What taxes must be paid for the sale of a property?

In this article we tell you all the taxes and expenses to take into account for the sale of a property, in this year 2020.

Withfor

26 August 2020 |
I’m sure you already have in mind what you want to do with your new home. You know what colour the walls will be, and which sofa you’ll put in the living room in front of the TV… but you may also be wondering how I can sell my flat.
In view of this doubt, we are here to clarify the delicate and complicated issue of the expenses involved in selling a property.
The fact is that in any process of buying and selling a home, you have to take into account some extra expenses that are not directly associated with the net price of the property, which include: taxes, notary’s office, property taxes and mortgage, to mention the most important ones.
Don’t worry! We will explain each one of them.

Taxes on the sale of a property

It is very important to be clear about which payments are to be assumed by the seller and which are to be assumed by the buyer. Let’s see:

The seller’s expenses

PERSONAL INCOME TAX

The first thing you have to consider as a seller is paying capital gains tax when the sale is higher than the purchase price. This amount must be paid in the Income Tax Return for the year in which the property is sold.
To calculate the IRPF, you must take into account the tax rates, which vary according to the profit. This year 2020 is the following year:
  • Up to 6,000 euros, corresponds to 19%.
  • Between 6,000 and 50,000 euros, corresponds to 21%.
  • Over 50,000 euros, corresponds to 23%.
However, there are exceptions to this tax, which are in the following cases
  • People over 65 who have sold their habitual residence.
  • Those under 65 who have sold their habitual residence to acquire another of the same type, having a period of two years for their declaration.

Capital gains

The municipal capital gains tax is a tax on land of an urban nature, and is calculated based on the cadastral value of the land on which the property is located. It has to be paid at the Town Hall, so it has nothing to do with the net price of the property.
To calculate it, you must know the cadastral value, which is established in the IBI bill. When you know the cadastral value, some percentages are applied taking into account the time during which the owner has been the owner of the property for sale.
It should be noted that there may be an exception to the payment of the capital gains tax. To do so, the home must have been sold at a loss; that is, when the price of the sale of the property has been lower than the purchase price.
You may be interested in reading about how to value a home.

IBI

The Property Tax is one of the “direct” taxes that is imposed for being the owner of the rights over a property. Each Town Hall manages the dates where this payment has to be made, but generally, it is made every 1st of January.
However, who must pay this tax?
Although the IBI can be negotiated at the time of sale of a flat or house, it is best if the owner of the property leaves it ready for sale without any record of debts before making any transaction on the property.
In the case of an inherited property, it is the owner who should pay this tax.
To get an idea, the calculation of the IBI is usually done according to the cadastral value of the property, to which a series of coefficients, reductions and a final tax rate must be added, which will depend on each Town Hall, but in the case of Catalonia this year 2020 there has been a drop from 0.75% to 0.66%.

The buyer’s costs

VAT and ITP

The calculation of taxes will be different in the case of a new or second hand home.
In the case of a new home, the purchase is subject to two taxes:
  • VAT (Value Added Tax): in the specific case of Catalonia, in the year 2020, the VAT on a new home corresponds to 10% of its value.
  • IAJD (Tax on Documented Legal Acts) corresponds to 1.5% of the value of the home in the case of Catalonia. This tax should not be confused with the IAJD on mortgage loans, which from June 2019, in application of Law 5/2019, of 15 March, regulating property credit contracts, will be assumed by the banking institution.
In the case of second-hand homes, the ITP (Property Transfer Tax) is applied, which, in the case of the Catalan region, is 10%.
However, bear in mind that both VAT and the IAJD are deductible expenses when buying a home, so we always recommend the advice of a property manager.
The best way to keep up to date with the variation in specific percentages for the Autonomous Community of Catalonia is to check the Barcelona City Council’s website. Remember that the variation will depend on the tax and fiscal calendar in relation to the date of the purchase.

And what happens when an inheritance property is sold?

In these cases, the sale is considered as a capital gain and the person (or persons) receiving the inheritance must pay the Inheritance and Gift Tax (ISD).
This can be a rate of 7% up to 32% based on the value of the inheritance.
This tax must be paid as part of the income for the year in which the flat or house was inherited.

To summarise the taxes on the sale of a property in Catalonia

Who pays?          Tax Amount
Buyer VAT 10%
IAJD 1,5%
ITP (only second hand houses) 10%
Seller Personal Income Tax
  • Up to 6,000 euros, corresponds to 19%.
  • Between 6,000 and 50,000 euros, corresponds to 21%.
  • More than 50,000 euros, corresponds to 23%.
Added value To be determined
IBI 0,66%
ISD Variable according to the value of the inheritance

 

Other expenses in the sale of a property

Additionally there are other calculations to add to the owner’s expenses:
Mortgage
If there is a mortgage in progress on the property to be sold, it must be paid off and the registration cancelled. This is processed through the bank and the notary’s office.
So if you sell a house that has a mortgage, the ideal way is to do so for a higher price than the purchase price, and with that income, pay off the outstanding debt.
It is important to make a deed (Certificate of Pending Debt) with the bank to cancel the mortgage, even if it is 0. This way the mortgage guarantee is also cancelled.
Energy certificate 
How much does it cost? There are very extensive rates on the market. It all depends on what the professionals estimate, but generally they range from 50 to 200 euros, and it also depends on the type of property that is for sale.
Finally, both the notary fees and the costs of the deed in the Land Registry will be paid by the buyer.
In these cases, it is the buyer who pays the fees for the copies of the deed of sale, which can roughly be 1.5%.

How can I sell my house without paying a lot of tax?

The issue of taxes cannot be avoided, so it will be quite difficult to have a chance of saving in this respect.
However, there are some areas where savings can be made if negotiations are held between the two parties concerned.
You have to take into account, for example, the state of the property and possible renovations for which you can claim deductions.
In general terms, this is how the costs of selling a home are calculated in terms of taxes and expenses:
  • New home. You will have to spend approximately between 12 and 16% of the total price.
  • Second hand housing. You will have to spend approximately between 5 and 9% of the total price.

How do you declare the sale of a home?

When you make your annual declaration, you must fill in form 210 of the Tax Office and, in this way, you can close the transaction.
We know that the sale of a property can cause many uncertainties, we are very aware of this and for this reason we will accompany you in each of the steps of the sale of your property, including the correct payment of taxes. As the first ethical real estate agency in Barcelona, our commitment is to guarantee honesty and transparency in all the management within the real estate field. Without a doubt, this will give you security in such a decisive step as the sale of your property.

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