Taxes

My friend has a property in Torreveija. She is thinking of selling but not buying another property. I know you have to pay 20% if you don’t buy within 2 years. She intends to keep the money in Spain and come over on holidays but stay in nice hotels. Would she still have to pay the 20% tax?

There's capital gains tax to pay for tax paying residents in Spain. This starts at 19% on the capital gain for the first €6,000, 21% on gains between 6 and €50,000 and 23% on gains 50 to €200,000.

Expenses incurred (taxes, legal fees, improvements and so on) can be deducted from the gain.
These taxes are only payable on the gain made and it is paid within a certain time of selling. If buying a property for more than the selling cost and gain anywhere in the EU within 2 years the tax can be claimed back.

So, yes, she would have to pay the tax, except:
If it has been her main home for 3 years or more and she is over 65 year of age then there is no capital gains tax to pay.

marcliff wrote:There's capital gains tax to pay for tax paying residents in Spain. This starts at 19% on the capital gain for the first €6,000, 21% on gains between 6 and €50,000 and 23% on gains 50 to €200,000.

Expenses incurred (taxes, legal fees, improvements and so on) can be deducted from the gain.
These taxes are only payable on the gain made and it is paid within a certain time of selling. If buying a property for more than the selling cost and gain anywhere in the EU within 2 years the tax can be claimed back.

So, yes, she would have to pay the tax, except:
If it has been her main home for 3 years or more and she is over 65 year of age then there is no capital gains tax to pay.

Thank you for taking the time to reply.

My friend is a non resident. I don’t think she will make any profit on the sale of her property. My question is, if she keeps the money from the sale of the property in a Spanish bank account will she still have to pay the 20% tax the government take for not buying another property?

You are getting mixed up. A non resident will have 3% of the total sale retained to pay taxes due. They are then taxed at a flat rate of 19% on the profit made from the sale, not the selling price.

Example, bought 80k and sell at 100k. 3% of the 100k will be retained or 3,000 euro. Profit made is 20,000 so tax will be €3,800 so she will get a bill for 800 euro. If bought 90k and sold for 100k then the same 3k is retained but the tax will be €1,900 so she will get €1,100 back.

The buying property within 2 years does not apply to non residents as it is a main home exemption. Only those who have property as a main home and then moving to another property as their main home can claim that exemption. A non resident cannot claim it is their main home. You cannot claim the tax back nor can you claim for any expenses on the property as that is also for tax paying residents only.

If she is non resident I would suggest she would be a bit silly to keep the money in a Spanish bank account due to the high charges made by banks here for that type of account. She'd be paying the high charges plus the cost of the non resident certificate as well.

rainbow54 wrote:

marcliff wrote:There's capital gains tax to pay for tax paying residents in Spain. This starts at 19% on the capital gain for the first €6,000, 21% on gains between 6 and €50,000 and 23% on gains 50 to €200,000.

Expenses incurred (taxes, legal fees, improvements and so on) can be deducted from the gain.
These taxes are only payable on the gain made and it is paid within a certain time of selling. If buying a property for more than the selling cost and gain anywhere in the EU within 2 years the tax can be claimed back.

So, yes, she would have to pay the tax, except:
If it has been her main home for 3 years or more and she is over 65 year of age then there is no capital gains tax to pay.

Thank you for taking the time to reply.

My friend is a non resident. I don’t think she will make any profit on the sale of her property. My question is, if she keeps the money from the sale of the property in a Spanish bank account will she still have to pay the 20% tax the government take for not buying another property?

There's no "20% tax for not buying another property". If she is non-resident and not made a profit, as you say, then there is no capital gains tax to pay. The authorities will retain 3% of the sale price whilst they check her tax affairs are in order and there are no other outstanding debts etc, but she will get that back after a few months if everything is OK. If she is fortunate enough to make a small profit on the sale I believe the rate is now a flat 24% for non-EU/EEA residents and 19% for EU residents.

Yes, sorry, the tax for non EU is 24% and not 19% which is only for EU residents.

marcliff wrote:You are getting mixed up. A non resident will have 3% of the total sale retained to pay taxes due. They are then taxed at a flat rate of 19% on the profit made from the sale, not the selling price.

Example, bought 80k and sell at 100k. 3% of the 100k will be retained or 3,000 euro. Profit made is 20,000 so tax will be €3,800 so she will get a bill for 800 euro. If bought 90k and sold for 100k then the same 3k is retained but the tax will be €1,900 so she will get €1,100 back.

The buying property within 2 years does not apply to non residents as it is a main home exemption. Only those who have property as a main home and then moving to another property as their main home can claim that exemption. A non resident cannot claim it is their main home. You cannot claim the tax back nor can you claim for any expenses on the property as that is also for tax paying residents only.

If she is non resident I would suggest she would be a bit silly to keep the money in a Spanish bank account due to the high charges made by banks here for that type of account. She'd be paying the high charges plus the cost of the non resident certificate as well.

Thank you for clarifying that for me. She is happy now that she doesn’t have to pay 20%tax. She will move the money back to the UK when she sells and just loose in the exchange rate.

rainbow54 wrote:

marcliff wrote:You are getting mixed up. A non resident will have 3% of the total sale retained to pay taxes due. They are then taxed at a flat rate of 19% on the profit made from the sale, not the selling price.

Example, bought 80k and sell at 100k. 3% of the 100k will be retained or 3,000 euro. Profit made is 20,000 so tax will be €3,800 so she will get a bill for 800 euro. If bought 90k and sold for 100k then the same 3k is retained but the tax will be €1,900 so she will get €1,100 back.

The buying property within 2 years does not apply to non residents as it is a main home exemption. Only those who have property as a main home and then moving to another property as their main home can claim that exemption. A non resident cannot claim it is their main home. You cannot claim the tax back nor can you claim for any expenses on the property as that is also for tax paying residents only.

If she is non resident I would suggest she would be a bit silly to keep the money in a Spanish bank account due to the high charges made by banks here for that type of account. She'd be paying the high charges plus the cost of the non resident certificate as well.

Thank you for clarifying that for me. She is happy now that she doesn’t have to pay 20%tax. She will move the money back to the UK when she sells and just loose in the exchange rate.

The lower the £/€ exchange rate (i.e. the weaker the £) the better it is for transferring funds back to the UK. Obviously it depends when she bought it, but the rate is historically pretty low at the moment at around £1=€1.16. We bought an apartment in 2004 and sold it in 2021 and although we 'lost' about €20k on the sale price (and therefore paid no gains tax) the sterling equivalent broke even which we were happy with. All the best to her!

Paul Uden wrote:

rainbow54 wrote:

marcliff wrote:You are getting mixed up. A non resident will have 3% of the total sale retained to pay taxes due. They are then taxed at a flat rate of 19% on the profit made from the sale, not the selling price.

Example, bought 80k and sell at 100k. 3% of the 100k will be retained or 3,000 euro. Profit made is 20,000 so tax will be €3,800 so she will get a bill for 800 euro. If bought 90k and sold for 100k then the same 3k is retained but the tax will be €1,900 so she will get €1,100 back.

The buying property within 2 years does not apply to non residents as it is a main home exemption. Only those who have property as a main home and then moving to another property as their main home can claim that exemption. A non resident cannot claim it is their main home. You cannot claim the tax back nor can you claim for any expenses on the property as that is also for tax paying residents only.

If she is non resident I would suggest she would be a bit silly to keep the money in a Spanish bank account due to the high charges made by banks here for that type of account. She'd be paying the high charges plus the cost of the non resident certificate as well.

Thank you for clarifying that for me. She is happy now that she doesn’t have to pay 20%tax. She will move the money back to the UK when she sells and just loose in the exchange rate.

The lower the £/€ exchange rate (i.e. the weaker the £) the better it is for transferring funds back to the UK. Obviously it depends when she bought it, but the rate is historically pretty low at the moment at around £1=€1.16. We bought an apartment in 2004 and sold it in 2021 and although we 'lost' about €20k on the sale price (and therefore paid no gains tax) the sterling equivalent broke even which we were happy with. All the best to her!

Thank you Paul for all your help. Much appreciated.