Properties for sale in Seville, Madrid, Barcelona, and other Spanish cities are among the most investment-attractive real estate for foreigners. The fact that non-residents are not liable for capital gains tax is one of the major causes of this. In 1999, the municipal administration released foreigners from this duty.

The experts of Spain-Real.Estate have responded to five issues that non-residents who intend to invest in Spanish real estate for capital gains frequently ask.

Who pays the municipal capital gains tax in Spain?

The law governing this levy is called the Ley de Haciendas Locales. According to this law, it is the homeseller that should pay the capital gains taxation. However, if he is a non-resident alien, the obligation under the payment extends to the property buyer. Therefore, the buyer will be responsible for the submission and payment of this levy to the local council.

Is it possible to make a non-resident return the tax paid?

Although the buyer must pay the capital gains tax, it should be emphasised that he is entitled to a full refund for the money already paid. How can you do that? According to the Spanish General Tax Law (LGT), purchasers may request a capital gains taxation refund from a non-resident seller. However, because the seller is a non-resident, this is a civil action that may present multiple difficulties.

The buyer will have to file a suit to recover the capital gains tax they paid if the non-resident refuses to give it back. Experts strongly advise negotiating in the purchase and sale contract how the seller can repay the buyer for paying this levy in order to prevent this issue.

How to compensate for the payment of capital gains tax?

The purchase and sale contract may include a clause allowing the buyer to claim back an amount equal to the capital gains taxation amount. As a rule, in order to cover this amount, the sides of the agreement negotiate to reduce the cost of the housing unit.

Can the buyer appeal the capital gains tax?

Since the buyer is a substitute taxpayer, the question arises: can he appeal directly the municipal capital gains taxation in Spain? Under local legislation, he has the right to appeal the review to the local council and the administrative department.

The law governing this taxation examines the legal situations of both the taxpayer and the person who is required to make the payment. In other words, filing an appeal requesting the return of an amount equal to this levy is possible.

How is capital gains tax calculated?

According to the new tax regulation, there are the following calculation methods for the taxation base:

1. The objective formula. In this case, the cadastral value of the unit is multiplied by the new coefficients. New coefficients will be approved in the General Law on the State Budget every year. They are developed in accordance with the real estate market. This is an optional method because the taxpayer has the option to pay levy based on the actual capital gains received during the real estate transaction. This information can be found in the notarial act or in its annexes. So, the calculation of the levy in this way should not cause any particular problems.

2. The real formula. This method involves calculating the difference between the sale price and the purchase price. It is applied when the taxpayer proves that the real capital gain is lower than the gain received as a result of an objective assessment method. In this case, it is crucial for the seller to provide a copy of the purchase and sale contract. Only then will the buyer be able to send it to the city council and prove the real amount of the capital gain.

The seller has to inform the buyer about any factors that may have increased the property value since it was purchased. These factors may include major renovations or cosmetic repairs, replacement of furniture and household appliances, etc.

Assistance with buying property in Spain

One of the most comprehensive databases of Spanish housing units, covering the leading regions of the country, is presented on the Spain-Real.Estate website. Investors interested in purchasing real estate for resale and capital gains can contact the aggregator’s representatives for a full consultation. The company’s catalogue includes only up-to-date offers with an ideal price-quality ratio from reliable sellers.

Homebuyers have two options. The first is to find a residential property on their own using a user-friendly search engine with dozens of filters. The second is to ask for support from a company’s specialist. During the selection process, the aggregator’s representatives take into account all the preferences and financial capabilities of their customers. So, they are never disappointed with the result.

In addition to assistance with real estate selection, investors can count on full support during a real estate transaction and high-quality after-sales service.