Capital Gains tax
Fiscal and legal advice from Webster Asesores Dear Sir, We bought our house here just over a year ago, and although we love living here, we have to sell and move back to Blighty.
Fortunately, and probably because of our reduced asking price, we have found a buyer and their solicitor is suggesting withholding quite a substantial amount, which we find surprising.
We have questioned this, and he said that 3% is kept back in case there are any debts. 'In case'? there are no debts. If there were, there are not - these would turn up during the searches.
He also wants to withhold a certain amount for “Plusvalía tax”, which is the responsibility of the vendor.
I understand that he wants to hold back an amount to cover our share of the utilities.
Finally, and in this respect, he says he is being nice, he wants us to pay for our share of the IBI tax for this year. He says that we should pay for the whole year even though we are not going to be the owners for the remaining period of this year. Answer The 3% that is being retained is because when a non-resident sells, the buyer is obliged by law to retain 3% of the sale price and to deposit this amount with the tax office. It is not 'in case' there are any debts, but is considered to be a payment on account of any Capital Gains Tax.
Once the sale deeds has been completed, your tax advisor will calculate the CGT for you. If this tax is lower than the 3% that has been retained your tax advisor will submit a refund application and you will receive the refund in about one year from the date of application. In the event that the CGT is higher than the 3% that has been retained, you are obliged to pay the difference.
The law states that when a non-resident sells their property, if the plusvalía tax is not paid, the property (i.e. the new owner) is responsible for the payment of this tax.
This is why the buyers’ lawyer wants to retain this amount to pay this tax on your behalf. He is just doing his job correctly.
Regarding the IBI, the law states that whoever owns the property on the 1st of January is responsible to the payment of this tax for the whole year.
So, in fairness, the buyers’ lawyer is being nice when he suggests an apportionment of this tax, for each party to pay in accordance with their respective period of ownership.
This law does seem unfair, but it works both ways. When someone purchases a property, if this law is applied, they buyer does not pay this tax for the first year of ownership.
It is customary for the buyers’ solicitor to hold back a certain amount of money to pay for things that are the responsibility of the vendor.
Usually the vendor leaves the country making the recovery of relatively small debts not cost effective, and therefore a retention is made.
Once all the payment has been made, you should request a statement of accounts and any balance should be refunded to you.
Finally, it is important to include all these retentions in the sale deeds that you will be signing in the presence of the Notary, as then you will have a clear record of what is going where and who is retaining it. Please send us your queries either by email, or letter indicating that you wish your letter and reply to be published in the Costa Blanca News. You may either send these directly to our offices or to the Costa Blanca News.
This column is intended for informative purposes only and we strongly advise any readers to seek professional advice prior to taking any action.