Withholding of tax by the buyer of Real Estate
The buyer of Real Estate whether or not he is a resident, must withhold and deposit in the Treasury an amount of 3% of the price agreed to. This withholding will be a down-payment for the buyer
Therefore, the purchaser must provide the nonresident seller with a copy of form 211 (used to pay the withholding), so that the seller may deduct this withholding from the tax arising from the capital gain. If the amount withheld is higher than the tax liability, the seller is entitled to a refund of the difference.
• Deadline: 1 month after the date of transfer of the real estate.
• Form: 211.
Refund of excess withholding
In the case of capital losses or when the withholding is higher than the tax due, the excess over the tax liability will be refunded
• Form 212.
The refund is made by bank transfer to the account provided in the form
Example:
Mr G.K., resident in UK, bought a villa apartment in Gandía on 1 January 1991 for 100,000 Euro and the villa has never been rented.
On 11 February 2007 he sold the villa for 200,000 Euro.
In the other hand, Mr J.M.F., the buyer, withheld a quantity of 6,000 Euro 3%
• Transfer value: 200.000 Euro.
• Updated acquisition value (2):
100,000 x 1.2162 = 121,620 Euro.
• Capital gain: 78,380 Euro.
Application of the transient regime:
• No. days between the dates of purchase and sale: 5.845 days
• No. days elapsed between the dates of purchase and 19/01/2006: 5.498 days
• Part of gains susceptible of reduction (3): 73.726,82 euros.
• No. years of ownership to 31/12/1996: 6 years.
• Reduction by abatement coefficients (4): 32,764.20 Euro.
Reduced capital gain (5): 45,615.80 Euro.
(1) Expenses and taxes inherent in the purchase and transfer have not been taken into account,
(2) This updating coefficient of the acquisition value may establish each year by provisions of 60 of the National Budget Act
(3) (5,498 / 5,845) x 78,380 = 73,726.82 Euro.
(4) 73,726.82 x 11.11% x 4 = 32,764.20 Euro.
(5) 78,380 – 32,764.20 = 45,615.80 Euro.
Tax rate 18%
Tax payable 8,210.84 Euro
Withholding 3% 6,000.00 Euro
Differential charge (8,210.84 - 6,000.00) 2,210.84 Euro |
