TAX REPRESENTATION OF FOREIGNERS IN SPAIN IN THE PURCHASE AND SALE OF A PROPERTY

The purchase and sale of a property in Spain by foreign citizens entails various tax obligations. To comply with these requirements, it is essential to understand the role of the tax representative, their obligations, and their functions within the process.

Mandatory Tax Representation

Spanish law establishes that non-tax residents in Spain who carry out certain economic transactions, such as the purchase and sale of real estate, may be required to appoint a tax representative. This depends on their country of residence and the type of transaction.

-Residents of the European Union (EU) or European Economic Area (EEA): Appointing a tax representative is not mandatory, although it may be advisable for managing tax obligations.

-Residents outside the EU/EEA: The Tax Agency may require the appointment of a tax representative domiciled in Spain to facilitate communication and compliance with tax obligations.

Duties of the Tax Representative

The tax representative acts as an intermediary between the foreign taxpayer and the Spanish Tax Administration. Their main duties include:

-Tax management: Declaring and paying taxes corresponding to the real estate transaction, such as the Non-Resident Income Tax (IRNR) and the Tax on the Increase in Value of Urban Land (municipal capital gains).
-Receiving notifications: Acting as the recipient of any official communications from the Tax Agency.
-Compliance with formal obligations: Filing tax returns and any other required documentation.
-Tax advice: Advising the taxpayer on their rights and obligations regarding tax matters.
-Taxes associated with the purchase and sale of a home

For Foreign Buyers
Non-resident buyers must pay several taxes and fees when purchasing a home in Spain:
– Property Transfer Tax (ITP): For second-hand homes, the rate varies depending on the autonomous community.
– Value Added Tax (VAT) and Stamp Duty (AJD): For new homes, the VAT rate is 10% and the AJD is 0.5% to 1.5%.
– Notary and Registry Fees: These arise from the execution of the deed and registration in the Property Registry.

For Foreign Sellers
Non-resident sellers must take into account the following taxes:
– Non-Resident Income Tax (IRNR): This applies to profits obtained from the sale, with a general rate of 19% for EU/EEA residents and 24% for residents of other countries.
-3% withholding tax on the sale price: The buyer must withhold this percentage and pay it to the Treasury as an advance on the IRNR (National Income Tax).
-Municipal capital gains tax: Local tax calculated on the increase in the land value since the last transfer.

Conclusion
Tax representation in the purchase and sale of homes by foreigners in Spain is a key tool to ensure compliance with tax obligations and facilitate communication with the Administration. Although not always mandatory, having a tax representative is highly recommended to avoid legal and tax problems during the process of buying or selling a property in Spain.