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the Tax Office within 30 days after signing
the Escritura for the sale of his property.
The amount of deposit payable is 5% of the
declared value in the NEW
ESCRITURA.
The responsibility for paying this deposit,
however, lies with the PURCHASER,
and if the amount is not paid to the Tax
Office,
a debt may be charged against the property
at the Property Register.
For this reason, the 5%
deposit is normally withheld from the final
PURCHASE
PRICE
payment by the PURCHASER
and the Purchaser then undertakes to make
the payment to the Tax Office.
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The
Seller,
or his agent should, however, ensure
that they receive a copy of the Tax
receipt as this will be necessary to
reclaim any amounts that may be refundable.Within
4 months after signing the Escritura,
the Seller (or his agent) must then
prepare the CAPITAL
GAINS TAX DECLARATION and calculate
the ACTUAL amount of Tax |
due.
If this amount is more than the 5% deposit
already paid, he must pay the additional
amount of tax to the Tax Office. If, however,
the tax declaration shows a lower amount
than that already paid, he can apply for
a refund. Contrary to popular belief, the
TAX OFFICE DO
REFUND AMOUNTS OVERPAID, usually
within 12 – 24 months if they agree
with the calculations.
The Capital
Gains Tax
is calculated on the PROFIT
of the sale of the property. The
PROFIT
is determined as the difference between
the value declared in the OLD
Escritura and the value declared in the
NEW
Escritura.
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If
the property was originally purchased
BEFORE 31.12.94:
A
discount of 11.11% is allowed for
each year the Seller has owned the
property as at 31.12.96 (except for
the first 2 years)
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If
the Seller originally purchased the
property BEFORE 31.12.86:
He will
have owned the property for over 10
years as at 31.12.96 and will receive
a 100% discount, and therefore does
not even have to pay the 5% deposit
on the tax. |
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If
the property was originally purchased
AFTER 31.12.94:
NO DISCOUNT WILL BE ALLOWED.
Instead a % co-efficient will be applied
to the original purchase price before
determining the profit made on the
sale. |
This co-efficient will vary according to the
number of years that you have owned the property
and will be fixed and published by the Tax
Office
every year.
Other costs may also be deducted from the
profit, such as the Transfer
Tax, Notary’s
fees,
Property
Register
fees paid by the Seller when he originally
purchased the property, and any costs for
extensions or other improvements to the property
since he purchased it. The Seller must, however,
provide VAT
invoices for any such items.
The balance remaining
less the discount (if applicable) and above
costs is the NET
PROFIT. The Capital Gains Tax is
35% of the NET PROFIT.
If the Seller has
a SPANISH RESIDENCIA
and has sold his property to buy another
property in Spain, he does not pay the 5%
deposit and furthermore, no Capital Gains
Tax is payable providing the NET
PROFIT is lower than the Purchase
Price of the new property to be purchased.
Details of the sale
of the property must, however, be declared
in his annual INCOME
TAX DECLARATION.
The PLUS
VALIA
is a tax payable to the Town Hall by the
Seller and is based on the increase in the
value of the LAND since the last sale of
the property.
The values are based on a number
of factors and vary from one area to another.
The calculation is somewhat complicated.
In general, the amount payable increases
with every year the Seller has owned the
property and the larger the plot of ground.
CAPITAL TRANSFER
TAX, payable by the PURCHASER within
30 days of the Escritura date, is 7% of
the value declared in the NEW ESCRITURA.
When determining the amount to be declared
in the Escritura, the Purchaser should ensure
that they do not under-declare. The Tax
Office have laid down guidelines for the
MINIMUM VALUE which they would accept –
approximately twice the RATEABLE VALUE quoted
on the latest Rates Invoice for the property
(IBI). Otherwise, if the Tax Office deem
that the value is too low, they will re-assess
the property according to their tables of
values, which may be calculated at the higher
“GIFT TAX” rate, and send a
demand for the additional tax due. If the
Tax Office over-assess the worth of the
property, the onus is then on the Purchaser
to prove otherwise, which may be difficult.
NOTARY &
PROPERTY REGISTRY FEES are based
on their scales of fees and both together
normally amount to approximately 1% of the
declared Escritura value.
As this whole
procedure can be fairly complicated and
time-consuming, it is always advisable to
appoint a Gestor or Solicitor to act on
your behalf and ensure that everything is
in order.
See Also
Taxes
for the Buyer and Seller
Buying
a New Property
An
Example Purchase
General
Advice
News/Features:
Property/House & Garden
Property
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