Selling a property in Spain as a non-resident: the 3% withholding, the capital gain and the plusvalía municipal

The three things that get paid, and that almost nobody separates

In a sale made by a non-resident there are three different payments, with three different recipients and three different calendars. Mixing them up causes most of the nasty surprises.

• The 3% withholding. It is not a tax: it is a payment on account of your IRNR (Impuesto sobre la Renta de no Residentes, Spain's income tax for non-residents) that the buyer deducts from the price and hands over to the tax office in your name (article 25.2 of the IRNR Law).
• The IRNR on the capital gain. That one is the tax: 19% on the difference between what the property cost you and what you get for it (article 25.1.f).3.º).
• The plusvalía municipal. A local tax that does not tax the flat but the increase in the value of the urban land that the transfer brings to light (article 104.1 of the Local Finances Law, the Ley Reguladora de las Haciendas Locales that governs town hall taxes).

All three are born on the same day, the date of the transfer, and they fall due at very different moments. And there is something less comfortable: the IRNR gain and the increase in value for the plusvalía municipal are worked out with different arithmetic on the very same sale. In the IRNR, costs and taxes reduce the gain (article 35 of the IRPF Law, Spain's resident income tax law); in the plusvalía municipal, to check whether there was an increase at all, costs and taxes are not counted (article 104.5). The two can point in opposite directions without anyone having made a mistake.

The 3% withholding: the buyer applies it, on the price

Article 25.2 of the IRNR Law says it without hedging: in transfers of property located in Spanish territory by taxpayers acting without a permanent establishment, «el adquirente estará obligado a retener e ingresar el 3 por ciento [...] de la contraprestación acordada, en concepto de pago a cuenta del impuesto», the buyer must withhold and pay in 3% of the agreed consideration as a payment on account of the tax. Article 14.1 of the IRNR Regulation repeats the same sentence word for word.

Three practical consequences follow from it:

• The buyer withholds, not you. That money never passes through your hands: it comes out of the price and goes straight to the Treasury. At the signing before the notario (the public official who authorises the deed of sale in Spain) you will see one cheque fewer.
• It is worked out on the price, not on what you make. «Contraprestación acordada», the agreed consideration, is the gross amount of the sale. Whether you sell at a gain or at a loss, the 3% is withheld just the same.
• One month from the date of the transfer. The buyer files and pays at the AEAT office covering the area where the property is (article 14.3 of the Regulation). The form is modelo 211, approved by a ministerial order: the law does not name it, neither article 25.2 nor article 14 cites any form and both refer to «el modelo que determine», whichever form the Ministry sets. It is the number you will see at the notary and the one to ask the buyer for as proof of payment.

There are only two situations in which nothing is withheld (article 14.2 of the Regulation): where you prove, with a certificate issued by the tax authorities, that you are taxed under the IRPF or under corporate income tax, and contributions of property to the incorporation or capital increase of companies resident in Spain.

And if the buyer does not withhold, or withholds and does not pay it in? The problem becomes his, and the property's. Article 25.2 provides that the transferred asset is charged with the payment of the lower of that withholding and the tax, and article 14.5 of the Regulation orders the land registrar to record it in a note in the margin of the entry, stating the amount for which the property answers. On top of that, article 31.3 closes the escape route: whoever is obliged to withhold takes on the obligation to pay in, «sin que el incumplimiento de aquella obligación pueda excusarles de ésta», without failing to do the first excusing them from the second.

The capital gain: both values are built, not copied

The gain is the transfer value minus the acquisition value (article 34.1.a) of the IRPF Law, which article 24.4 of the IRNR Law applies to non-residents). Neither of the two is the figure written in the deed.

• Acquisition value (article 35.1): the real amount you paid for it, plus investments and improvements, plus the costs and taxes inherent to the purchase that you paid yourself, interest excluded. From that total, depreciation is subtracted, and article 40.1 of the IRPF Regulation requires «en todo caso la amortización mínima», the minimum depreciation in every case, to be counted whether or not you ever deducted it: if you had the flat let out, your acquisition value goes down even if you never deducted a thing.
• Transfer value (article 35.2): the real amount of the sale, less the costs and taxes of that same nature that you have paid. If the price in the deed is below the normal market price, the market price prevails: putting a lower figure in the deed does not lower the tax and it does open the door to a review.
• If the property came to you by inheritance or gift, the values come from the rules of the Impuesto sobre Sucesiones y Donaciones, Spain's inheritance and gift tax, without exceeding market value (article 36).

The gain is taxed at a tipo (rate) of 19%, wherever you live (article 25.1.f).3.º). This is the one place in the whole operation where a British, Swiss, American or Russian owner can relax. The split between 19% and 24% in article 25.1.a), the one that moved residents of the United Kingdom from 19% to 24% when the country stopped being a Member State of the European Union in 2021, is the rate for renta imputada (the income Spain presumes an empty urban property produces) and for rent when you live outside the EU. It is not the rate on the sale. Applying the 24% to a sale inflates the tax by a quarter. And no reduction of any kind fits in a non-resident's base (article 24.1).

One relic of the past survives: the coeficientes de abatimiento, the tapering coefficients of the ninth transitional provision of the IRPF Law, which the first transitional provision of the IRNR Law extends to non-resident individuals. If you bought before 31 December 1994, the gain is reduced by 11.11% for each year of ownership at 31 December 1996 beyond the first two, and it falls out of charge altogether if that ownership period is over ten years. With two cutbacks: it only reaches the part generated before 20 January 2006, apportioned by days, and it lapses once the transfer value accumulated with tapering since 1 January 2015 reaches €400,000.

How the circle closes: a refund, or the difference to pay

Article 14.4 of the IRNR Regulation closes the loop: the non-resident taxpayer «deberá declarar, e ingresar en su caso, el impuesto definitivo, compensando en la cuota el importe retenido», must declare and, where applicable, pay in the definitive tax, offsetting the amount withheld against it, within three months counted from the end of the period the buyer had for paying the withholding in. One month for him and three more months for you: about four months from the signing. Your deadline does not run from the deed, and getting that wrong by one month turns a refund into a recargo (the surcharge for filing late). The sale is declared on the modelo 210 itself, with the income type code for transfers that applies (28, 33 or 34), and not with the one for imputed income.

The same flat, with two different sale prices, produces the two possible endings:

The right-hand column is the more frequent case and the worst handled: because the 3% is worked out on the price and the tax on the gain, the less you make the more of the withholding is left over. That refund does not arrive on its own: you ask for it by filing the self-assessment (article 16.1 of the Regulation) and the Administration pays out the excess «previas las comprobaciones que sean necesarias», after whatever checks are necessary. If you never ask, the right lapses after four years (article 66 of the General Tax Law). And if you file late without a prior demand, the surcharge in article 27.2 is 1% plus another 1% for each full month of delay, and 15% once twelve months have passed.

The reinvestment relief on a main home, EU and EEA only

It is the only exemption with real reach, and it has strict borders. The seventh additional provision of the IRNR Law allows the gain on the transfer of what was your main home in Spain to be left out of charge, provided you reinvest the full amount obtained in acquiring a new main home. If you reinvest less, only the proportional part of the gain matching what you reinvested is exempt.

• Only if you are resident in a Member State of the European Union, or in a State of the European Economic Area with an effective exchange of tax information (paragraphs 1 and 4). This is the border that hurts most outside the EU: someone resident in the United Kingdom, Switzerland, Russia or the United States does not have this relief. British owners had it while the United Kingdom was a Member State, and residents there no longer do.
• Main home in the sense of article 41 bis of the IRPF Regulation: lived in for a continuous period of at least three years, and actually and permanently occupied within the twelve months following the purchase or the end of the building works.
• Two years to put the reinvestment into effect, before or after the sale (article 41.3 of the IRPF Regulation, to which the additional provision refers through article 38 of the IRPF Law).

The point that surprises everyone is in paragraph 3: the exemption does not remove the 3% withholding, nor the obligation to file. If the reinvestment has already taken place before the date on which you have to file, it is taken into account in working out the debt; if you do it afterwards, you file first and claim the refund later, within the three-month period set by the second additional provision of the IRNR Regulation.

There is a second exemption, far narrower: the fourth additional provision of the IRNR Law leaves 50% of the gain exempt on urban property acquired between the entry into force of Royal Decree-Law 18/2012 and 31 December 2012. It is a closed historical window. And one mirage worth ruling out early: the exemption in article 14.1.c) for residents in the EU covers gains on movable property, and it expressly excludes real property and entities whose assets are mainly Spanish real estate.

Plusvalía municipal: the buyer pays it if you are a non-resident individual

The tax on the increase in the value of urban land sits in articles 104 to 110 of the Local Finances Law. It taxes the increase in the value of the land, not of the flat: in a block of flats the land is isolated by applying the proportion that the valor catastral of the land (the valor catastral is the value the Catastro, Spain's official property register for tax purposes, assigns to each property) represents within the total valor catastral (article 104.5), and that proportion is applied to both figures, purchase and sale. Comparing the full prices in the two deeds is the most repeated calculation error there is.

If there was no increase in value there is no charge, but that does not operate by itself: you have to declare the transfer and produce the deeds of acquisition and of transfer (article 104.5), taking the higher of the value in the deed and the value checked by the Administration. The coefficients in article 107.4 are legal maximums updated every year; what actually applies is the one in your municipality's ordenanza (the town hall's own by-law), and the tax rate cannot exceed 30% (article 108.1).

And here is the point that changes the negotiation of the sale. In a sale for consideration the taxpayer is the transferor (article 106.1.b)), but where the transferor is a non-resident individual the buyer becomes the sujeto pasivo sustituto del contribuyente, the substitute taxpayer (article 106.2): the buyer pays, and it is the buyer who has to report the transaction to the town hall within thirty working days (articles 110.2.a) and 110.6.b)). The notario, for his part, expressly warns of that deadline at the signing (article 110.7). One knock-on effect in your IRNR: the plusvalía municipal only reduces your gain if you were the one who paid it (article 35.2 of the IRPF Law), so who actually pays it changes the base of your own tax.

The paperwork you need ready before you sign

Everything that reduces your gain has to be documented on the day the tax office asks for it, and the time to gather it is before the signing, not four months later.

• The purchase deed. It fixes the real acquisition amount of article 35.1.a). If the property came to you by inheritance or gift, the document that governs is the inheritance and gift tax assessment, because the values come from its rules (article 36).
• The receipts for the costs and taxes of the purchase: ITP or IVA (Spanish VAT), notary, land registry and gestoría (the administrative agency that handles filings for you in Spain). They add to the acquisition value, with one express exclusion in article 35.1.b): interest does not.
• The invoices for the works. Article 35.1.b) admits «el coste de las inversiones y mejoras», the cost of investments and improvements, and the one who has to prove that cost is you: you need complete invoices, in your name and describing the work done. A quote or a lone bank transfer supports nothing.
• The selling costs you pay yourself, such as the estate agent's commission or the certificates: they come off the transfer value (article 35.2).
• The IBI receipts for the years the property was yours. The IBI (Impuesto sobre Bienes Inmuebles) is the annual property tax the town hall charges, and its receipt is where you read the valor catastral you need for the renta imputada, including the one for the year of the sale itself.
• The certificado de residencia fiscal (tax residence certificate) from your own country, if you are going to invoke a convenio de doble imposición (a double taxation treaty). Article 7.1 of the IRNR Regulation requires it to be attached to the return, and some treaties additionally require it to say expressly that you are resident «for the purposes of the Convention»: a generic certificate can be rejected. Ask your own tax authority for it well ahead of the signing, because it is not a document you can improvise on the day.

Keep all of it for at least four years: that is the limitation period in article 66 of the General Tax Law and it runs in both directions, the tax office's to review you and yours to claim the refund. And if you live outside the European Union, bear in mind that the Administration can require you to appoint a representante fiscal (a fiscal representative) in Spain simply because you own a property here (article 10.1 of the IRNR Law).

The four mistakes that cost the most money

• Believing that the 3% is the final tax. It is not: article 25.2 calls it a «pago a cuenta», a payment on account. With a large gain you fall short and you will have to pay in the difference; with a small gain, or a loss, you have money left over withheld that nobody is going to give back on their own initiative.
• Not claiming the refund, and losing it. The excess is claimed by filing the self-assessment (article 16.1 of the IRNR Regulation), and the right to claim it lapses after four years (article 66 of the General Tax Law). It is the quietest way there is of giving away thousands of euros.
• Forgetting the renta imputada for the year of the sale. The days on which the property was yours generate imputed income apportioned by days, and that is another return, with its own deadline and its own calculation at 1.1% or 2% of the valor catastral. We cover it in full in the modelo 210 guide, and if you also had it let out, in the guide on renting out a property as a non-resident.
• Not keeping the purchase paperwork. With no deed, no invoices for the refurbishment and no receipts for ITP, notary and land registry, your acquisition value drops back to the bare price and your gain inflates all by itself. These are papers from twenty years ago that you need exactly when they can no longer be recovered.

One warning in the interest of honesty: the sale is not covered by kontora's service today. What we do cover is the renta imputada of a property that is not let out, which is the mass case and the one with a closed calculation. A sale drags in the withholding, the plusvalía municipal, values that have to be rebuilt from old paperwork and, sometimes, a treaty as well: for that, the sensible thing is to sit down with a gestor (a Spanish tax agent) before you sign, not afterwards.

File your own modelo 210 for €19.95 + IVA. kontora works out the tax and prepares the completed form; you do the filing. How it works · tell me when it opens.

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