Legal considerations and tax issues Part I.

At this time of economical unrest, many people are trying to sell their second homes and in Spain (as in most places) the procedure is complicated. You should be aware of the legal considerations and tax issues to avoid complications later on. The best way to make sure that you have all your bases covered is by having a competent lawyer. One of the easiest ways to find out how much your property could be worth is asking your lawyer to find out from a valuation company. The certificates that you receive are especially practical for determining the price of properties not only for selling but also in divorce cases.
As the vendor you will have various costs to pay when you sell your property. These include the municipal capital gains or ‘plusvalia’. This is calculated by the Town Hall and is based on the increased value of the land since it last changed hands. Normally the vendor pays the estate agent, but this can vary depending on the agreement made by the buyer and vendor. The vendor has to pay his lawyers fees. You also have to pay Capital Gains Tax on the difference between the amount that you bought the property for and the amount that you are selling it for. This profit is adjusted depending on the time that you have owned the property.
Whether you are residents or not, the capital gains that you pay is 18% but non residents have to pay 3% directly to the tax office at the time of sale. The buyers retain (3%) from the sales price and pay the tax office by completing a form 211. You should keep in mind that your yearly non-resident’s tax has to be paid up to date. When the buyer and vendor have come to an agreement on the price of the sale, a private sales purchase contract is drawn up and a deposit of 10% is paid. Although there is also the possibility of signing an option to buy contract and paying amounts of less than 10%.
Another possibility is to sign a rental agreement with an option to buy, which is a common formula amongst our clients who have problems trying to get the financing to buy and for the vendors trying to find a buyer. If there is a mortgage on the property being sold, it has to be cancelled at the time of signing the sales purchase deeds, unless it is being taken over by the new owners. Most banks have a clause in their contracts saying how much has to be paid as a penalisation for early repayment and this is normally 1%.
Other costs that have to be paid are for the economic cancellation which is around 50 euros, registry certificate, and the notary and registry fees for the cancellation of the mortgage. These costs depend on the amount of the mortgage at the time of the cancellation and the registry where the mortgage is inscribed. There are no taxes to be paid for the cancellation of the mortgage but the form 600 has to be presented with the deeds at the land registry. If the money for the cancellation of the mortgage comes from a tax haven, then the notary has to be given a copy of the form DP2.