Also in Spain a complete collection of property documents is the basic condition for a smooth sale. Compared to the past, numerous things have changed in the analysis and processing of real estate transactions. This is partly driven by new laws but also simply by stricter execution and control of formerly less considered, existing regulations. A certificate of habitability (“Cedula de Habitabilidad”) was given only little attention in the past. Nowadays, for example, the application of a new holiday rental license without it is no longer possible.
Make sure you have (digital) copies of the following documents at hand:
- Notarial title deed
- Land register excerpt
- Building permit(s) (“Licencia”) and approvals (“Final de Obra”)
- Proof of payment of property tax (IBI)
- “Cedula de Habitabilidad” or Certificate of habitability
- If applicable: Water supply contracts (alternatively well permit), electricity
- Energy certificate
- Inventory list if defined furnishings are also sold
EVALUATION OF THE TAX CONSEQUENCES WITH YOUR TAX ADVISOR*
*Please note: The following contents are only intended to give you a rough overview of the tax implications of the sale of a Mallorca property and can under no circumstances replace consulting services by an expert.
The tax consideration is probably one of the most important points in a real estate transaction, but an amazing number of sellers hardly pays timely attention to it. The reasons are different. Usually, however, the consultation of a tax consultant is ignored due to excessive fee expectations. In our opinion, qualified tax and legal advice from experts is indispensable, especially since the costs are comparatively low compared to the associated tax risks.
The profit from the sale of a property owned by a non-resident with limited tax liability is taxable in Spain. The profit is calculated from the difference between the purchase price and the sales proceeds. Ancillary acquisition costs, brokerage fees, value-increasing investments in the property, accumulated depreciation (if applicable) and other factors are to be added to the purchase price and thus reduce the profit. However, these costs can only be taken into account if they are supported by proper invoices. At this stage some owner have to pay the price for investments “without” invoices, because on the profit determined in such a way the tax amounts to 19%. Besides there is no speculation period, after whose expiration a profit would be tax-free.
A non-resident must submit the declaration of the capital gain, if higher than the withheld three percent retention (down payment for the tax to be paid on the capital gain, calculated from the selling price), within four months after notarization of the sales contract and pay any outstanding amount.
If the seller is older than 65 years and the property sold has served as the main residence for the last two years, exceptions apply. Also for the case that the sales proceeds are invested within two years in a new main residence (also outside Spain). Your tax advisor will advise you on the options available.
Residents declare the profit from the sale as part of their income tax return. The tax rate for residents is also 19%. Exceptions for sellers aged 65 and over and in connection with the reinvestment of the sales proceeds also exist here.
The tax situation in the home country using Germany as an example
Gains on sales in Spain are in principle also subject to domestic tax, with the tax paid in Spain being credited. As a rule, however, the sales profit in Germany is not taxable, namely whenever the Mallorca property was only used for own residential purposes. If one sells the Mallorca property after a holding period of 10 years, the sales proceeds are not taxable in any case in Germany. We also recommend to discuss this matter with your tax adviser.
Increase in value tax (Plusvalía)
In addition to the profit tax, a seller owes the so-called Plusvalía, which is levied by the municipalities. However, it only taxes the increase in value of land since the last notarisation process. The basis for assessment is the cadastral value of the land, the duration of ownership and the calculation factor of the respective municipality. Plusvalía’s tax liability must be paid to the tax office within 30 days by way of a self-assessment.
*As of August 2019, subject to change and error.
- Comparable to a job interview, the first impression is also very important in the sale of a property. When our photographer visits you, he will be dedicated to presenting your home from its best side. Help him to do this and remove disturbing or very personal items in time. Only a well-groomed property can appeal to potential buyers. Of course, this also applies to the condition during inspections.
- In a conversation with your agency, point out the advantages and special features, but also any defects of your property. Open and honest communication is the basis for a successful sale. Especially non-obvious, legal deficiencies would hardly remain undiscovered nowadays in the course of an examination by an experienced lawyer. The associated loss of trust towards interested parties is irretrievable and will in most cases probably lead to the termination of the talks. Better therefore already in the Vorhinein inform about it. Quite a few situations can be solved by consulting an architect or a lawyer. Others, on the other hand, are also accepted by buyers, as long as they are fairly informed.
- Consider, gladly also together with us, which measures can be taken quickly and without larger cost expenditure to the value increase of your property.
- Revision of the technical facilities by the respective craftsmen of your confidence.
- Renew the certificate of habitability (“Cedula de Habitabilidad”) in due course.
- Get legal assistance from an experienced local lawyer. For good reason, there is hardly a buyer without legal advice these days. Don’t save money in the wrong place.
Our services for you
- Determination of the sales price in line with the market environment, taking into account all value-determining factors
- Creation of professional photos by a photographer
- Development of a tailor-made sales strategy with a focus on buyers from Switzerland, Austria, Germany, the United Kingdom and Scandinavia
- Creation of an appealing sales exposé
- Active approach of registered prospective customers from our customer base
- Placement in high-frequency, qualitative online portals
- Selection of interested parties and execution of inspections
- Contacts to lawyers and architects in case of need (e.g. for the legalization of buildings or parts of buildings)
- Contacts to tax consultants