The 3% tax on non-resident purchases and sales of property in Spain

When you buy property in Spain from a non-resident (a seller not resident in Spain), there is a tax or retention of 3% on the purchase price. This article provides more information.

What is the 3% tax when buying and selling property in Spain?

There is capital gains tax in Spain, including on the sale of property. This capital gains tax also applies to non-residents. To prevent a non-resident from running off with the wild after the sale of his Spanish property, the buyer is obliged to deduct 3% from the purchase price in advance and transfer it to the Spanish tax authorities. This way, the Spanish tax authorities have a guarantee that (at least part of) the capital gains tax will be paid.

Read more about capital gains tax in Spain.

So this 3% is not really a 'burden' for the buyer

As a buyer of property in Spain, you pay transfer taxes on top of the purchase price. For new builds, this is VAT (or IGIC in the Canary Islands) + a stamp duty and for resales, a rate depending on the autonomous region. In addition, when you buy from a non-resident, you are obliged to deduct 3% from the purchase price and pass it on to the Spanish tax authorities. For the buyer, this retention of 3% is not actually an additional tax.

An example. You buy a €350,000 property in resale in Alicante from a non-resident. You deduct 10,500 euros (3%) from the purchase price and pay the seller 339,500 euros when the notarial deed is passed, to be reduced by any outstanding debts. This 10,500 euros is therefore no extra cost to you, as you will pay 350,000 euros in total.

Separately, the transfer tax in the Alicante region is 10%. You will then pay a tax of 35,000 euros to the regional government on top of the purchase price. This 35,000 euros is an additional cost, though.

Here is an overview of the purchase costs when buying a property in Spain.

How does 3%'s payment work in practice?

Within one month of the passing of the notarial deed of sale, you are required to modelo 211 file and pay the 3% to the tax authorities. You are also required to provide the seller with a copy of your tax return.

What if you forget this obligation?

We distinguish between forgetting to deduct the 3% tax and forgetting to file modelo 211.

If you forget to deduct the 3% from the purchase price and the seller does not declare the capital gains tax himself, you will be liable for the seller's capital gains tax for 4 years. Specifically, the Spanish tax authorities can claim from you the 3% of the purchase price, plus interest and a tax increase within the 4 years.

If you forget to timely modelo 211 submit, you risk a fine, namely 1% per late month. On the other hand, the seller can sue you for fines and tax increases he may have had. In any case, even without modelo 211 file his own tax return.

When should I not deduct 3% from the purchase price?

In three cases, the buyer should not deduct the 3% deposit from the price:

  • when the seller proves that he is tax resident in Spain, by presenting a 'certificado de residencia fiscal‘;
  • When you receive a donation (the donor also pays capital gains tax in Spain);
  • when the real estate transaction is part of the contribution of the capital of a company on Spanish territory.

So in an ordinary buy-sell transaction, you should check whether or not the seller is Spanish resident. If the seller declares that he is resident in Spain, you can obtain the tax certificate of tax residence from him.

What obligations does the seller have?

Within 3 months of the declaration of modelo 211 by the buyer, the seller is obliged to modelo 210 to file. This is the capital gains tax return. On the capital gain actually realised (gross capital gain less purchase and sale costs, as well as certain renovation works), the seller,if resident in the EEA or EU, pays a rate of 19%.

If the seller fails to file a declaration and forgets to modelo 210 submit, the acquisition value of the property is set to zero. This means that the entire sale price is considered capital gains.

In case the capital gains tax exceeds the amount of 3% of the purchase price, the seller must top up the balance within the period of 3 months from the declaration of modelo 211 by the buyer.

However, if the tax due is less than 3% of the purchase price, he can reclaim the excess tax deducted from the Spanish treasury. The Spanish tax authorities then first investigate whether the seller has no other outstanding tax debts in Spain. A refund of the final balance can take up to 15 months.

An example. You live in Belgium or the Netherlands and sold your property in Alicante for EUR 350,000. The buyer deducted 10,500 euros (3%) and passed it on to the tax authorities. The capital gain you realised is 50,000 euros. The capital gains tax is 9,500 euros (19% of 50,000 euros). This means you can reclaim 1,000 euros (10,500 - 9,500) from the Spanish treasury.

However, suppose your capital gain was 100,000 euros. The capital gains tax is then 19,000 euros (19% of 100,000 euros). However, the buyer has already paid on 10,500 euros. In that case, you have to pay an additional 8,500 euros.

Do you have any questions about buying or selling property in Spain? If so, please feel free to contact with us.

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