Can anyone with knowledge please advise?

If I purchase a NEW apartment in Spain for Euro 400,000 and I also pay Euro 28,000 iva as it is a new property, it will have cost a total of Euro 428,000.

If I sell it a year later for Euro 430,000, have I made Euro 2,000 profit which is liable to capital gains, or, do the Spanish Authorities ignore the iva and say that I have made Euro 30,000 profit??

Also, can one offset the expenses of selling, ie agent's fees etc.?

Martin

Yes.

Is that "Yes" to both questions?

You can offset the IVA against the capital gain in just the same way that you can offset the 7% transfer tax on a resale.

You can also offset the agent's fee when you sell provided that he is prepared to issue you with a proper invoice bearing his name and CIF.

Thank you very much indeed for that response and information!

I will then actually have made a gain of about Euro 10,000.

I understand that they withold 5% of the sale price which will be a lot more than the tax due on Euro 10,000.

How long does it take to get a refund of the balance of the witholding, and how do you apply for it?

Martin

The withholding tax for non-residents was reduced from 5% to 3% at the beginning of this year.

In case of capital losses or in case that the withholding exceeds the tax due, it is your right to receive a tax refund of the excess withheld. The refund procedure starts with the presentation of a 212 form at the District or Local Office indicated. The refund will be forwarded by means of a bank transfer to the account stated in the return. The account holder has to be the taxpayer or representative. In the latter case, the representative has to be lawfully entitled to receive the payment. In case that there is no bank account open in Spain, a cheque payment may be requested. In any event, the 211 form filed with the withholding payment has to be attached to the 212 form for non-residents.

The Tax Administration is obliged to carry out a provisional settlement within six months following the deadline established for the filing period of form 212. If the provisional settlement has not been performed within this period, the Tax Administration will forward the excess of the self-assessed tax due. Once six months have passed, without having ordered the refund, due to reasons attributed to the Tax Administration, interests rates on the amount pending payment will be paid.

I have heard of cases where the amount of the refund has been challenged and so the whole procedure has taken up to a year.

Depending on how long you own the property you will also need to have paid any non-resident taxes which may have become due in order to receive the refund.

They once challenged one of my declarations for a friend which took the repayment beyond the six month deadline and they ended up paying more in interest than the difference in the amount I claimed and what they wanted to pay.

The retention which the purchaser made must be paid within one month of the signing of the escritura and the claim for refund (or payment of balance) must be made within three months of that payment.

When you are working out your capital gain don't forget to apply the applicable coefficient to take into account inflation.

Hillybilly

If you go through this new EU citizen procedure for becoming resident and obtain your certificate, does that mean that there is no witholding please?

we were told there is no witholding for us as we are residents, don't need residencia, just be regstered on the padron as a resident, i.e you spend more than 183 days a year in Sapin.

Signing on the Padron or getting a residents certificate does not necessarily mean that you are classed as tax resident in Spain.

To prove that you are tax resident so that you can enjoy the tax breaks that you get, you need to be able to prove that you have paid your income tax in Spain, or if you are below the tax threshold, that you have either submitted a nil return or applied for a certificate of tax residency from Hacienda.

You used to be able to produce a residencia card to prove this but recently most Notarios insist on proof of tax residency if you wish to avoid the retention (now 3%)

No you will only pay capital gains on the declared value on the escritura,(which is more than likely what you paid excluding IVA unless you paid some of it with black money) the rate is for capital gains is :thumbup18%.
Not on the iva that you paid on top of the purchase price.

interesting thanks for that