Transfer of holiday homes
Any inter vivos transfer of a property located in Spain, whether against payment (sale) or rewarding (donation), gives rise to the obligation to file various tax returns and, where applicable, to pay the resulting taxes. It is essential to know in advance the tax burden associated in order to be able to plan the transfer properly and reduce the tax bill as far as possible, in accordance with the regulations in force at the given time in Spain.
Non-Resident Income Tax
Through the purchase, donation or similar transfers among the living of a property in Spain, there is an alteration in the composition of the taxpayer's assets, which, in principle, constitutes a capital gain subject to taxation in Spain. This is the case even when the transfer is not against payment and the donor does not obtain any benefit. The capital gain, if any, is subject to Non-Resident Income Tax (IRNR). Transfers upon death, on the other hand, are exempt.
Since 2016, the rate of non-resident income tax on transfers is 19% and is payable on the capital gain. This is the difference between the acquisition value and the sale value of the property. In order to make an accurate calculation, it is necessary to know in detail all the costs related to the acquisition and transfer of the property, such as transfer taxes paid on the purchase, notary and registration fees, lawyers' and tax advisors' fees, real estate agents' commissions, etc. These costs reduce the profit.
Invoices relating to investments made in the property, which are all constructive measures that have resulted in an increase in value (as opposed to mere repairs or replacements), should be reviewed with particular care. The value declared in the Declaration of New Construction deed is not sufficient to justify the investment. Corresponding VAT invoices (not estimates) must always be submitted.
When a non-resident sells his property in Spain, the purchaser is obliged to withhold 3% of the purchase price and pay it to the Spanish tax authorities within one month, by submitting Form 211. The seller or donor must, for his part, file an IRNR tax return within four months of the transfer, using Form 210, deducting from the tax payable, in the case of a sale, the amount of the withholding, or requesting a refund if the tax payable is less than the withholding or zero.
Municipal tax on the increase in value of land
In addition, the tax on the increase in value or "plusvalía" is payable, both in the case of sale and in the case of donation and is settled by the Town Hall. This tax is based on the real or fictitious increase in the value of the land over a maximum period of 20 years. It is not possible to modify the tax rate by means of the declared value, as only the cadastral value influences the calculation of the tax.