Capital Gains Tax

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23 Feb 2013 09:59 by bringiton Star rating. 29 posts Send private message

Hi All, just trying to get an understanding of this as we embark in the sale of our property. Property is definitely worth less than the purchase price. All la renta tax has been paid since day 1. Am I correct in saying that 3% of sale proceeds will be held back by the buyer who will pay that to local tax office? When they see all la renta tax is paid and there was no profit from the sale , we can reclaim the 3%. is this correct? I believe there is some sort of local tax also. How do I find out how much that could be? Thank you.



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23 Feb 2013 11:50 by Roberto Star rating in Torremolinos. 4534 posts Send private message

Roberto´s avatar

 Assuming you are non-residents, yes, the buyer will have to retain 3%. You can claim this back (although it may take a while) if there has been no gain - I think you use form 210, but you can check with whoever does your regular returns for you. 

The local tax you refer to is called Plus Valia. You can find out the exact amount that will be due by going to your local town hall and asking.

You will aslo be liable for the IBI (rates) for this calendar year, even if you sell before the bill is due. If your property is part of a community, you will need to obtain a letter from the administrator stating that all your community fees are paid up to date.



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28 Feb 2013 15:50 by Roberto Star rating in Torremolinos. 4534 posts Send private message

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 Surely just CGT by another name, Plus Valia could come as a nasty surprise to some when selling. Another nail in the coffin of the Spanish property market. It's almost as if the powers that be actually want to kill it off.

http://www.euroweeklynews.com/features/your-sa/item/112886-crippling-tax-to-sell-your-own-home

 

 



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28 Feb 2013 16:11 by johnzx Star rating in Spain. 5247 posts Send private message

 
I am practically certain that the letter,  Like so many others in EWN,  is incorrect.
 
The Plus Valir tax is based on the increase in value of the land upon which a property is built.
 
Thus with normally rising property prices it would increase year by year. 
 
  It has no relationship to the price the property is sold for, and would normally be a very small amount for each year the property had been owned by the person selling.
 





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28 Feb 2013 16:29 by Roberto Star rating in Torremolinos. 4534 posts Send private message

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I'm not one to normally believe stuff I read in the papers either, but it's quite clear that the author is aware of what plus valia is: " This punitive tax on the sale of properties in Benalmadena is due to the ridiculously high valuation of land by the council in 2007". The reference to the tax being around 30% of what he paid for the property 23 years ago was presumably just as a point of interest and comparison. I'm quite prepared to believe there may be an error and/or and exaggeration in the reporting, but many town halls have revised their valor catastrals in recent years, and my reason for posting this was purely to let people know that they may be in for a shock when selling. 

You can find out at any time how much plus valia you would be liable for, by simply asking at your local town hall.



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28 Feb 2013 17:32 by johnzx Star rating in Spain. 5247 posts Send private message

Roberto

 

I am a bit unclear on what this means

 

Any idea if it lends weight to the letter writer ?

 

http://www.foro-ciudad.com/malaga/benalmadena/documento-21035.html





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28 Feb 2013 17:55 by Roberto Star rating in Torremolinos. 4534 posts Send private message

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 If you follow the link provided there to calculate your plus valia and enter your own info, it will become clear. This is the link

On my property in Torremolinos, bought in 2004, my plus valia would be around €4,000. Certainly not anywhere near 30% of what I paid of course, but nevertheless a bit of a kick in the teeth when one doesn't expect to pay capital gains tax (which is what it is in effect) on the sale of your own home. There are no exemptions for plus valia, and it has to be paid within 30 days of the sale.

I think the author of the article may have been quoting the valor catastral, or maybe the base imponible, rather than the tax due, but at best that could still result in a tax of almost €8,000. 

As I said before, I'm quite sure there are many who have never counted on this. And since these days EOS is as much about selling as buying, I thought it was an interesting subject to highlight. 



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28 Feb 2013 18:40 by johnzx Star rating in Spain. 5247 posts Send private message


Each time I have sold, I have been fortunate in that the buyer has agreed to pay the Plus Valir.





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01 Mar 2013 14:35 by camposol Star rating in Camposol. 1408 posts Send private message

Johnx-how did you get the buyer to pay the plus valia, when it is standard practice for the seller to pay it?





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01 Mar 2013 14:49 by bringiton Star rating. 29 posts Send private message

Thank you all for here feedback. I thought it was standard for the buyer to hold back part of the value of the property and they would pay the tax?? Sounded odd to me at the time of reading.



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01 Mar 2013 15:02 by Roberto Star rating in Torremolinos. 4534 posts Send private message

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 Not sure I understand what you're asking. What sounded odd to you?

You do realise that we're discussing two seperate taxes? The buyer only holds back 3% of the total sale price if the seller is a non-resident. This is in lieu of any potential capital gains tax the seller is liable for. The buyer pays this 3% to Hacienda. The seller then either claims it back if no CGT is due (or if the 3% was too much), or he pays the balance of any CGT due to Hacienda himself.

The Plus Valia tax is paid, normally by the seller, to the town hall. If a prior agreement has been made, the buyer may pay it. Often, developers selling new properties will try to get the buyer to pay it. But this is not the normally accepted practice.



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01 Mar 2013 15:03 by johnzx Star rating in Spain. 5247 posts Send private message

Camposol
                     Johnx-how did you get the buyer to pay the plus valia, when it is standard practice for the seller to pay it?
 
It is legally the responsibility of the seller, but where I live it is not unusual for the buyer to pay. 
 
Just a matter of what one agrees to put in the Compraventa.
 
It has always been a relatively small percentage of the sale price, depending on the number of years since it last changed hands. 
 
As in Roberto’s example, a little over 400 euros a year.





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01 Mar 2013 15:10 by camposol Star rating in Camposol. 1408 posts Send private message

It's a considerable amount when you've lived in it for 10 years or more! on top of all the other expenses agents fees etc selling is a very expensive business.





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01 Mar 2013 15:21 by johnzx Star rating in Spain. 5247 posts Send private message

 
Camposol
                    But is not a secret tax, just one of the taxes.
 
In normal times when properties increased in value, it was tiny on a year by year basis.
 
 In Roberto’s case, it is a little over 400 a year for the 9 years he has owned his property. If a property sells for say 150,000 euros , that is a bit over 0.25% a year.





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01 Mar 2013 15:23 by Roberto Star rating in Torremolinos. 4534 posts Send private message

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"selling is a very expensive business."  As is buying.

I have just done a very rough calculation, and reckon that if I sold today for the exact same price I paid 9 years ago, (which is wishful thinking) I would be about 20% down. This is taking into consideration the costs of buying, the plus valia, the agents fee, and CGT if I declare the true sale price (which stupidly I didn't when I bought, along with about 100% of everyone else)

Except from during an unprecendented property boom, which doesn't come around too often, buying property in Spain makes little sense from an investment point of view - and there is a good reason why Spaniards tend not to move home too frequently. If the government woke up to this fact, things might look a little more promising for the property market than they do at present.

 


This message was last edited by Roberto on 01/03/2013.

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"Get your facts first, then you can distort them as you please"

Mark Twain

 

 

 




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01 Mar 2013 15:28 by johnzx Star rating in Spain. 5247 posts Send private message

I don’t know how old you are Roberto, but of course is one has been resident in a property, as a tax resident, for 3 years, when they reach 65 (or over)  there is no CGT.





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01 Mar 2013 15:45 by Roberto Star rating in Torremolinos. 4534 posts Send private message

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 Well I think the original poster is non-resident, so this wouldn't apply anyway. The 3% will be retained, and he/she may then have a long battle convincing Hacienda that the property was sold at a loss, and even if they accept that, it could be over a year before they see this money. 

Plus Valia is not a secret, true, but many (and no doubt especially non-resident) owners are blissfully unaware of it - until they come to sell. So it can come as a nasty surprise, on top of all the other costs involved.



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"Get your facts first, then you can distort them as you please"

Mark Twain

 

 

 




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01 Mar 2013 16:05 by johnzx Star rating in Spain. 5247 posts Send private message

When I bought a property in the UK in about 1963 I was surprised to learn that I had to pay Stamp Duty as the purchase price was above the free amount, I believe then £4,500.  It was about £50 over so had to pay on the lot.   

 

That I did not know was my fault. 

 

The Plus Valir is still I beleive a very small part of the cost of selling, and is a normal tax throughout Spain.





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01 Mar 2013 16:23 by Roberto Star rating in Torremolinos. 4534 posts Send private message

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 Well, 4 grand is no small amount to me, regardless of what you compare it to, but for the sake of letting you have the last word - I AGREE WITH YOU. OK?



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"Get your facts first, then you can distort them as you please"

Mark Twain

 

 

 




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02 Mar 2013 10:50 by bringiton Star rating. 29 posts Send private message

Thank you all. I managed to glean the information I needed from your discussions. I do understand there are two taxes involved and the buyer pays the CGT from the holdback which is fine with me as it will be one less thing for me to deal with until reclaim of course! And yes I am non-resident. Thanks again for your help with this.



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