NON-RESIDENTS CAPITAL GAINS TAX ON REAL ESTATE SALES. EXPLAINED

03 Jul NON-RESIDENTS CAPITAL GAINS TAX ON REAL ESTATE SALES. EXPLAINED

The obtainment of a capital gain as a result of the sale of a property constitutes an income subject to taxation. This income is understood to accrue when the capital change occurs.

In general, the gain will be determined as the difference between the transfer and acquisition values.

• Gains accruing from 1 January 2015

  The acquisition value will be formed by the actual amount for which the transferred property was acquired, to which will be added the amount of any expenses and taxes inherent to the acquisition, excluding interest, paid by the transferor.

  If the property that is now transmitted had been leased, the value thus determined must be reduced in the amount of the repayments corresponding to the lease period.

  The transfer value will be the actual amount for which the transfer has been made, reduced by the amount of any expenses and taxes inherent to the transfer paid by the seller.

• Gains accruing until 31 December 2014

  The acquisition value will be formed by the actual amount for which the transferred property was acquired, to which will be added the amount of any expenses and taxes inherent to the acquisition, excluding interest, paid by the transferor. According to the year of acquisition, this value will be corrected by applying review coefficients which are established annually in the General State Budget Act.

  For properties transferred in 2014, the coefficients are the following:

  Year of acquisition	Coefficient
  1994 and previous 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013	1.3299 1.4050 1.3569 1.3299 1.3041 1.2807 1.2560 1.2314 1.2072 1.1836 1.1604 1.1376 1.1152 1.0934 1.0720 1.0510 1.0406 1.0303 1.0201 1.0100

  However, when the investments were made on 31 December 1994, the coefficient 1.4050 will apply.

  The application of a different coefficient from unity will require that the investment have been made more than a year in advance of the date of the transfer of the real estate property.

  If the property that is now transmitted had been leased, the value thus determined must be reduced in the amount of the repayments corresponding to the lease period. These repayments are also updated according to the year to which they correspond.

  The transfer value will be the actual amount for which the transfer has been made, reduced by the amount of any expenses and taxes inherent to the transfer paid by the seller.

  The difference between the transfer value and the acquisition value thus determined will be the gain which is subject to taxation.

However, if the property is transferred by an individual who acquired it before 31 December 1994, the gain previously determined may be reduced by the application of a transitional regime.

If the transferor has acquired the property on two different dates, or the property has been the object of improvements, the calculations must be made as if they were two gains.

Partial exemption:

Capital gains deriving from the sale of urban properties located in Spanish territory acquired from 12 May 2012 until 31 December 2012 have a 50% exemption. This partial exemption is not applicable:

• In the case of individuals, when the property has been acquired from or transferred to the spouse or any person related to the taxpayer by straight-line or collateral kinship, consanguinity or affinity until the second degree, inclusive, or from or to a company associated with the taxpayer or with any of the aforementioned persons through any circumstances established in Article 42 of the Commercial Code, regardless of the residence and the obligation to prepare consolidated annual accounts.
• In the case of companies, when the property has been acquired from or transferred to a person or company associated through any of the circumstances established in Article 42 of the Commercial Code, regardless of the residence and the obligation to prepare consolidated annual accounts, or from or to the spouse of such person or from or to any person related to him/her by straight-line or collateral kinship, consanguinity or affinity until the second degree, inclusive.

Exemption for reinvestment in usual residence for taxpayers in the EU, Iceland and Norway (applicable to earnings accrued since 1 January 2015):

In the case of taxpayers resident in a member state of the European Union or the European Economic Space with effective exchange of tax information, the capital gains obtained by the transfer of what has been their habitual residence in Spain may be excluded from taxation, provided that the total amount obtained through the transfer is reinvested in the purchase of a new habitual residence. When the reinvested amount is lower than the total of the amount received in the transfer, only the proportional part of the capital gain obtained corresponding to the reinvested amount will be excluded from taxation.

When the reinvestment has occurred before the date on which the form 210 is to be submitted, the reinvestment, total or partial, may be taken into account to determine the corresponding tax liability. When it occurs later, an application must be submitted on the form which is approved according to this purpose, within three months following the purchase date of the habitual residence, enclosing with the application the documentation certifying that the transfer of the habitual residence in Spanish territory and the later acquisition of the new habitual residence have actually taken place.

The person acquiring the property, resident or otherwise, is obliged to withhold and deposit with the Treasury 3% of the agreed price. This withholding has for the seller the nature of payment on account of the corresponding tax for the income deriving from this transfer. Therefore, the purchaser will deliver to the non-resident seller a copy of the form 211 (with which he/she has made the withholding), so that the latter can deduct this amount from the amount to be paid resulting from the declaration of the gain. If the withheld amount is greater than the amount payable, the refund of the surplus can be obtained.

If the withholding is not deposited, the property will be subject to the payment of the smaller amount of the withholding or deposit to the pertinent account and the corresponding tax.

Tax return form

Form 210, approved by Order EHA/3316/2010 of 17 December, declaring income type 28. However, when the exemption for reinvestment in a habitual residence is applied, the type of income will be declared as 33 or 34, as corresponds.

Filing methods:

• on paper, generated as a result of printing the PDF form contained in the web portal of the Tax Agency.
• online, via Internet.

When the property is of shared ownership by a married couple in which both spouses are non-resident, exceptionally a single self-assessment may be made.

Term: three months from the end of the period which the purchaser of the property has to deposit the withholding retention (this period is, in turn, of one month from the date of the sale).

Refund of the withheld surplus In the case of capital losses, or if the withholding made is greater than the liability which should have been deposited, the taxpayer is entitled to the refund of the withheld surplus. The refund procedure commences with the filing of the tax return form.

The Tax Agency may apply a provisional settlement within the six months following the end of the established period for filing the return. When the return is filed late, the six months will be counted from the filing date. If the provisional settlement is not made within this six-month period, the Tax Administration will proceed on its own account to refund any surplus paid above the self-assessed amount, without prejudice to making any later provisional or definitive settlements which may correspond. Once the said six months have elapsed without the payment of the refund having been ordered for reasons not imputable to the taxpayer, the corresponding late payment interest will be applied to the amount pending refund.