Introduction:
Non-residents selling property in Spain are subject to a 3% retention, which is applied to the sales price. This money is retained by the buyer (or his lawyer) and then transferred to the Spanish tax authorities.
Unbeknownst to most people, sellers are legally entitled to request a refund on the full 3% of sales proceeds, provided they sold at a loss or are breaking even.
This process is technical, meaning it requires the input of an experienced attorney to file this chargeback (a seller cannot do this alone).
In addition, a seller is also entitled to statutory interest if the tax authorities take longer than usual to repay the withheld tax. This could be quite substantial, and certainly higher than what any major bank pays depositors for their deposits today!
Surprisingly, most sellers are unaware of this possibility and never bother to ask for their money back, which is then lost!
3% retention explained:
The purpose of this deduction is to guarantee the capital gains tax that the seller owes on the sale of real estate in Spain. The purpose of this deduction is to guarantee the capital gains tax that the seller owes on the sale of real estate in Spain. The 3% ensures that sellers do not ‘runner’.
However, not all sales generate a profit. Many who bought their homes before the 2008 crisis and many other sellers will break even after adding up all the associated costs and expenses! This would mean that they are all entitled to this tax reduction/refund.
When you add up the associated lawyer fees (both when buying and selling the property), the associated taxes, professional fees payable (estate agent, notary, land registry, lawyer) and improvements to the property over time, it is It is often the case that sellers break even, or even make a loss, no matter how small.
If you sell at a loss or break even, the 3% retention is no longer legally justified. This means that the seller has the legal right to claim it back from the Spanish tax authorities, plus interest on top!
Procedure
As mentioned, when selling property in Spain, a 3% retention is applied to the non-resident sales proceeds upon completion. For example, when selling a house worth €500,000, €15,000 is withheld by the buyer at the notary.
This withholding will be paid by the buyer to the tax authorities after delivery.
Depending on whether a profit or loss has been made, the seller’s lawyer can make a recovery for all or part of the € 15,000. Additionally, depending on how long it takes for the tax authorities to pay the rebate, interest may accrue, which can be quite significant over time.
Conclusion:
If you are planning to sell your property in Spain and you are a non-resident, you can contact us to recover your money in a timely manner. Don’t let your money go to waste! It is your right, as the seller, to recover this money, your money.
Because every penny counts.
Contact us or your attorney/attorney if you have any questions.
