One of the strange things that always seems to confuse people is that at Valencia Property we work for the buyer. Our role of the buyer’s agent isn’t understood completely by everyone outside of the United States but we have built a business based on that model over the last twenty years and it is starting to be understood here too. However, that doesn’t mean our advice is limited to what we explain to our clients, the buyers, at times we have to advise the sellers on what they need to do, get prepared for and finally pay when they sell. So just in case you are a seller, in this article we are going to look at your responsibilities, what you need to provide and what you need to pay when selling your house in Valencia or Spain.
The Sale Process
We have written about the process of buying a property previously on this blog. You can see the article here. Obviously this is also applicable to sellers but basically, somebody makes an offer to buy your property, you accept it and then the buyer places a deposit payment, usually 10% of the price of the property, which forms part of the whole final payment. If you pull out of the sale then you have to return double that money back (But in this article we assume that isn’t going to happen)
As a seller it’s best to have all your paperwork ready because the selling agent and the lawyer of the buyer will ask you for it. Don’t be surprised that you can’t just put something on the market, accept an offer and get the money (Although many sellers insist that’s all there is to it). You will need to supply some or all of the following.
- Copy of the deeds
- Copy of registry details (Nota Simple and/or Catastral details)
- Certificate from the community showing payments are up to date
- Proof of last four years of payments for council tax
- Latest utility bills
- Any licences for building work that has been done (In the case of houses)
- Details of bank for working out mortgage settlement figure (In cases where there is a mortgage on the property)
- Energy Certificate
- Habitability Certificate
- Name of fiscal representative in Spain (For non-resident sellers)
Payments on Sale
Let’s take a typical example of a house that has been sold for 250k. On the day of the signing you get a banker’s draft for 250k minus the previously mentioned deposit payment right? Well, usually that isn’t the case. There are retentions, taxes and more applied to that amount so you need to be aware how much you may have to pay. And these amounts will also depend on your situation as a resident or non resident too.
Notary, Registry and Gestor Costs
The seller pays 65% of the Notary costs of a sale. On our notional sale of 250k the notarial costs are around 1000 euros, so 65% of that. The registry costs would be around 461 Euros and the gestor would charge around 300 Euros. You will need to pay these costs to the notary on the day of the sale and they can be paid by card or cash.
Some money may be kept back for a couple of reasons. If there are any outstanding payments to be made to the local council for the last four years of Council Tax then some money should be kept back by the buyer. Equally if you have a mortgage then the bank may be receiving a bank draft of 100k to pay off your mortgage for example. Remember though that around 1000 Euros extra may be held back for the cancellation of the mortgage in the property registry.
Also you will be liable for the Plusvalia Municipal, mentioned below. Often that money is kept back and the buyer pays it to make sure that it gets done. This is especially true when the seller is a non-resident of Spain and might not be in the country in the following 30 days to pay the tax.
The good news for sellers is that if you are organised and you have paid your taxes up to date, you don’t have a mortgage on the property and you are a resident of Spain (See more below) then there won’t be any retentions made on the amount you receive on the day of the sale.
There are two main taxes to pay, a local tax called the “plusvalia municipal” and the capital gains tax on any profit made (In the case of principal residences without reinvestment for people not of pensionable age – Yes there are exceptions).
As mentioned above the plusvalia municipal may be kept back to be paid by the buyer on behalf of the seller via the Notary. This amount varies from a few hundred Euros to many thousands. It is constantly under review and the cause of many court battes between town halls and individual taxpayers so if you are selling ask us about your particular situation and we will give you advice.
The main issue and cost facing many sellers, especially at the moment as prices have risen, is the capital gains tax. If you buy for a low price and sell for a higher price then you have a capital gains tax to pay. The amounts for capital gains tax are below:
- Up to 6,000 Euros 19%
- 6-50,000 Euros 21%
- 50-200,000 Euros 23%
- Over 200,000 Euros 26%
As an example if you bought a place for 60k and sold it for 140k you haven’t got 80K capital gain because you add taxes paid and other costs such as notary and registry on purchase to the price paid and deduct costs of sale. Therefore the capital gain might be 70k. In this case you would pay 1140 Euros on the first 6k of capital gain, 9240 Euros on the amount up to 50k and 4600 Euros on the part from 50-70k giving a grand total of 14980 Euros or 21.4% of the whole amount**.
You have 30 days post sale to pay this to the tax office. If you don’t then they will fine you. The notary may offer to make this payment for you and they will give you their account to deposit the money into so they can act on your behalf.
**Remember that there are exceptions to these rules, resident pensioners, people buying another primary residency and others such as “familias numerosas” either don’t pay or have tax benefits and each autonomous community may have different tax bands on purchase and sale so it’s always best to ask.
However, if you are a non resident then on sale the Notary and Buyer are obliged to keep back 3% of the sale price to pay potential capital gains. The tax office has estimated the amount that non-residents need to pay to be this 3% average but not everyone is average, so if your particular case is that you should pay less as a non-resident, maybe you lost money on the sale, then you can claim this 3% back from the tax office. It takes around 9 months to get it back.
If you are liable to pay more then the tax office will send out a second bill to complement this retained 3%, eg, if the 3% retention is on our hypothetical 250k sale then the buyer and notary keep back 7500 Euros. If you have a large capital gain such as the 70k example above then you would have a tax bill of 14980 Euros (The tax office definitely won’t take nine months to charge you this!). Effectively you have already paid the 7500 Euros so you would get a complementary bill of 7480 Euros to pay. Previously this was if the tax office can find you as a non-resident living elsewhere. Now though, since the 1st of January 2022, on the day of the sale you will need to name a fiscal representative in Spain who the tax office will contact to notify you of your tax responsibilities, in other words you cannot just skip the country and cross your fingers any more. (Generally think that if you ever want to come back to Spain, even on holiday, then pay it ;-)) The tentacles of the tax office are long even in non EU states by the way.
If selling through an agency they will generally be charging you 3% of sale in Valencia and up to 6% in other areas of Spain. Most agents will wait for the payment until you have been paid for the property but some request payment beforehand and sometimes hold the deposit and take it from there (They shouldn’t as this is relatively illegal ;-)). It’s at this point that we often see arguments in the notary.
And that’s it. Not too painful was it? If you are organised then it’s relatively easy to get the papers together and make any payments required on sale. Some town halls are easier than others to deal with when looking to find out how much the Plusvalia Municipal will be and the tax office is pretty efficient too. Prior to the sale the paper that most owners find most difficult to supply is the Habitability Certificate as it only became obligatory this year and most people aren’t aware of it and haven’t got it (Sometimes it can be replaced if difficult to get because of the appointment situation at the local town hall with a “Declaración de Responsable”) Secondly, the energy certificate is just something that slips their mind at times but again this is pretty quickly solved. You can prove four years of payments of IBI with bank receipts if you don’t have the actual bills as visits to the town hall have become more difficult post covid.
Make Sure To Enter Our Summer Quiz
Last week we introduced our summer quiz for which we will be awarding the prize before the end of this month. We have already had a few fully correct entries but that means your chances of winning our rather excellent prize are still high. You’ve gotta be in it to win it. Give it a go and send your answers in.
Property of the Week
Country Life and lots of space…………but not miles out the way……. a common request from clients and generally hard to come by, more often than not “House with character on Big Plot” usually translates as “Ancient Ruin in the Back of Beyond” but here’s a nice looking villa that wouldn’t look out of place in a magazine on a massive piece of land and just 2km from Betera, so trips into town and school runs won’t take up most of the day.
This excellent property has embraced its location and the owners have gone full on rustic charm with wall to wall wood panels but fear not, its actually made of bricks and mortar and very solid it is too. So aside from the 2 storey main build of 4 Bedrooms, 4 Bathrooms, spacious living room with chimney, large kitchen, utility room and study there is also a good sized landscaped garden with pool, pond and paellero, then the huge 10,000M2 plot you would probably put some horses or livestock on with a garage space for tools and tinkering then one of those bars that were all the rage a couple of years ago, because lets face it, who didnt dream of building a pub in the back garden during the first outbreak of Covid?
Anyway, I’m not sure if this qualifies for Valencia’s smallest pub but it must be close and the only thing missing here is some bar stools, your favourite tipple on draught and some friends with comical nicknames. It’s time to live that dream…… Take a look at all of the photos here.
You want more right?
Then just click on the images below for more of our previous posts that give you the ultimate guide to buying property in and around Valencia.