- By AOB Abogados
We will all agree that buying a dwelling is not on the agenda for most, but the truth is that it is clear that the sales of flats and / or houses for housing are constantly increasing, which makes it essential that both parties, buyer and seller, really know which expenses they face, in their broadest extent, whether they are direct purchase/sale expenses or indirect costs, such as notary, registry and other expenses.
That is why, next and in the most methodical way I will proceed to analyse the economic cost of buying or selling a house nowadays in Spain, since this decision is one of the most important economic decisions that can be taken throughout our lives and it is not advisable to leave loose ends and find surprises afterwards.
At the beginning, I will start by analysing the impact on the seller, the taxes that must be paid and whether or not expenses can be deducted at the time of reducing the capital gain obtained from the sale of the house; and then we’ll go on with the economic effects of the purchase for the buyer, making the appropriate distinction depending on whether the home acquired is new construction or has already been the result of previous transmissions.
a) SELLERS TAXES
The owners who want to sell their home, which are not few today taking into account the situation in which we are, are subject to certain taxes. In case that either buyer or seller do not have their residence in Spain, we recommend you reading our post about “The sale of a home in Spain when the buyer or seller is a non-resident person or a foreigner".
1. Tax on the increase in the value of land of an urban nature (Goodwill).
The reason that we sellers have to pay for this concept is the increase in the value experienced in the urban nature since its purchase and until the time of sale, increase in value due to extrinsic circumstances and independent of any improvement made in the property. It is a municipal tax, so the calculation rules will depend on the coefficients that each municipality applies to them. Notwithstanding the foregoing, the known Constitutional Court Judgments of 2017 have declared that they are operations not subject to tax when there is no increase in land value. Therefore, and a priori, if it is possible to demonstrate that there has not been an increase in the value of the land between the purchase and the sale (sale at a loss), it could be argued that the tax is not payable in such cases.
2. Personal Income Tax (IRPF).
The owners who sell a real estate property are subject to taxation for the Income Tax of the Individuals or, if they are not residents of the Spanish territory, to the income tax of non-residents. At this point does not deserve to consider the taxation of legal entities for the Corporation Tax, as you have already noticed, the focus of this article is the sale of a home, not a real estate asset in general terms.
Thus, in the case of an owner who sells their dwelling, in the event that the income obtained from that sale is reinvested in the acquisition of a new home, this would not exempt you paying taxes, but would involve tax rebates.
Likewise, it is exempted from taxation for the sale of a habitual residence in the following cases:
a) When the sale of the habitual residence is carried out by persons over 65 years of age or by persons in a situation of great dependence,
b) Provided that the total amount obtained from the sale is reinvested in the acquisition of a new habitual residence, everything that must happen within a period of two years, since one is sold and the other is purchased or the other way round.
By the way, it is worth remembering at this point that there are tax deductions derived from the sale of the habitual residence; that is, that in the declaration of the rent the seller will be able to deduct the investments and expenses caused with the purchase: notary expenses, real estate agent as well as those caused by the taxation for the municipal capital gain, expenses that are all deductible for calculate the profit that must be declared and, ultimately, decide the amount to be paid as income tax.
Finally and in order to clarify an issue that raises many doubts in practice is what role have the bank interest derived from a loan. Are they not a deductible expense? Well, I am afraid to say that they are not -bank interest are not deductible expenses or the sale value, nor does it increase the acquisition value.
b) BUYERS TAXES
As I have advanced in previous lines, and how is that there are different taxes to which you can be subject depending on whether the home you have purchased is new work or first transmission or, on the contrary, is second transmission or second hand, colloquially speaking; It is convenient to make a differentiated analysis of the obligations derived from the purchase of a home.
A) NEW HOUSING
1. Value Added Tax (VAT): VAT must be paid by the buyer who buys a newly built house, and its general tax rate is 10% of the deed amount, while if it is an Official Protection House Taxation is reduced to 4% of the deed amount. Finally, take into account that in the case where the home is transmitted together with a garage and / or storage room (with a maximum of two annexes), the same tax rate will apply to that annex to which it is subject. the House; although for the rest of cases the general rate will apply. Commercial premises are not considered annexes in any case, although they are transmitted jointly with the buildings or part of them are destined to housing.
2. Transfer Tax and Documented Legal Acts (ITPAJD), in the form of Documented Legal Acts: The formalization in notarial document of the contract of sale, that is to say its elevation to a public deed is subject to the Tax on Patrimonial Transmissions and Documented Legal Acts in the form of Documented Legal Acts. In this sense, the houses of official protection are exempt from the payment of said tax, although the rest will pay between 0.75 and 2% of the deed amount, depending on the autonomous community in which the dwelling is located. In this context add that the autonomous communities usually provide bonuses if the acquisition value does not exceed a certain amount of money and make it young people under 35 years old.
B) SECOND TRANSMISSION HOUSING
1. Capital Transfer Tax and Documented Legal Acts (ITPAJD), in the form of Property Transfers Onerous to this tax is the acquisition of second or subsequent transmissions. In this case the buyer does not have to pay the VAT but this tax in the modality of Onerous Transmissions. The applicable rate will depend on the Autonomous Community in which the dwelling is located, and normally ranges between 6 and 10% of the deed amount; being that as planned for the acquisitions of new housing, the autonomous communities usually provide bonuses if the acquisition value does not exceed a certain amount of money and made by young people under 35 years old. In Catalonia, currently taxed at 10%,
In both cases, whether it is the acquisition of new housing as a second transfer, the buyer must also pay for ITPAJD in the form of Onerous Transfers in the case in which financing is contracted for the acquisition of a home. That is to say, that the taxable event here is not the sale but the constitution of a loan, an operation that is also subject to this tax.
c) COMMON CONSIDERATIONS FOR SELLER AND BUYER
It is essential that at the time of the deed of sale the seller has proven to be up to date with payment of both the Real Property Tax (hereinafter IBI) and the community expenses, as the case may be; everything you must prove by providing a certificate in the terms referred to as well as the bank receipts justifying the said end. All this will allow the buyer to be certain that there are no unpaid receipts or pending payments from the community.
Said the previous thing, to the purchase of a house it is necessary to add other INDIRECT EXPENSES to him like expenses of valuation, notarial, registry, as well as those of management:
- Home Appraisal Expenses: In the event that a mortgage loan is sought, the property must be valued by a Valuation Company, and the cost thereof varies according to the value of the home. Currently there are jurisprudence numbers that are giving the reason to consumers and obliges all, at least 50%, to pay the costs of appraisal, agency and notary and registration relating to the writing of the mortgage loan (not those of the deed of sale). If you are interested in going deeper into this point, we recommend you read our post for "The claim for the expenses of mortgage formalization. A new battle against banking?"
- Notary expenses: Notwithstanding the foregoing, the deed of sale must be paid by the buyer. They are set by tariffs, which are approved by the Government by Royal Decree. These expenses are also borne by the buyer.
- Property Registration Expenses: These are the registration fees for the purchase and sale of the property in the Property Registry, and they vary according to the price of the sale, although they are also regulated. The one obligated to pay is the buyer; except for the cancellation expenses of any registration charges, which correspond to the seller.
- Management Expenses: Its importance is paramount, because the agency or manager in question is the one that assumes the execution of the relevant registration and tax procedures (processing and presentation before the different offices). The intervention of an agency will be precise both for the buyer and for the seller, separately, with which both will have to assume the costs that this may entail depending on the intervention that one and the other has to perform.
- Other possible expenses: Consideration must also be given to the expenses involved in obtaining the certificate of occupancy as well as the certificate of energy efficiency, essential documents for the successful completion of the sale and which must be assumed by the seller.
Finally, point out that what we have explained here does not apply to mortis causa acquisitions (that is, because of the death of another and because of the succession), nor inter vivos free acquisitions (donation), nor in the event of a dissolution of the condominium. These subjects, as they endow themselves with characteristic and differentiated characteristics, I reserve the right to expand on them in future articles.
In any case, buying or selling a dwelling is not a precisely simple operation, as it is to see, and one should seek advice from a good real estate agent, and at the same time comprehensive legal advice.
Do you have more questions? Need our lawyers to draw a contract of deposit or advise you throughout the process of buying a home? Contact us for visiting our office or use any of the online legal services we offer on our website.