When buying a property in Spain, the contents are often sold along with the property. The seller may also explicitly request that a distinction be made between the value of the property and the value of the contents. However, the sale of the furniture can lead to last-minute discussions. In addition, there are tax implications that it is best to take into account. What should you pay attention to when buying property in Spain with the furniture?
Why does the seller want to make a split?
Before giving some advice, it is interesting to know why a seller likes to sell the contents with the property and have it valued separately. A common reason is to reduce capital gains tax when selling property in Spain. By selling the furniture separately, he can (try to) declare a lower sales price, so he realises a lower capital gain. And therefore has to pay less taxes. The capital gains tax rate is 19%.
What are the tax implications for the buyer when buying property in Spain with the furniture?
It may also seem attractive for the buyer to purchase the furniture separately. The transfer tax rate depends on the autonomous region, but ranges between 7 - 11%. Thus, you then seem to save the transfer tax to the share of the furniture. However, in a subsequent sale, the buyer will not be able to deduct the furniture share from the capital gains tax, so he will actually pay more at the end. In addition, transfer taxes are also due on the movable property, which is often forgotten.
An example. You buy a property in Altea (Alicante) for 400,000 euros, including 40,000 euros for the contents. You have the property described at 360,000 euros. The transfer tax is then 36,000 euros. Later, you can sell the property for 500,000 euros. The capital gain you realise is then not 100,000 euros, but 140,000 euros. You will then pay 26,600 euros capital gains tax. On the 40,000 euro share, you pay 7,600 euros. You therefore lose 3,600 euros.
Through the correct way, you will also have the furniture registered. In the case of the above example, you then pay 6% registration duties on the value of the contents in the Alicante region. Later, you can then include the furniture as a purchase cost in the capital gains tax return, provided you have supporting documents.
An example. You buy the same property again in Altea (Alicante) for €400,000, of which €40,000 is for the contents. The deed mentions the split-up. The transfer tax is then 36,000 euros for the property and 2,400 euros for the movables, totalling 38,400 euros. Later on sale, you can declare as purchase value 400,000 euros. When selling at 500,000 euros, your capital gain will then be 100,000 euros and you will pay 19,000 euros capital gains tax instead of 26,600 euros.
Belimportant condition is that you purchase the contents sufficiently documented. Not only useful to be able to prove its value with the tax authorities: these days, we see more and more Spanish tax authorities targeting the sale of furniture. But also to avoid discussions with the seller. Below you will find Some tips on buying property in Spain with the contents.
1. Save the property's publicity
When making your bid or signing the reservation, you can save the publicity of the property. Indeed, in the (online) advertisement of the property, you will find a description of the property, as well as photos showing the contents. We recommend that you download this page, save it and keep it in your purchase file. We also save the ad for our clients by default. Later, you can use the ad to show which items were or were not included in the purchase. And it can also be useful for the tax file as a supporting document to give an impression to the dealing officer.
2. Take your own photos while visiting the property
In practice, it is not obvious to already make an inventory list at once when making a bid. Therefore, when formulating your bid, you can already mention the most important objects. Therefore, take photos during the site visit. Have these photos signed when concluding the reservation contract. That way there can be less discussion afterwards when drawing up the inventory.
After all, the inventory is taken at the stage between booking and signing the purchase agreement. It would not be the first time that the inventory you eventually get to see is much more concise than you expected.
3. Prepare a detailed inventory list with photos
Attach a detailed inventory list to the private sale agreement. After all, the inventory list is an integral part of the sale agreement. In this inventory list, describe all the items you are taking over, preferably with a photo and a valuation for each item. For example: "TV, in good condition, working, brand, product reference/article number, value: X euros, photo 4". If possible, ask for purchase invoices for the more valuable objects.
This way, there is no discussion about which items are included, and which items the seller may keep. If the inspection before the execution of the deed of sale reveals that certain items are missing, you will immediately have a yardstick to reduce the final purchase price. Have this inventory list signed by all parties, including the estate agent.
For the declaration of contents and for the declaration of later capital gains tax, an inventory list is also a great advantage. The Spanish tax authorities will then find it much harder to prove that you have exaggerated the value of the furniture in order to pay less taxes.
4. Do not pay anything in cash
You can only pay up to 1,000 euros in cash in Spain. Larger cash payments are not allowed. When buying a property in Spain, you make the down payment via bank transfer and pay the balance via bank cheque. So for the furniture, you pay nothing in cash.