No Capital Gains Tax For Non-residents When Selling Property In Spain

Ever since 1999, when the government of Spain modified the laws that govern the municipal capital gains tax, Spain’s non-residents have been exempted from having to declare this tax or pay it.

But what is this tax that we’re talking about? Capital gains tax is paid when a person is selling their property in Spain. And by law, non-residents no longer have to pay such taxes. Instead, they can transfer the complete sum to the buyer. 

But why does such a rule exist? Its reason can be traced back to the law that brought about this new rule. According to the explanatory memorandum of that law, there was no explanation given for the same. 

All that being said, there are some things you should keep in mind if you’re planning to buy a property in Spain from a non-resident owner. 

Who Must Pay Municipal Capital Gains Tax?

According to the above-mentioned law, the seller of the property is liable to pay the municipal capital gains tax.

However, if the seller isn’t a resident of the country, he is exempted from paying this tax, and instead, the buyer must pay the tax for the same.

Wherever the house is located, the buyer will take the responsibility of paying the tax to the local council if he buys the property from a non-resident.

Is There A Way To Claim The Tax From The Non Resident?

So, if as a buyer you have to pay the municipal capital gains tax, how can you claim the money from the non-resident who should have paid the tax if not for this law?

Well, you’ll be happy to know that there is a way to claim a refund of the tax from the non-resident. Spain’s General Tax Law allows you and any other buyer to demand a refund from their non-resident sellers.

But, we must warn you that it comes with its own complications. Since you’re claiming the tax refund from a person whose status is that of a non-resident, your claim automatically becomes a civil action. 

If the seller refuses to give you the demanded refund, you might have to take the matter to the court. Sounds extremely complicated, doesn’t it? Well, the best way to go about the situation is to deal with it even before you’ve bought the property.

Prevention is better than cure, as they say. So make sure you discuss the matters beforehand while preparing the deed of the sale of the property. You can sign an agreement with your seller about how they would like to pay the municipal capital gains tax. In this way, you can avoid future legal proceedings and headaches.

Can A Buyer Appeal The Tax In Spain?

While adding a clause allowing buyers to claim back the tax from the seller is a great start, there’s a catch you must keep in mind. 

This little agreement between the buyer and seller is only binding for the two parties involved – not for the tax authorities. In case your seller refuses to pay up the refund despite agreeing earlier, you can surely get into a legal battle with the seller – but since you’re the one who’s legally responsible for the property, you still need to pay the tax since you’re legally the substitute taxpayer.

If you don’t want to pay the tax, you do have the right to appeal the tax in Spain by means of reconsideration in front of the local council and in the economic-administrative proceedings.

In simpler words, yes, you can appeal to gain the municipal capital gains tax back if your non-resident seller doesn’t want to pay.