When a non-resident person or company sells a property in Spain, the law requires the buyer to withhold 3% of the total sale price. This amount must be paid by the buyer to the Spanish Tax Office (Agencia Tributaria) within one month after completion, on behalf of the seller.
It is important to note that this 3% retention is not the final Capital Gains Tax but rather a deposit towards the seller’s potential tax liability. The vendor’s final tax obligation must still be calculated and declared through a tax return.
How Capital Gains Tax Is Calculated
Once the 3% has been withheld and paid, the seller must submit a tax return to calculate the exact amount of Capital Gains Tax (CGT) due. The applicable rate for non-residents is currently 19% of the net capital gain — that is, the difference between the purchase price (plus allowable expenses) and the sale price (minus selling expenses).
In many cases, the 3% withheld may not cover the full tax owed, meaning the seller must pay the difference. Conversely, if the calculated tax liability is less than the 3%, the seller can claim a refund from the Spanish Tax Office.
Claiming a Refund of the 3% Retention
When requesting a refund, the Spanish Tax Office may review the seller’s tax history, particularly the Non-Resident Income Tax (IRNR) obligations during the period of ownership. If any previous taxes were unpaid, the Tax Office will offset or reclaim them (including interest) before issuing any refund.
Key Points to Remember
- Buyers must retain and pay 3% of the sale price to the Tax Office within one month of completion.
- The 3% is a deposit, not the final tax amount.
- Non-residents pay 19% on the net capital gain.
- If you overpay, you can claim a refund from the Tax Office.
- Outstanding taxes (especially IRNR) may be deducted from your refund.
Understanding the Capital Gains Tax process in Spain helps avoid delays and unnecessary penalties. Our team at Lex Iuris Solicitors specialises in helping non-residents handle their tax obligations efficiently and recover overpaid taxes.
