What is the 3% retention tax when selling a property?

The 3% retention is a tax which is payable when a non-resident sells a property in Spain.

The buyer of the property is required to retain 3% of the purchase price and deliver it to the tax office.

The non-resident seller is able to make a claim to have the 3% returned to them.

This is an administrative process. The Tax authority checks whether there are any outstanding taxes payable by the non-resident seller (such as the annual non-resident tax) before returning any funds.

The buyer is not obliged to retain 3% of the purchase price if the seller is able to prove their Spanish tax residency (Hacienda Tax Residency Certificate).The regulation covering the 3% retention is Royal Legislative Decree 5/2004, of March 5, which approves the revised text of the Non-Resident Income Tax Law, article 25.2.

The 3% retention scheme for the transfer of non-resident properties is as follows:

  • Transmissions of real estate located in Spain by taxpayers of the Non-Resident Income Tax, the buyer is obliged to retain 3% of the purchase price.
  • The buyer will not have this obligation if the seller accredits his Spanish Tax Residence by Hacienda Tax Certificate.
  • The buyer must present the tax declaration to the Tax Agency and pay the amount withheld, within the first month from the date that the sale was signed.
  • The non-resident taxpayer (seller) must make their tax declaration, pay the appropriate tax, and then request return of the 3% tax paid. The Tax Agency will check the validity of the claim, ensure there are no outstanding Tax debts, and then notify the taxpayer of the status of their claim.
  • If the 3% retention is not made at the time of the property transfer (and no tax resident certificate is presented), the payment/debt is transferred to the property, and therefore it will fall to the buyer to pay since it is assumed that the seller is abroad and unreachable.

For further information, please contact us.