3% retention on house sale

[baroness]

Hi, I know what it is and what it is for, but how does it work in practice. Who actually hands it to the tax man and when. Is it the buyer before transferring funds to the seller, or is it the seller after receiving the funds from the buyer. Thanks in advance, jeff.

[MartinEB]

When we sold our apartment the buyers solicitor held back 3% of the purchase price which we then claimed back from the tax man when we purchased another house in Spain.

When we purchased the house in Spain, our solicitor held back 3% of the purchase price from the seller. Apparently they would not have needed to hold back 3% if the seller had been a fiscal resident (and had the necessary certificate to prove it)?

I am sure if I am incorrect one of the more knowledgeable one's on the site will correct me?

[Beachcomber]

Read this:

viewtopic.php?f=42&t=27591

then ask again if you have any further questions.

Whether or not you purchase another property has no bearing whatsoever on the subsequent reclamation or otherwise of the 3% retention.

[baroness]

Many thanks, jeff

[chrissiehope]

Hi Beachcomber
As you probably recall, my late husband I were joint owners of our Spanish property. He left his half to his daughters from a previous marriage, and once everything is signed, I will own half, and they will own a quarter each.
This has been taking some time (don't ask !), So for the past two years I have paid the full Renta rather than splitting it as I did while hubby was alive. This means of course, that the step daughters have never made a tax return. Is this going to cause problems when the property is sold (it is on the market), and if so would it be an idea for them to submit nil returns (as I have already paid all due tax) ?
I suspect (hope !) that there will be little or no CGT to pay, as we paid a fair amount for the property, and then a lot more for the reform (which has IVA shown on the invoices/receipts), and in the current market I doubt the eventual sale price will even reach the expenditure figure...

[Beachcomber]

As with most things in this country there is no definitive answer to your question.

Last year two couples I know made non-resident tax returns for the very first time despite having owned their respective properties for several years. Within a few weeks one couple received a demand for payment for taxes going back to 2010 which they paid only to find, a few weeks later, that AEAT was demanding more payments for each year going back to 2010 as fines for late declarations totalling nearly €1.000. The whole thing has cost them nearly five thousand euros. The other couple have heard absolutely nothing and appear to have got away with just paying the one year.

Your case is different in that your deceased husband obviously could not submit a tax return and from what you say ie. "once everything is signed" your step-daughters have not yet been included in the escritura. It is probable that, when you sell and if you make a capital loss and claim a refund, AEAT will just check that the appropriate tax payments have been made even if they have been entirely in your name for the past two years. I certainly would not stir up a hornet's nest by making negative returns for your step-daughters. However, if the property should take some time to sell it would be wise for your step-daughters to make individual pro rata returns in respect of each of their shares during their period of ownership from the date of the new escritura.

There is one other point concerning your capital gains tax declaration. Was your reform subject of an 'escritura de declaration de obra nueva'? In my experience very few people know how to make the declaration properly when an inheritance or obra nueve is involved let alone when both situations apply. You need to check carefully that it has been done properly otherwise you could end up paying far more in CGT than necessary or not receiving the full amount of the refund to which you may be entitled.

[chrissiehope]

Yes we had an escritura de obra nueva done, raising the declared value by (I think) about 30,000€, and paying the relevant tax on this increase, and I have sent copies of this to various parties, including the lawyer who dealt with the Spanish side of the Estate and who will handle the legal side of the eventual sale. He is English but fully qualified in both Spain & UK, and was an occasional business associate of my hubby, so fingers crossed he knows what he is doing
Perhaps you would be so kind as to advise me of the 'proper' way to do the declaration, so I can check it is correct ?

I am currently ploughing through the Herencia parcial (Deed of Inheritance?) which will accompany the final papers (basically the Ratification of the Deed of Acceptance) first to the Notary, then to be apostiled, then back to the lawyer, then hopefully that will be that - only taken a year....

[Beachcomber]

The capital gains tax return for a non-resident is submitted on our old friend Modelo 210 but in respect of capital gains tax the section which must be completed is '210 H Rentas derivadas de transmision de bienes inmuebles' which is accessed by selecting option 28 from the dropdown box under 'Renta obtenida 02 Tipo Renta.

When there is a straightforward transmission only the column 'Adqusition' is completed but when there is an obra nueva or an inheritance the column called 'Mejora o 2ª adquisition' also has to be completed but this is where it gets a little complicated.

In order to ascertain the 'valor de transmision' you cannot just put down the sale price because it has to be divided across two columns. In order to obtain the value for each column you need to calculate what is the percentage of both the original purchase price and the price of the second adquisition in relation to the total. You then apply the calculated percentages to the total sale price and put the results under 'valor de transmision' in the respective columns. You then carry out the calculations as indicated and you calculate the 'base imponible' by adding the two gain figures together. If one of the figures should be negative you just take the positive figure. You cannot balance a capital loss under one column against a capital gain in another.

A further complication lies in the fact that, in your case, you have three 'adquisitiones'. The original one, the obra nueva and the inheritance but there is only room on the form for two. I am sure that I have seen instructions in the past from AEAT that you can continue the calculations on a separate piece of paper but I cannot find it now and I have never done a return with three acquisition values but the principle should be the same.

If the calculation is done incorrectly and your final figure results in the payment of less CGT or a higher rebate than that calculated by AEAT they will challenge the declaration. However, if the final figure is erroneously calculated in their favour they will not.

I have compiled a spreadsheet to calculate the CGT when one second acquisition is involved. I will see, as an arithmetical exercise, if I can amend it to take account of two and, if you wish, when you have a final figure from your accountant I will see if it conforms to my own calculations but this would obviously mean that you would have to provide me with all of the figures used to calculate it.

[chrissiehope]

Thanks Beach - I am copying this to my 'casa sale' file so that when the time comes I will know where it is (says she optimistically )

Out of curiosity, I checked some basic figures - original purchase price €92,500; obra nueva declaration added €60,000. I have IVA receipts/invoices totalling approx €145,500 (I was quite shocked when I realised this !), so I'm guessing there won't be much CGT to pay, as I very much doubt we will sell at a figure that covers the costs....

[Beachcomber]

I have been working on my spreadsheet and was about to go to bed when I saw your post.

The important figures on your obra nueva are the escritura value plus the expenses for which you have IVA receipts. This does not include the receipts for the actual building work because that is already being claimed under the escritura value (of the obra nueve). I mean receipts for fees of the lawyer, architect, notary and property registry plus taxes paid on the obra nueva.

We would also need details of the same expenses on the original purchase assuming you have receipts for those as well and the same again for the inheritance.

I would also need to enter a sale price. Do you have one in mind? Plus the estimated agent's fee and the plus-valía together with any other expenses on sale. I could then tell you the maxim price that you could sell for without incurring a capital gain enabling to reclaim all of the 3% retention.

If you are happy to provide me with these figures you may prefer to do so in a PM.

Once I have everything worked out I could export my spreadsheet to PDF format and send you a copy although you would have to bear in mind that I have compiled it for my own personal use and it may be difficult for a third party to comprehend.

I am afraid we have hijacked your thread, Baroness, but your original query was answered and you are still very welcome to ask further questions on your own account or as a result of what you are reading here.

[chrissiehope]

I too was just going to bed, having been away for the weekend !
Thanks for your kind offer - I will fish out what figures I have that you need, though it may take a few days or even a week or two. I think I have most of it already assembled, but not necessarily in the right form for your needs.

I will PM the info, unless an email would be better ?