The following Taxes need to be paid at the time of purchase:
Impuesro sobre el Valor Afiadido
•Impuesro sobre el Valor Afiadido (I. V.A.) Equivalent to V.A.T. and applied to the purchase of a new property, at the rate of 7% of the value of the property as declared in the Tide Deeds (Escritura).
Impuesto de Transmisiones Patrimonial
•Impuesto de Transmisiones Patrimonial (I. T.P.) Also refered to as Transfer Tax, this is applied instead of V.A.T L V.A. on the purchase of a second hand property. The current rate is 7% of the value as declared in the Tide Deeds.
ActosJurIdicos Documentados
•ActosJurIdicos Documentados (A.JD.) A docuthentadon tax, equivalent to Stamp Duty, currently at 1 % of the value as declared in the Tide Deeds.
Inipuesto sobre el Incremento del Valor de los Terrenos
•Inipuesto sobre el Incremento del Valor de los Terrenos (Plus Valia) Tax charged on the increase of the value of the land, at a percentage determined by the local tax authorities. Varies according to location, land size, and time since last transfer, and not always enforced by all Town Halls (Ajuntamiern’os), this tax applies to new and second hand property. While legally the responsibility of the vendor,it may be stipulated that the buyer meets the cost.
The following taxes are paid annually, the first two to the Spanish Tax Authorities, the third being a local tax:
Impuesto sobre el Patrimonlo
•Impuesto sobre el Patrimonlo (Wealth Tax) A non-resident in Spain for tax purposes has to make an annual tax return, showing the value of all his assets located in Spain on 31 December of the previous year, normally property, car, and bank account balance. This latter is the average cleared balance, and is automatically supplied by the bank. The tax rates are in bands, the basic rate of O.2% applying to assets valued up to 167,129 Euros.
Impuesto sobre la Renta
•Impuesto sobre la Renta (Income Tax) A non-resident in Spain for tax purposes has to make an annual declaration for income tax, concerning only the income derived from activities in Spain. Typically, interest on bank deposits, or money earned by the letting of property. If the property is not let, then a notional tax of O.5% of the catastral value, (the value placed on the property by the authorities, similar to Rateable Value) is charged. Where no catastral value has been assessed, then the value of the property is deemed to be 50% of the value in the Tide Deeds.
• Impuesto sobre Bienes Inmuebles (IBI. . .Property Tax) A municipal tax, calculated with reference to the catastral value of the property,and varying from area to area. Currently in Torrevieja the rate is O.8%.
On the sale of a property the seller becomes liable for the following taxes.
Capital Gains Tax
The rate charged depends on the status of the seller, whether resident or non resident, but all are liable, with only a few exceptions.
1 Residents over 65 years of age, seffing a property they have lived in for more than three years.
2. Owners who bought before 31st December, 1986.
3. Holders of “Usufructo”, where the owner has sold the property to a company in exchange for the lifetime right to inhabit the dweffing, along with a monthly payment.
4. Residents reinvesting all the proceeds of the sale of their home will get total relief pro rata, only if reinvesting some of the proceeds.
Residents pay a maximum of l8%, and their capital gains are calculated as part of their Spanish income tax. Non- residents pay a flat rate of 35%.
Buyers from non-resident sellers are required to withhold 5% of the total purchase price, and pay it directly to the Spanish Tax Agency, thereby ensuring that the seller does not take the money and run.
To calculate the profit (or gain) made on the sale, it is necessary to establish the actual purchase price together with the actual sale price.
To arrive at the actual purchase price, the following costs should be added to the value of the property as quoted in the seller’s Title Deeds
1. V.A.T. (I. VA) .. . .new property
2. Transmission Tax (LT.P.). . .resale property
3. Legal Fee
4. Notary
5. Land registry
To arrive at the actual sale price the following costs should be deducted from the agreed sale price
1. Legal Fee
2. Taxes
3. Improvements made to the property, on condition that official VAT receipts can be presented.
The profit made is then the difference between the actual purchase price and the actual sale price.
Plus VaIJa Please refer to the previous section regarding this tax.