In Spain, any property sale involving a non-tax-resident seller requires a mandatory 3% withholding on the sale price.
This amount is not paid to the seller: the buyer must withhold it and pay it directly to the Spanish Tax Agency (Agencia Tributaria) on behalf of the seller, ensuring the capital gains tax due on the transaction is secured.

This obligation, introduced in the 1990s and now set out in article 25.2 of the Spanish Non-Resident Income Tax Act (TRLIRNR), was created to address a common issue at the time: many foreign sellers left Spain after completing the sale without declaring or paying the tax due on their capital gain.
With limited international cooperation mechanisms available, the tax authorities were unable to recover these amounts.

To ensure proper taxation of capital gains obtained by non-residents, Spanish law introduced this withholding system, which remains an essential component of any property transaction involving a non-resident seller.

A withholding designed to secure the seller’s tax liability

Under current legislation, the buyer must withhold 3% of the price stated in the deed and pay it directly to the Tax Agency.
This amount serves as an advance payment of the non-resident income tax (IRNR) due on the capital gain.

At completion, the seller therefore receives 97% of the price, and the buyer is responsible for paying the remaining 3% to the authorities.

How does the buyer pay the 3% withholding?

The buyer must declare and pay the withholding using form 211, within approximately one month of signing the deed.
Once processed and paid, the Tax Agency issues a receipt which the buyer must provide to the seller for their own tax filing.

The seller’s obligation to file a tax return

The non-resident seller must then declare the actual capital gain using form 210.

In this declaration:

• if the final tax due is higher than the amount withheld, the seller must pay the difference;
• if it is lower, the seller may request a refund of the excess withholding.

No refund is issued without submitting form 210.

Situations in which the 3% withholding does not apply

The withholding does not apply if the seller proves they are a tax resident in Spain, which requires an official tax residency certificate issued by the Tax Agency.
Without this certificate, the withholding remains mandatory, even if the seller claims to be a resident.

Certain corporate transactions, such as contributing a property to a company on incorporation or capital increase, are also excluded, although these situations are rare and technically specific.

Municipal capital gains tax: another key aspect for the buyer

In addition to IRNR, Spain applies a municipal tax known as plusvalía municipal (impuesto sobre el incremento de valor de los terrenos de naturaleza urbana).
Where the seller is not a tax resident, the law often designates the buyer as the taxpayer liable for this tax.

The buyer may seek reimbursement from the seller under contract, but the authorities will always pursue the buyer first.

For this reason, many buyers either retain an equivalent amount or negotiate a price reduction to avoid bearing the cost alone.

Conclusion: significant obligations for the buyer and real risks in case of poor coordination

The 3% withholding secures the capital gains tax owed by non-resident sellers, but it also places significant risk and responsibility on the buyer.
Any mistake in filing or paying form 211 may lead the authorities to claim the amount directly from the buyer, even if the full price was mistakenly paid to the seller.
Similarly, failure to anticipate the municipal capital gains tax can result in unexpected costs that can only be recovered if expressly agreed beforehand.

Careful coordination, verification of the seller’s tax status and thorough preparation of all formalities are essential to avoid disputes and additional costs.
For foreign buyers, professional advice is key to securing the transaction, avoiding common errors and ensuring compliance with Spanish tax obligations.

Miguel Morillon

Lawyer

MORILLON AVOCATS