7.1 Taxes
The transfer of freehold properties will normally attract Transfer Tax at the applicable rate which depends on the region where the property is located.
Generally speaking 7%except in some circumstances where a reduced rate may be applicable.
The Transfer Tax known as "Impuesto Sobre Transmisiones Patrimoniales y Actos Juridicos Documentados " (ITPyAJD) is a local Government tax payable by the buyer to the local tax office within 30 working days of completion.The tax base is calculated by applying the relevant percentage to the purchase amount stated in the Title Deed (Escritura).
Filing and logging assessment of this tax is mandatory and without this payment the Title Deed (Escritura)cannot be registered at the Land Registry.
In the case of new residential property transactions,there is a mandatory VAT to be charged normally at the rate of 7%of the purchase price.The purchase of commercial properties and plots of land will normally attract VAT at the rate of 16%.An additional Stamp Duty,normally at the rate of 1%of the purchase price will also be levied by the local Government.
If the seller of a property is a non Spanish resident,then the buyer is liable to withhold 5%of the agreed purchase price and pay it into the Inland Revenue on account of the seller ´s Capital Gain Tax arising out of the transfer.The tax does not amount to an extra expense to the buyer as the 5%is deducted from the total purchase price.
If more than 10 years have elapsed between the seller ´s date of acquisition of the property or the date of the last improvement made to the property and the 31 st December 1996, there will be no capital gains tax and therefore no obligation to withhold and pay the 5%into the Inland Revenue. However,discuss this issue with your solicitor who will advise you accordingly.Be aware that failing to comply with the tax obligations imposed on the buyer,the tax liability will be attached to the property as a charge.
Tax Identification Number (NIE) In Spain every single person is assigned a tax identification number (NIE)which is used to file any tax returns and formal communications to the tax authorities. Foreigners need to obtain an NIE - foreigners identification number, which is obtained from the foreigners department at your local Spanish police station and issued by the Directorate General of the Police. Alternatively,nationals of other EU members states and other states which are part of the European Economic Area may apply to the Tax Office for a tax identification number.Ask your solicitor as to the formalities to obtain this number and the registration procedure before the tax authorities for tax purposes. |
