Sell online? Make sure you’re declaring your tax – even if it’s a once off!
The Spanish tax authority has ruled that any individual selling goods second-hand online is still liable for tax, even if it’s a once-off sale. Make sure you declare it – because Hacienda will be linking up information provided by online marketplaces such as EBay, Wallapop or Amazon to catch tax evaders….
We’re giving the basic overview in this article of what taxes apply to anyone selling stuff online – contact Cervantes Alarcon Consulting for an in-depth look at your personal situation, and tax preparation for individuals or follow us on Facebook.
The case study
Maria Caserio is moving house and wants to dispose of unwanted personal items. A first time seller, sets up seller accounts with online marketplaces such as EBay and MilAnuncios.com to dispose of her old stuff. She sells her old books, CD collection, several items of furniture, a bicycle and some decorations for a total value of €750. She then closes her seller accounts and concentrates on her house move.
But if Maria doesn’t file a special tax form straight away and declare the tax due on the €750 on her annual income form for that year, she could find a nasty surprise in the post when Hacienda comes across her record of sales declared by the online marketplaces, and issues an automatic tax regularisation with late payment penalty…..
What taxes are due?
Two taxes apply – a sales tax applied to the total value of the sale, and capital gains on any profits made.
- The sale of second-hand items online by individuals is subject to the Impuesto sobre Transmisiones Patrimoniales (tax on capital transfers or ITP) in the modality of Transmisiones Patrimoniales Onerosas (Onerous capital transmission tax or TPO). In essence, this means all sales are subject to a 4% sales tax on the sales price.
- Any profits generated by the sale must be declared as capital gains in your annual IRPF income tax. The total to pay in this modality depends upon your personal tax situation.
Do I have to pay tax on everything?
Yes, you have to pay ITP at 4% on the final sale price of anything that is sold, even if it is sold at a loss. There is no minimum sale value and ITP has to be declared at the time of sale.
But you only pay IRPF on the profit generated – the difference between the purchase price and the sale price. This isn’t to be expected on many second hand goods of low value, but tax inspectors will pay special attention to anything that could be considered to be collectable or antique. It is up to the seller to prove what profit, if any, was generated, and if no proof can be provided a generic purchase value may be calculated by the Tax Office.
Can I write off losses?
No, only capital gains can be calculated on your IRPF. Loss on second hand goods is not computable for the purposes of this tax. Nor can individuals deduct the cost of posting the items be deducted from the ITP tax.
How do I declare these items?
ITP is currently declared via the filing of form 600 directly to Hacienda on a per sale basis.
IRPF is declared annually, it’s your annual tax form.
Who is in charge of collecting the tax?
ITP is paid to the regions of Spain. Your IRPF is paid to the central state. However, Hacienda has suggested that it will be passing information on sellers to the regional tax authorities (see more below).
Why has this suddenly come to light?
The Dirección General de Tributos (DGT), which is the legislative branch of Hacienda, has published a binding report into the matter of private online sales. The report was commissioned after a tax payer filed a judicial complaint alleging that the tax rules surrounding the sale of second hand goods online by individuals were unclear. The new report by the DGT clarifies the situation and commits Hacienda to pursuing these types of tax evasion.
What if I sell my items locally, ie at a car boot sale?
Exactly the same taxes apply, and always have done. The DGT tax report simply establishes that the rules are the same whether you sell online or offline.
However, selling an item physically is more difficult for Hacienda to track.
So is Hacienda going to pursue these sales?
All reports suggest that Hacienda intends to start aggressively pursuing these sales. Financial newspaper of record Expansión reports that Hacienda has already contacted major second hand sales websites such as SegundoMano, Wallapop and EBay, amongst others, to inform them of the need to preserve sales data and to hand it over to tax inspectors.
Once Hacienda has these databases, it would be a simply matter to trawl through them automatically and collate them with the information provided by tax payers. Any sales which have not been declared to the Tax Authority would then generate an automatic tax demand.
Hacienda will also be on the lookout for businesses committing tax fraud by selling as individuals – thus avoiding IVA – and other suspicious online activities.
How will the sale of new items be affected?
The sale of new items (as opposed to used or second hand) will be taxed in the same fashion. The important thing to bear in mind is who is doing the selling.
If the seller is a business or a self-employed professional, the sale is subject to IVA tax. If it is sold by an individual who is not self-employed, the tax to pay is ITP (and IRPF). In general, Hacienda suggests it will assume individuals are always selling used items unless otherwise proven.
So how can I calculate my taxes?
It’s important to keep all documentation for a minimum of four years from the date of the sale. Keep all bills of sale, invoices and other documentation – if you only have them in electronic format, keep screenshots. Also keep copies of all bank transactions to prove the amounts being received and sent on your behalf.
If you are selling anything that could be considered to be liable to capital gains, then ensure you have copies of the original purchase price. If you don’t have it, and it is a valuable item, you may be hit with a large estimated capital gains tax.
You also need to be able to prove you are the legitimate owner of the item offered for sale. In general, you won’t need to accredit the identity of the purchaser or the source of the funds – this is the duty of the online marketplace.
I have a busy little hobby selling online….
In which case, you may well be better off going self-employed and tracking the sales as a business. This will also allow you to write off liabilities and losses.
Contact Cervantes Alarcón Consulting for more information.