What is the 3% Retention on Property Sales?

This is a retention 3% of the full sales price of the property as declared at the notary. This amount is withheld on all property sales conducted by nonresidents. The amount can be held by the purchasers legal representative or the notary and passed to the tax authorities. The amount once reclaimed by the vendor or professional acting on his/her behalf, will be returned minus any taxes that the tax agency find is owed. This could be for the annual nonresidents taxes or other.

Residents. In the past it only sufficed that the vendor was a resident and this retention was not practised. This is no longer the case. A resident now must prove that they are fiscal residents and provide a ‘certificado de residente fiscal’ to prove that the resident is in the tax system and paying any taxes due. The resident then declares the sale in the following years resident tax declaration. If a vendor cannot provide the certificate, 3% of full purchase price will be retained.

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.