Many foreign property owners in Spain believe they do not need to file a Spanish tax return if they do not earn income in the country. However, this assumption can cause serious problems later, especially when selling a property. Even if you are not technically required to submit a yearly tax return, doing so can prevent delays, extra costs, and unnecessary administrative complications.
If you own a property in Spain and plan to sell it in the future, filing your annual tax return can be crucial.
1. The Spanish Tax Agency Can Block the Fiscal Residence Certificate
When a seller claims to be a tax resident in Spain, the Tax Agency may block the issuance of the Fiscal Residence Certificate (Certificado de Residencia Fiscal) if:
- they have not filed their annual income tax returns (IRPF), or
- their tax situation appears inconsistent with being a resident.
This certificate is mandatory at the Notary on the day of the sale if you want to avoid the 3% withholding.
Without it, the Notary must apply the rule for non-residents:
Automatically withholding 3% of the sale price and transferring it to the Spanish Tax Agency.
2. Why the Fiscal Residence Certificate Is So Important
This certificate proves that the seller is tax resident in Spain, which means:
- the sale must be declared under IRPF (Personal Income Tax),
- and not under Non-Resident Income Tax (IRNR).
If the certificate is not provided at the Notary at the moment of signing, the law obliges the Notary to assume the seller is non-resident, and therefore:
- 3% of the sale price is withheld,
- the amount is sent to the Tax Office as an advance payment of IRNR,
- and the seller must later claim the refund.
This process can be slow, frustrating and easily avoidable.
3. The Consequences of Not Filing Tax Returns Before Selling
Failing to file your annual tax returns, even when not legally obliged, can create a chain of problems:
a) The Tax Agency refuses to issue the Fiscal Residence Certificate
This is the most common issue. Without a complete tax record, the Agency doubts your residency status.
b) Automatic 3% withholding at the Notary
For a property sold at €250,000, the Notary must withhold:
€250,000 × 3% = €7,500
c) The seller is forced into the Non-Resident Tax system
Even if the seller has lived in Spain for years, the law applies IRNR if the certificate is missing.
d) A refund request must be filed
This involves:
- paperwork,
- patience,
- delays of several months,
- and a high risk of rejection if documents are missing.
e) It may cause complications in future tax years
If previous tax obligations were unclear or incomplete, the Tax Agency may open reviews or request additional information.
4. Filing IRPF Voluntarily Creates a Clear Tax History
Even when you are not legally obligated to file IRPF (for example, if your income is very low), doing so ensures:
- Your residency status is recognised and supported by tax filings
- The Tax Agency sees that your tax situation is correct
- There are no gaps in your tax history
- The fiscal residence certificate can be issued immediately when requested
- You avoid the 3% withholding at the Notary
In short:
Filing IRPF voluntarily protects you when selling your property.
5. If You Are a Tax Resident, You Must Declare the Sale Under IRPF
This is crucial.
If you are legally a tax resident in Spain, your property sale must be declared in your IRPF as a capital gain or loss.
It does not matter if you also have assets or income abroad: the rules of residency apply.
Therefore, presenting the Fiscal Residence Certificate ensures:
- You are taxed correctly under IRPF
- You avoid being incorrectly taxed as a non-resident
- You avoid unnecessary withholdings
6. Summary for Foreign Sellers: The Key Points
Below is a clear and simple breakdown for clients to understand quickly.
When you are a tax resident in Spain:
- You must declare the sale under IRPF
- You must provide a Fiscal Residence Certificate at the Notary
- The 3% withholding should not be applied
- Filing IRPF regularly avoids problems
When you have not filed IRPF:
- The Tax Agency may block the certificate
- The Notary must apply the 3% non-resident withholding
- You are treated as a non-resident for tax purposes
- You must later claim the refund, which is slow and complicated
Why filing IRPF even when not obliged is smart:
- It proves tax residency
- It ensures the certificate is issued immediately
- It avoids the 3% withholding
- It prevents costly delays
- It simplifies the entire conveyance process
Conclusion
For foreign property owners in Spain, filing your annual IRPF — even when not strictly required — is one of the best decisions you can make to avoid significant complications when selling a property. It makes the conveyancing process smoother, prevents the automatic 3% withholding, and ensures that your tax residency status is recognised without delays.
If you need assistance filing your tax returns, obtaining your Fiscal Residence Certificate, or preparing your property sale, I can take care of the entire process on your behalf.