Non-residents Capital Gains Tax on Real Estate sales. EXPLAINED

28 Mar Non-residents Capital Gains Tax on Real Estate sales. EXPLAINED

Capital gains obtained as a result of selling a property are subject to tax. This income shall be deemed to be accrued when the property is transferred.

In general, net gains shall be calculated based on the difference between the cost price and transmission value of the property.

The cost price consists of the real amount  for which the asset being sold was acquired, plus the sum of the costs and taxes inherent in the acquisition, excluding interest, paid by the transferor. However, this value could be corrected, according to the year in which the property was acquired :

For the assets acquired before 31-12-1994, a transitory regime is applied which is characterized by applying some reductions (reducing coefficients or reduction percentages) by permanence of the good or right in the Patrimony of the taxpayer, although they only apply to the part of the capital gains obtained before the 20-1-2006.

The application of the aforementioned transitional regime is limited to transmissions made from 1-1-2015 of goods acquired before 31-12-1994, whose joint transmission value does not exceed 400,000 euros

If the property being transferred had been rented, the value determined should be reduced by the amount of the depreciation corresponding to the rental period. This depreciation will also be updated in accordance with the year to which it corresponds.

The transfer value is the real amount for which the disposal was made, reduced by the amount of any costs or taxes related to the transfer paid by the seller.

As a result, the capital gain on which taxation will be paid consists of the difference between the transfer value and the cost price, determined as described above.

If the transferor acquired the property on two separate dates or the property has been renovated, calculations must be made as if there were two net gains.

The equity gains obtained by non-residents without permanent establishment, be they natural persons or entities, are taxed, from 2016, with the rate of 19% .

There is a partial exemption of 50% of the patrimonial gains derived from the disposal of urban real estate, when it was acquired between 12-5-2012 and 31-12-2012

The person who acquires a non-resident’s property, whether resident or non-resident, is obliged to withhold and deposit with the Public Treasury 3% of the consideration agreed. For the seller this amount constitutes a payment on account for the tax on the income arising from the transfer. Therefore, the purchaser will give a copy of form 211 used to deposit the withholding, to the non-resident seller, so that the seller can deduct this withholding from the tax to be paid as a result of the tax return including the capital gain. Should the amount retained be greater than the tax liability, it is possible to obtain a refund of the difference.

In the event that the withholding is not deposited, the building will remain liable to payment of the lower of the amount of the withholding or payment on account and the corresponding tax.

Form 210, approved by Order HAC/3316/2010, of 17 December, recording income type 28.

Means of filing:

– on paper, generated by printing the form after it has been completed in on Tax Agency’s the Internet portal.

– Electronically, via the Internet.

If the property is under shared ownership by a married couple in which both spouses are non-resident, a single self-assessment may be provided.

When to file the tax return: three months from the end of the period that the person acquiring the building has to deposit the withholding (this time period, in turn, is one month from the date of the sale).

Refund of excess withholding. Should there be a capital gains loss, or if the tax withholding is greater than the whole payment due, you will have the right to have the excess amount withheld refunded. The refund procedure is initiated by filing the tax return form.

The Tax Agency shall, where appropriate, make a provisional payment within the six months following the end of the established period for filing of the form. If the provisional payment is not made within this time period, the Tax Agency shall voluntarily refund the excess owing over the self-assessed amount. Once six months have elapsed without payment having been ordered, for reasons not attributable to the taxpayer, the amount pending refund shall accrue late payment interest.