3% retention tax

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Miro
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Re: 3% retention tax

Postby Miro » Fri Sep 29, 2017 7:26 pm

I believe Capital Gains Tax is 19.5%
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El Cid
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Re: 3% retention tax

Postby El Cid » Fri Sep 29, 2017 8:26 pm

The gift tax rates are the same as the IHT rates. CGT is entirely different and go in bands of 19% 21% and 23%.

It’s more than 10 years since it was 35%

Sid

Miro
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Re: 3% retention tax

Postby Miro » Thu Oct 05, 2017 2:34 pm

I'm really not sure, and I did once ask at Hacienda and got varying answers the more people I asked - but from the info I have at hand, for non-residents at least (which this thread pertains to since it's about the 3% retention) since 2016 the CGT rate has actually been 19% (it was 19.5% between 2015-2016). But I could be wrong....
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mijasdavid
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Re: 3% retention tax

Postby mijasdavid » Sat Oct 21, 2017 10:23 am

I hope this isn't a daft question.
When you sell a property, the tax office wants to hang onto 3% - does your agent/solicitor retain this money or do they have to send it direct to the tax office?

Regards
David

Miro
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Re: 3% retention tax

Postby Miro » Sat Oct 21, 2017 12:15 pm

The buyer retains it, and must pay it to the tax office within 30 days, using form 211 to submit it. You, or your representative, need to get a copy of the stamped form and it's reference number, for when you submit your own tax return on form 210.
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mijasdavid
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Re: 3% retention tax

Postby mijasdavid » Sat Oct 21, 2017 12:31 pm

Am I missing something here? I thought that the seller was the one liable for the 3% retention - unless they are over 65.
How would the buyer be in control of this? I thought as a buyer you pay a seperate tax (linked to the purchase price) at the time of purchase.

Confused ...

Miro
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Re: 3% retention tax

Postby Miro » Sat Oct 21, 2017 12:36 pm

The buyer "retains" 3% of the purchase price, and submits it to the tax office. This is considered a payment on account in lieu of any potential capital gains tax the seller owes. It's done this way only with non-resident sellers, to make sure they don't just disappear overseas without paying their dues.
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mijasdavid
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Re: 3% retention tax

Postby mijasdavid » Sat Oct 21, 2017 12:49 pm

Thanks Miro, but I still don't quite follow this. I have just checked my records for when we bought our house and we had to pay 8% Property Tax on top of our purchase price. We never had to 'retain' 3% on behalf of the sellers.
Last edited by mijasdavid on Mon Oct 23, 2017 12:23 pm, edited 1 time in total.

Miro
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Re: 3% retention tax

Postby Miro » Sat Oct 21, 2017 1:06 pm

Your abagado probably arranged it. Do you have a record of who you made cheques payable to and for how much? Or perhaps you simply transferred all the money to your abagado? Either way, if the sellers were non residents there's no way the notary let them walk out with 100% of the sale price. It'll be mentioned in your escritura as well.
Don't worry about what people think, they don't do it very often

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mijasdavid
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Re: 3% retention tax

Postby mijasdavid » Sat Oct 21, 2017 1:39 pm

Hello again Miro,

I have a detailed account of the costs incurred by the Abagado.

His bill included the following items: Property Tax, IVA on legal fees, Notary fees, legal fees and Land Registry.

Regards

David
Last edited by mijasdavid on Mon Oct 23, 2017 12:24 pm, edited 2 times in total.

mijasdavid
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Re: 3% retention tax

Postby mijasdavid » Sat Oct 21, 2017 1:41 pm

P.S. They didn't walk away with 100% of house sale, they also had to pay their agent, notary and abagada fees.

Miro
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Re: 3% retention tax

Postby Miro » Sat Oct 21, 2017 1:54 pm

But you, or your abagado, provided a banker's cheque for the seller. This would have been for 97% of the full purchase price. The remaining 3% was paid directly to the tax office.
The other expenses you mentioned would have been down to the seller to pay from their proceeds, but not the 3% - that's why it's called a retention: it's retained before the seller gets it.
Don't worry about what people think, they don't do it very often

"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.

mijasdavid
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Re: 3% retention tax

Postby mijasdavid » Sat Oct 21, 2017 2:27 pm

There is something completely wrong here. The expenses I listed above were 'our expenses' not those of the seller. The abagado fee was for the work our abagado did, not the seller's. The property tax is payable by the purchasers, not the sellers. The Land Registry fee is payable by the buyer, so that it is registered in the 'buyer's name'.

Nobody issued a banker's cheque - people don't use them these days.

I'll phone my abagado on Monday.
Last edited by mijasdavid on Mon Oct 23, 2017 12:26 pm, edited 1 time in total.

Miro
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Re: 3% retention tax

Postby Miro » Sat Oct 21, 2017 2:58 pm

mijasdavid wrote:P.S. They didn't walk away with 100% of house sale, they also had to pay their agent, notary and abagada fees.


I was referring to these expenses that you mentioned (although it's true, the seller doesn't normally pay the notary anything).

mijasdavid wrote:When you sell a property, the tax office wants to hang onto 3% - does your agent/solicitor retain this money or do they have to send it direct to the tax office?


David, I can't really help you any more, perhaps someone else can explain it. I already answered your question: the seller retains the 3% and pays it to the tax office on the buyer's behalf.

In Spain, property transactions are almost always done with banker's drafts.
Don't worry about what people think, they don't do it very often

"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.

mijasdavid
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Re: 3% retention tax

Postby mijasdavid » Sat Oct 21, 2017 3:25 pm

No problem Miro.
Thanks for your time.
Last edited by mijasdavid on Mon Oct 23, 2017 12:21 pm, edited 1 time in total.

Miro
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Re: 3% retention tax

Postby Miro » Sat Oct 21, 2017 7:53 pm

David, I'm sorry if there's a misunderstanding; perhaps it's because I was watching the football and posting on a mobile at the time. :wink: I'll try one more time:

When you bought your property, let's say for example the purchase price was €100,000
In addition to this, you would have had to pay transmission tax at 8%: €8,000
Plus notary fees, land registry fees and any applicable IVA - let's say e.g., €1,000
Plus your lawyer's fee, let's say another €1,000

So you would have transferred €110,000 to your lawyer to complete the deal.

Out of that money, your lawyer would have paid the transmission tax, paid the notary, paid the land registry & kept his own fees. He would then have obtained a bankers' draft for €97,000 made out to the non-resident seller, and within 30 days of the sale paid the remaining €3,000 to the tax office. There would be no need for him to show this on your breakdown of expenses, since it came out of (was included in) the €100,000 purchase price; it was not an additional charge to you at all. You did not pay the seller's tax, it was deducted (retained) from the money he received - before he received it. It is almost certainly mentioned in the escritura. The notary would have included it, to ensure that the buyer (you/your lawyer) was legally bound to transfer the money to the tax office within the 30 day period.

To go back to your original question, "When you sell a property, the tax office wants to hang onto 3% - does your agent/solicitor retain this money or do they have to send it direct to the tax office?" The answer really is neither; it is the buyer (or their lawyer) who "hangs on" to it, who is legally bound to send it in to the tax office within 30 days. This money is then held on account against any capital gains tax owed by the seller.

We then get into the question of whether or not the seller can reclaim this retention, which is what this thread was originally about. That depends on whether the 3% was greater than the capital gains tax bill resulting from the sale or not.
And by the way, you mentioned over 65s, but that's irrelevant in this case because the exemption from CGT for over 65s only applies to residents anyway.

I hope that makes it a bit clearer. I can only apologise again if it's still not clear, but the answer to your question is there.
Don't worry about what people think, they don't do it very often

"Acquiring a dog may be the only opportunity a human ever has to choose a relative," Mordecai Siegal 1935-2010.

Alcala Barry
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Re: 3% retention tax

Postby Alcala Barry » Sun Oct 22, 2017 9:47 am

Mijas David
Good luck with your house sale.
Last edited by Alcala Barry on Sun Oct 22, 2017 2:40 pm, edited 1 time in total.

mijasdavid
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Re: 3% retention tax

Postby mijasdavid » Sun Oct 22, 2017 11:12 am

Alcala B
Thanks
Last edited by mijasdavid on Mon Oct 23, 2017 12:20 pm, edited 1 time in total.

Beachcomber
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Re: 3% retention tax

Postby Beachcomber » Sun Oct 22, 2017 12:58 pm

Well someone is certainly leading you up the garden path. Rather than adding to the unnecessary confusion by contradicting both your lawyer and Alcala Barry myself perhaps you should read this from the Notarys and Registrars web site:

https://www.notariosyregistradores.com/ ... ciento.htm

especially where it says 'el adquirente estará obligado a retener e ingresar el 3 por ciento' This states 'the purchaser is obliged to retain and pay the 3 per cent'

So of course it is the 'buyers' business' and to state anything to the contrary (as it was originally in Alcala Barry's edited post) is utterly ridiculous and dangerously inaccurate. It is the purchaser (or his representative) who completes the form 211 for the payment of the retention and pays it through the bank to the tax office NOT the seller and not his lawyer.

The applicable laws are Real Decreto 1776/2004, de 30 de Julio (Article 14) as amended by Real Decreto 1576/2006, de 22 de Diciembre. Perhaps you should suggest that your lawyer reads them.

mijasdavid
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Re: 3% retention tax

Postby mijasdavid » Sun Oct 22, 2017 2:25 pm

Beachcomber

Point taken. I will read the link very carefully.


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