Capital Gains Tax (IRPF) is payable on the benefit you make when you sell your property. Currently, all non residents are retained 3% on the TOTAL sale price at the Notary’s office. The amount is retained by the purchaser and paid on the seller’s behalf. After the sale the seller must do a “complimentary” tax return and declare and pay the balance of the tax.
Mr. Smith purchased his property in 2001 for 100,000€, he sells now for 150,000€, making a gain of 50.000€. At the Notary he will have 4.500€ retained by the buyer to pay to the tax office on his behalf. However what he should be paying is 27% on 50,000€, that is to say: 13.500€. Therefore, he should file the complimentary tax return and pay the 9.800€ that he still owes the Tax Man!
Residents are not retained the 3% but have a period of two years in which to reinvest the total amount obtained in another property. Should this not be the case you are also liable for Capital Gains Tax, and it will have to be declared in your yearly tax returns and paid to the tax office.
Residents over the age of 65 are exempt from Capital Gains Tax.
The latest tax reforms increased the 19% across the board to the following amounts:
If the gain is:
Up to 6.000€ : 21%
6.001€ to 24.000€ : 25%
24.000€ + : 27%
On the other hand, you must remember to keep all bills for Notary and Registry fees, Transmission tax (form 600), which incidentally has increased from 7% to 8% this year, these will normally all be in the back of your original Deed when you get it back from the Land Registry; as well as Legal fees and Estate Agency Fees. Keep also bills for any refurbishments carried out in your property, including things like changing windows, etc., (which by the way are also tax deductible on your yearly tax returns) as all these compute towards reducing the gain you have made, and handing over less of your hard earned cash!
If, on the other hand, you have not made a gain on sale, or you “broke even”, then whilst the 3% will still be retained at the Notary it can be reclaimed from the Tax Office after the sale is registered. Bear in mind that to reclaim this money you must have presented your yearly non resident tax returns for the last four years, or since you have had the property should it be less than four years. The Tax Authorities will not return monies to you until you have paid these.