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Method of payment
Give some thought to your method of payment. One point to consider is whether you are buying from a resident or a non-resident.
In the old days before the European Union, property buyers had to pay Spaniards or residents in pesetas, and had to prove importation of foreign currency if they later wanted to export the money from Spain. With the lifting of exchange contro’s, this is no longer necessary, although a report must be made to the hank.
You can pay for your Spanish property in euros, through a hank cheque, from your Spanish bank, along with a bank certificate that you have imported foreign currency for this purpose. You can also pay by a cheque in foreign currency. You can also pay by direct transfer from your foreign bank to the seller’s foreign hank, so that no money enters Spain.
Certificate of non-residence
If you wish to keep the money transfer completely undocumented inside Spain, you can do this, hut you must then obtain a certificate of non-residence from the Spanish authorities. Be warned that this can take up to two months to obtain, and the Notary will not authorise the completion of the sale without it. If you file your bank certificate and use a normal cheque, this certificate is not necessary.
Five per cent tax deposit.
If you buy from a non-resident, you must deposit five per cent of the total purchase price with Hacienda in the seller’s name, as a guarantee on his taxes. A few sellers, who have owned their Spanish property for a long time, will be exempt from this deposit.
You pay the seller only 95 per cent of the price, and pay the other five per cent directly to Hacienda, presenting Form 211 to justify your payment. The Notary will want to see your copy of Form 211, showing that you have made the payment and filed the form with the Tax Agency.
This amount serves as a guarantee against the non-resident seller’s Spanish capital gains tax liability and for his payment of the annual Spanish wealth tax and non-resident property owner’s imputed income tax.
Non-resident owners of Spanish property are required to declare two percent of the official rated value, the valorcatastral, of their property as if it were income. They then must pay real income tax on this imaginary income. The non-resident pays at a flat rate of 25 per cent. (See section on Taxes for more details).
If Hacienda discovers that the non-resident seller has failed to keep up his yearly imputed income tax payments, they can retain this amount from the deposit of 5 per cent.
Capital gains tax: The deposit is mainly designed, however, to cover the non-resident’s liability for Spain’s capital gains tax of 35 per cent on his profit. As of December 31, 1996, Spain ended the exemption from capital gains for those who owned their property more than 10 years.
This was replaced by an inflation correction factor that reduces the capital gains tax hut can never eliminate it completely, so most non-resident sellers will be liable for some Spanish capital gains tax.
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