Non residents 3% tax retention

The non-resident vendor of a property in Spain must pay the local tax authority 3% of the property price when selling a property.

This amount is “retained” and kept on account to pay income tax and other fiscal liabilities which the vendor might be liable for.

If the 3% retained is more than is needed to cover any tax liability the excess is returned to the vendor.

The reason behind the 3% scheme is to make sure that a non-resident is in full compliance with his fiscal dues at the time the property in Spain is sold (and hence, presumably leaves the country).

The Notary must ensure that the purchase price is split in a way that the 3% goes to the taxman.

As this is done at the signing of the transfer deeds, many vendors tend to confuse the retention with the capital gain tax or the stamp duty.

However, it is neither (actually a vendor of a property is not even liable for stamp duty), but rather a payment on account against the non-resident income tax.

This retention can be refunded: in total if the income tax is submitted and paid; or partially if the final amount to pay is lower than the amount retained.

The aforementioned refund is not made by default – the vendor must request a refund from the authorities.

On receiving the request for refund (via the relevant forms) the local taxman reviews the amounts due / paid and refunds the excess, if any.

This refund normally takes place within 3-12 months following the submission of the request and depending on the local tax authority.

For help reclaiming your 3%, or any other Spanish tax issues, please contact us today for a no obligation consultation.

We offer a dedicated, fixed fee service for 3% tax refunds to both new and existing clients.