) 211. A copy of the submitted form should then be given to the vendor or his lawyer, so a refund can be claimed.
Capital Gains Tax Reclaim
If the vendor believes he is owed a refund (that the tax liability is less than the 3% retention), he has 3 months to present form 212 requesting a refund. This step is done at the local tax office (delegación de hacienda).
If a refund is due, how long does it take? It depends upon the tax office; some are quicker than others. In theory it shouldn’t take more than a few months, though some people report it taking up to 16 months. Around a year seems to be quite common according to comments in our Spanish property forum dicussions on the 3% retention tax, though some people report it takes more than two years to get a refund.
Be warned that if there are any minor errors in the documentation the tax authorities will jump on them as a reason to delay any refund. So make sure all the information in your 212 reclaim form is correct.
In some cases, the vendor’s tax liability is greater than the retention. What then? Depending upon the size of the liability, the Spanish taxman may try and come after you for it back home.
So, for example, if a British person living in London sells a holiday home in Spain for 200,000 Euros, the vendor will retain 6,000 Euros and pay it to the tax office. Say the vendor originally bought the home for 100,000 Euros, meaning a capital gain of 100,000 Euros, and a capital gains tax of something in the region of 18,000 Euros (there will be some relief for inflation). In this case the vendor will not be entitled to a refund, and may be pursued for 12,000 Euros back home by the Spanish taxman.
But if you don’t hear from them within 4 years you know you’re safe, as that is the legal deadline for the tax authorities to take action.
Note: This issue only applies to vendors who are considered non-resident by the Spanish tax authorities, i.e. fiscal non-residents. To be considered a fiscal resident you have to get a certificate from the tax office (hacienda) certifying that you are a fiscal resident. You will get this if you have been doing tax returns (declaración de la renta) for several years. Do not make the mistake of thinking you are fiscally resident just because you have an NIE number, or once had a residency card (tarjeta de la residencia). A notary will only accept a certificate from the tax office.
Tax & fiscal
3% withholding tax, Capital gains tax (CGT), Tax
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Re: Retention fees
by Jan » Mon Aug 29, 2016 9:54 am
Thanks for the copy & paste article Freddo - I was thinking it was the same for everyone selling but obviously not.
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Re: Retention fees
by Tootandploot » Fri Sep 16, 2016 3:30 pm
Freddie, thank you very informative. Are you able to advise what deductions can be made. I have understood that when calculating the tax initial costs canbe deducted which in many cases negates or at least reduces the tax due.
Rgds
Rgds
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Re: Retention fees
by freddo » Fri Sep 16, 2016 3:51 pm
As long as you have receipts you can deduct all alterations and any rebuilds as long as they were legal
Of course if you are over 65 and a Spanish Fiscal Resident and are going to buy another property sometime with the proceeds of the sale you will have no Capital Gains to pay
Of course if you are over 65 and a Spanish Fiscal Resident and are going to buy another property sometime with the proceeds of the sale you will have no Capital Gains to pay
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Re: Retention fees
by Tootandploot » Fri Sep 16, 2016 4:01 pm
Thank you. However, I was thinking initial purchase/legal costs as opposed to alterations??We are too young to qualify for the tax break suggested although we were certainly going to buy another property.
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Re: Retention fees
by freddo » Fri Sep 16, 2016 4:56 pm
Yes you can deduct fees and all costs associated with prchase of the property for captal gains calculations
This also will apply to you so if you reinvest or have allready done so you will not be liable for CGT
SALE OF THE MAIN RESIDENCE OF A NON RESIDENT IN SPAIN As from 1st January 2015 the general tax rate for non residents will be reduced from 24,75 to 24% and to 20 % and 19 % en 2016 in the case of residents in other EU member states or residents in a member state of the European Economic Area, with which there is an effective exchange of tax information The rates applicable to capital gains from the sale of assets will be reduced as well from 21 % to 20 % in 2015 and to 19 % in 2016 (the latter independently from the residence in other member states of the EU or the European Economic Area). But the major novelty of the law project - pending final approval too - is that the capital gain that a resident in another member state of the EU - or in a EEA member state with which there is an effective exchange of tax information - obtains from the transmission of a property that he/she has been using as “permanent” domicile in Spain will be exempt from tax provided the total amount obtained from the sale is invested again in another permanent home in Spain, under the same conditions as those applicable to tax residents in Spain, that is, the amount must be re-invested within a term of 2 years prior to or following the sale, the transmitted property must have been the “principal” residence of the taxpayer for a continuous period of at least 3 years and he/she must start living effectively and permanently in the new home within 12 months from the date of purchase or the date of completion of the works, as the case maybe. Nevertheless, the buyer’s obligation to retain 3% of the property price when the seller is a non resident, remains unchanged as well as the seller’s obligation to present a capital gain tax return with the amount payable - or refundable in the case of loss; however in the next future, if the reinvestment has taken place prior to the transmission, it may be taken into account to calculate the corresponding tax amount.
This also will apply to you so if you reinvest or have allready done so you will not be liable for CGT
SALE OF THE MAIN RESIDENCE OF A NON RESIDENT IN SPAIN As from 1st January 2015 the general tax rate for non residents will be reduced from 24,75 to 24% and to 20 % and 19 % en 2016 in the case of residents in other EU member states or residents in a member state of the European Economic Area, with which there is an effective exchange of tax information The rates applicable to capital gains from the sale of assets will be reduced as well from 21 % to 20 % in 2015 and to 19 % in 2016 (the latter independently from the residence in other member states of the EU or the European Economic Area). But the major novelty of the law project - pending final approval too - is that the capital gain that a resident in another member state of the EU - or in a EEA member state with which there is an effective exchange of tax information - obtains from the transmission of a property that he/she has been using as “permanent” domicile in Spain will be exempt from tax provided the total amount obtained from the sale is invested again in another permanent home in Spain, under the same conditions as those applicable to tax residents in Spain, that is, the amount must be re-invested within a term of 2 years prior to or following the sale, the transmitted property must have been the “principal” residence of the taxpayer for a continuous period of at least 3 years and he/she must start living effectively and permanently in the new home within 12 months from the date of purchase or the date of completion of the works, as the case maybe. Nevertheless, the buyer’s obligation to retain 3% of the property price when the seller is a non resident, remains unchanged as well as the seller’s obligation to present a capital gain tax return with the amount payable - or refundable in the case of loss; however in the next future, if the reinvestment has taken place prior to the transmission, it may be taken into account to calculate the corresponding tax amount.
Last edited by freddo on Fri Sep 16, 2016 6:56 pm, edited 1 time in total.
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Re: Retention fees
by Tootandploot » Fri Sep 16, 2016 6:22 pm
Thank you but at present we are under 65 non resident. If we can offset that will help enormously.
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