October 14th, 2014
Before setting a sale price, Spanish property owners who are considering selling should be aware of all the associated costs and taxes, in order to be able accurately to calculate the net amount they will receive from the sale.
The costs and taxes on selling a Spanish property can typically be in the range of 10-15% of the sale price, in total. The following is a reminder of the principal areas to consider.
1. Estate Agency Fee. The seller usually covers the estate agency fee. The applicable percentage of the fee needs to be individually negotiated in each case. It will be determined by the nature and location of the property; its price; and the detail of the service which will be provided by the estate agent. The typical range of estate agency fees for ‘ordinary’ Spanish property sales is 3-5% plus IVA. (A higher % applies if it is a low value transaction).
2. Energy Performance Certificate. In order to market a property for sale, Spanish property owners are legally required to have an up to date Energy Performance Certificate. Usually, the estate agent will be able to recommend a local authorized certificate provider. In terms of pricing, it is a fairly competitive market now; and there are a number of certificate providers covering wide areas, so it is easy to determine a fair price for this service.
3. Tax Retention on a Spanish property transfer. When a non-Spanish resident owner of a Spanish property sells, the buyer has to retain 3% of the declared sale price and pay this to the Spanish Tax Authority. So, this is a 3% deduction from the amount the seller receives. In some cases, the retention can be reclaimed subsequently, but the reclaim process can be quite convoluted and expensive to pursue.
4. Plus Valia Tax. When there is a transmission of a Spanish property interest, the local Town Hall is entitled to charge Plus Valia Tax, which is calculated by reference to the rateable value of the property and the period of ownership. In a sense, it is a hybrid between a stamp duty and a local level capital gains tax. The amounts in question vary widely from area to area; and in some areas the charge is surprisingly high. So, it is always essential to have a clear idea in advance of the Plus Valia which will be payable on a sale.
5. Community Administrator Certification. It will ordinarily be a term of the sale that the seller pays all outstanding community charges up to the date of completion. This is confirmed by the provision of a Community Administrator’s Certificate, which the seller procures (and pays for). The charge for the provision of this certificate typically ranges from 50-100 Euros.
6. Capital Gains Tax. A seller of a Spanish property might potentially face an obligation to account for any profit in Spain and/ or in their home country (if a non-Spanish resident). But this is a case-specific issue, so advice should always be sought in both jurisdictions before proceeding with a sale, to ensure full fiscal compliance.
6. Legal Fees. Expert independent legal representation is essential when selling a Spanish property (please see our previous Blogs for details). The cost depends on the value of the transaction and its complexity. But typically, 0.75- 1% plus IVA (usually subject to a minimum fee level) should be budgeted for.
7. Bank Charges. Bank charges in Spanish property transactions can be surprisingly high. Some Spanish banks even charge to receive funds; and always to transfer funds following completion. Often the charge is a significant %. So, this should be confirmed in advance. If net sale proceeds are to be repatriated to the seller’s country of origin, then (if outside the Eurozone), a specialist Foreign Exchange broker should be used. This will improve on the direct bank to bank FX rate; and there is then greater control over the timing of the transfer; and agreement of the applicable FX rate. This specialist service can also be useful, in case Tax Authority source of funds certification is required.
8. Mortgage Redemption Charges. If the property is owned subject to a mortgage, then before agreeing a sale, the terms of redemption of the mortgage (or its transfer to another property) must be confirmed with the bank. Sometimes a substantial redemption fee can be payable.
9. Notary Costs. Although technically this should be a shared cost, it is often the case that the buyer pays the Notary fee. But sellers need to be aware that this is an area of possible negotiation. The amount of the Notary fee will depend on the value and complexity of the transaction. But we recommend that the budgeted figure is around 0.75-1% plus IVA. So it is important to agree before exchanging contracts, how this cost will be borne.
10. Property Registry. The buyer almost always bears the Property Registration cost, so this should not be an issue of concern to the seller. But as an aside, the Property Registration cost also depends on the size/ complexity of the transaction; and also the type of property and its location. The Property Registration cost is typically around 0.5-0.75%.
In conclusion therefore, most well advised Spanish property owners will assume a typical range of 25-30% to cover the ‘in and out’ costs and taxes when assessing the total cost of buying and then later selling a Spanish property.
This general commentary is not intended to be exhaustive; and case-specific legal advice should always be sought.
The Legal 4 Spain team provides a full property conveyancing service (buying and/or selling) throughout Spain. We are always happy to provide a competitive cost estimate at the outset of a transaction on a no-obligation basis.