Costs of selling property in Spain explained: taxes and hidden costs you need to know

How much will the seller spend then? Let's find out.

The most important tax on the sale of real estate in Spain, which falls on the shoulders of the seller, is a land appreciation tax, or Plusvalía. This tax is one of the most controversial in today's Spain since this duty is essentially a percentage of the difference in price that was originally paid for the land where the property is built on and the sale price.

• The cadastral value of the land on which the property is located. It can be found in the latest receipt for IBI tax payment or directly in the cadastral office (Catastro).
• The period that this property is owned by the seller, starting with the date of purchase and ending with the date of sale.
• The tax rate, which depends on where the property is located, since each municipality in Spain has its own tax rate. This information can be found on the official website of the municipality or at the mayor's office. The maximum rate, in this case, is approximately 30%.
• The growth rate or tax on revaluation. These two components of the settlement base of the land appreciation tax also depend on where the real estate is located. This information can be obtained from the city hall or cadastral service. The maximum is approximately 3.5%.

Thus, the final formula of Plusvalía is as follows:

From this, it follows that the longer the property is owned by you, the higher the tax base. However, here the state has established some limits, which states that the maximum period of ownership of real estate for calculating the tax cannot exceed 20 years, even if the property sold was owned for a longer period. That is, the tax will be the same if it has been 21 years or 50 years since you bought the house. If not a year has passed, you will not have to pay Plusvalía, although you do have to declare the tax.

Let's make a practical example for the calculation of Plusvalía. Imagine that you bought a house 10 years ago. The cadastral value of the land is € 200,000 (remember, that the purchase price is irrelevant). In accordance with your municipal ordinance, the annual growth ratio is 3.5% and the tax rate is 30%. Then the capital gains tax to be paid will be:

When selling the property, a tax is paid on the difference between the purchase price and the sale price. If you make a deal and sell a house more expensive than you bought, the tax is charged on this price difference.

Those, who bought the property before December 1986 are free from paying IRPF (both residents and non-residents).

If the capital gain is not confirmed, the seller should submit a petition in order to return the amount withheld. If this difference is higher, the seller must pay the difference to the tax authorities.

The seller has 3 months to claim a refund. Unfortunately, the wait for a refund can be around 1-2 years.

If you are going to continue your residency in Spain, you need to provide the contract for at least half a year rental or a contract that shows your purchase of another property in Spain. Then you or your lawyer will need to apply for the certificate to the tax office asking to be exempt to the retention.

Do not forget about the IBI tax. According to the law, it is the seller who pays this annual tax for the year in which the sale is concluded, that is, this council tax is paid by the person who was the nominal owner of real estate on January 1 of the current year. Thus, if you sell a property on December 1, 2017, it is the seller who pays IBI for 2017, and the new owner is responsible for paying this tax for 2018.

The annual property tax in Spain is set by the municipality and is calculated on the basis of the cadastral value as of January 1 of the reporting year. You should bear in mind that the cadastral value can be several times lower than the real one, therefore, on average, owners pay only about 200-800 euros per year. IBI ranges from 0.4 to 1.2 in various regions of Spain.

They usually do not charge a transfer fee and their exchange rate can save you a couple thousand euros. Keep in mind that the organization's activities you are about to give your money to should be regulated by the Financial Conduct Authorities: https://www.fca.org.uk/.

The seller should understand that the services of an agent are not free of charge. Therefore, one of the first questions that the seller should ask is the pricing of an agent's services, as well as, any other associated costs.

For an apartment, the price ranges from about €100 to €200, and for a villa, it can be €200 to €500. In case you fail to provide this certificate, you will receive a fine of €300 - €6,000.

Those, who are over 65 and have been residing in Spain legally for at least 3 years are free from paying capital gains tax in case of selling the primary residence.

In case you are going back to your country of origin, you should pay 3% retention on the price of the deal and with your following year's declaration, you can ask the tax office to refund this payment.

If you have not been paying taxes in Spain, but are able to prove that you earn less than 11,200 euros annually, then you are exempt from paying IRPF.

In order to skip this tax, you need to sign a life-long rent (renta vitalicia) and re-invest up to 240,000 euros. The amount of sum paid will be free of tax.

If the property, that you have planned to sell, was bought with a mortgage, you should make sure that the mortgage obligations are lifted from the Property Registry, even if everything is paid. All in all, mortgage cancellation fees involve costs of Notary's work and Property Registry fees. To do this, you will have to pay up to 1000 euros.

In case there are current mortgage obligations on the property you want to sell, you should cancel the mortgage. The bank will most likely take the cancellation fee. Usually, it is 0.5-1% of the total loan.

If you want your home to really appeal to the buyers, you should tidy it up. This includes, not only the decoration, but everything that needs to be repaired should be repaired.

In case you are selling a house without the furniture, you will need to pay for the loaders and transfer services. However, it is better to calculate in advance if it is profitable to take everything with you to a new place of residence, especially if you are moving far from the current home you are selling.

When people are going to rent or sell a house or apartment, they often ask themselves how to do it better. The best way is through direct contact or a real estate agency. Well then, we are going to break down both the advantages and the disadvantages of both options and see what each one consists of.

• If you decide to sell your house on your own, you will have greater profits by saving the percentage of commission that the real estate company carries.
• If you sell your house directly, you can do it your own way in terms of deciding where and how to promote it.
• You will have direct contact with the person who will buy your property. This can be a great advantage because it helps to avoid misunderstandings and if there are any, they are solved quickly. As a result, the negotiation of the contract will be faster.
• You know your house better than anyone. If your house has some positive feature to highlight, no matter how small it is, you will be the one that knows it best and can tell about it to possible buyers. Sometimes it is small details that make the purchase decision positive.