The arras contract (the private deposit agreement that usually precedes the deed of sale) is the only moment in the whole transaction when both parties are willing to negotiate in writing and there is still room to do it. After that, there is not: at the notary's office, with the money on the table and the removal van booked, nobody wants to open a debate about withholding. That is why the 3 % withholding is not settled in the escritura, the public deed signed before a notary: it is settled in the arras, two months earlier, in four clauses that cost little to draft and avoid almost every dispute of this kind that reaches our office.
What has to be decided
| Question | If it is not agreed |
|---|---|
| Whether the seller delivers a tax residence certificate, and when | It is argued on the day of signing, in a hurry and without the document |
| That 3 % is deducted from the price if residence is not proved | The seller takes 100 % and the buyer pays in out of their own pocket |
| Who actually files Modelo 211 | Each side assumes the other is doing it |
| When the copy is handed to the seller | The seller asks for it months later, when they can no longer find the buyer |
| Who pays the plusvalía municipal (the town hall's tax on the increase in land value), and with what amount set aside | The buyer finds out they answer to the town hall as substitute |
| What happens if the certificate arrives after signing | Nobody knows what to do with money already paid in |
Before drafting: what kind of arras you are signing
Not all arras are the same and the label matters. Article 1454 of the Spanish Civil Code regulates the so-called arras penitenciales (withdrawal deposit), which allow a party to walk away from the contract, the one who paid the deposit losing it, or the one who received it paying back double. But that figure only operates when the parties have expressly agreed it: if the contract says nothing about its nature, it is usually read as a deposit confirming the contract, with the ordinary consequences of breach and no right to withdraw. It is worth saying so in the document itself, because it decides what happens if the sale is never signed.
Because if the seller does not deliver the residence certificate and the buyer wants to withhold, the argument can end with one side refusing to sign. Knowing in advance which kind of arras was agreed decides who bears that breakdown. Leaving it ambiguous leaves the worst possible consequence to chance.
Clauses worth including
What follows is an outline of content, not a model to be copied without reading. Every contract has its particular features and the final wording has to be fitted to the case, the transaction and what the other side will accept.
The selling party undertakes to deliver to the buying party, at least fifteen calendar days before the date set for executing the deed, a tax residence certificate issued by the Agencia Estatal de Administración Tributaria (the Spanish state tax agency) for the current tax year. If there are several sellers, one certificate shall be provided for each of them.
If that certificate is not provided within the period stated, the buying party shall withhold from the price the 3 % provided for in article 25.2 of the consolidated text of the Non-Residents' Income Tax Act, and shall pay that amount in by means of Modelo 211 within the legal deadline, handing the selling party its copy together with the proof of payment within fifteen days of filing. The parties expressly acknowledge that this withholding forms part of the price and does not amount to non-payment or defective performance of the payment obligation.
Where the selling party is not tax resident in Spain, the buyer shall be the taxpayer's substitute for the purposes of the tax on the increase in value of urban land. To that end, the sum of [amount] euros shall be withheld from the price as a provision, which the buying party shall use to pay the tax, rendering a documented account to the seller and returning any surplus within [period] of payment.
If, after the deed is executed, the selling party proves that it is tax resident in Spain, the buyer shall give reasonable cooperation and provide the documents needed to regularise the payment, without this giving rise to any obligation of direct reimbursement between the parties or any liability for the buyer for having made the withholding.
The fourth is the one almost nobody includes and the one that prevents most grief: it makes clear that withholding when in doubt is not a breach and that the way to fix it runs through the tax system, not a claim between private individuals.
The amount to set aside for the plusvalía
The third clause needs a figure, and that figure has to be worked out before signing the arras. The plusvalía municipal allows two methods of calculation and the taxpayer may apply whichever gives the lower result; which one comes out cheaper depends on the valor catastral (the official cadastral value) of the land, the years elapsed and the real gain on the transaction. With the latest IBI bill (the annual municipal property tax) and the two deeds the amount can be estimated quickly, and that is what has to be done for the provision to be realistic.
A provision that is too small leaves the buyer paying the difference; an outsized one makes the seller refuse. The calculation is in the guide on the two methods, and the overall picture on the plusvalía municipal page.
Who files, and why it is worth deciding
| Option | Advantage | Drawback |
|---|---|---|
| The buyer or their adviser files | They control the deadline, which is their responsibility | They take on a task they did not go looking for |
| The gestoría handling the transaction files (the administrative agency that processes the paperwork) | It is done in the same package as the deed | You have to check it really has been done and ask for the receipt |
| The seller's adviser files with the buyer's funds | The seller makes sure their copy exists | The person liable is still the buyer: if it is not filed, they answer for it |
You can hand the filing to whoever you like, but the person obliged to pay in is still the buyer, and the charge for non-payment still falls on the property they have just bought. So whoever files, the buyer has to demand and keep the proof of payment. That is the evidence, not the gestoría's invoice.
From the contract to the notary
What was agreed in the arras has to be carried into the deed, because that is where payment of the price is documented. The deed should show the breakdown: the amount handed to the seller and the amount withheld to pay in the 211, stating why. That way it is proved to anyone (including the seller months later) that the price was paid in full and that part of it went to a legal obligation.
And it is worth bringing three documents to the signing: the residence certificate if there is one, the IBI bill for the plusvalía, and the draft 211 already prepared. With those, the filing is done in the following days and not in the last week of the period.
What we do at this stage
- We review the draft arras contract from the tax point of view and propose wording for the missing clauses, fitted to the specific transaction.
- We check the seller's residence and say whether withholding applies and on what exact base.
- We estimate the plusvalía municipal under both methods to set a realistic provision.
- We prepare and file the 211 within the deadline and hand the copy to the seller.
It starts with the Modelo 211 intake form, and the sooner the better: a clause put in before signing the arras is worth much more than the best defence afterwards. That said, and because it should be said: drafting a contract well reduces the risk, it does not remove it. What the other side agrees to sign is still a negotiation, and what they do afterwards is a fact we do not control.
What the contract had better not say
- "The seller declares that they are tax resident in Spain." On its own, with no obligation to prove it and no agreed consequence, it is a sentence that does not protect the buyer. If it is included, it should come with the obligation to deliver the certificate and automatic withholding if it is not delivered.
- "All taxes arising from the transaction shall be borne by the seller." Between private parties it can govern who bears the cost, but it does not shift who is liable for the tax: before the administration, the one answerable for paying in the 211 is still the buyer.
- "The price shall be paid in full at the time of signing." It clashes head-on with the withholding and creates a contradiction someone will have to resolve at the notary's office, which is exactly what was meant to be avoided.
- Impossible deadlines. Undertaking to deliver the copy of the 211 "at the time of signing" is unrealistic: the form is filed afterwards. Fifteen days from filing is a deadline that can be met.
A clause that cannot be performed is worse than none, because it turns into a contractual breach what was simply the normal working of the tax.
Questions that come up with “How to provide for it before signing”
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