3 % tax retention
Sep 4th 2015, 3:38 pm
#1
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Joined: Dec 2011
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3 % tax retention
I apologise for asking a question that has probably been covered before (or is just a daft question). Is it the case that anyone purchasing a property has to retain 3 % of the purchase price and send it to the taxman and then for the seller to apply to the taxman for its return (depending on their residency, age, future plans etc etc)? Also, if this is the case, and the purchaser does not do this, are they then themselves liable for the 3%?
Sep 4th 2015, 3:51 pm
#2
Joined: Jun 2006
Location: Granada Costa
Posts: 10,901
Re: 3 % tax retention
It only applies to properties owned by a non resident. It is to cover any Capital Gains Tax that might be due. A resident will pay the tax via his normal tax declaration.
If the seller is non resident, he could do a runner and not pay the tax. That is why he has 3% deducted from the selling price which goes direct to the taxman. If he doesn't pay it, it is not the buyer's problem.
There is no way the purchaser can avoid paying the 3% as it is deducted at the time of the sale.
If the seller is non resident, he could do a runner and not pay the tax. That is why he has 3% deducted from the selling price which goes direct to the taxman. If he doesn't pay it, it is not the buyer's problem.
There is no way the purchaser can avoid paying the 3% as it is deducted at the time of the sale.
Sep 5th 2015, 7:27 am
#3
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Re: 3 % tax retention
Many thanks, Fred. Just one last question - who would ensure that the retention was made - is it the Notary , and would he/she only not make the retention when the seller provided proof that they were resident?
Sep 5th 2015, 9:09 am
#4
Joined: Jun 2006
Location: Granada Costa
Posts: 10,901
Re: 3 % tax retention
As I have never been involved in such a situation, I assume that it would be sorted out with the notary. I think it has to be paid to the tax office within 30 days and the receipt goes to the seller so they can claim back some or all of the retention if they can prove that the gain was less than the retention.
The seller has to prove that they are tax resident otherwise the notary will insist on the retention. That means that you would need to get a certificate of tax residency from the tax office. I imagine that your current tax return would also be accepted.
This is one of the many reasons why you should make tax declarations even if your income is low enough for it to be free of tax. It also has implications with regard to CGT as tax residents can claim different exemptions compared to non residents.
The seller has to prove that they are tax resident otherwise the notary will insist on the retention. That means that you would need to get a certificate of tax residency from the tax office. I imagine that your current tax return would also be accepted.
This is one of the many reasons why you should make tax declarations even if your income is low enough for it to be free of tax. It also has implications with regard to CGT as tax residents can claim different exemptions compared to non residents.
Sep 5th 2015, 9:32 am
#5
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Re: 3 % tax retention
As a purchaser, it is of no concern to you.
Sep 5th 2015, 10:41 am
#6
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Re: 3 % tax retention
Ive just been though this, but it's the seller that is involved in this, not the purchaser. The retention is made at the point of sale in the legal process. You may have to wait at least 6 months for the 3% to be refunded to you, and it's best to employ a solicitor / gestor to keep an eye on it for you if you are no longer in Spain afterwards.
