Raquel Soto, a designer in Barcelona, has spent weeks negotiating the purchase of a house in Calpe for 295,000 €. The seller, Urs Keller, a Swiss man from Lucerne, accepts the price with a condition he drops into his last email: "I do not want any withholding. I pay my taxes in Switzerland, the treaty protects me and I need the full amount to close my purchase there." Completion is planned in three weeks, and the arras contract (the deposit agreement signed before the deed) says nothing about the 3 %.
Why it does not depend on what the seller wants
The withholding is not a clause the parties can negotiate. Article 25.2 of the Law on IRNR (Spanish non-resident income tax) provides that, when the seller is a taxpayer under that tax without a permanent establishment, "the acquirer shall be obliged to withhold and pay in 3 per cent" of the consideration. The obligation is Raquel's. If Urs does not want it, that does not release her; it only changes who ends up bearing the cost.
The only case the Regulations provide for not withholding, apart from contributions to companies, is that the seller proves with a certificate from the Spanish tax authorities that he is taxed in Spain under IRPF (Spanish personal income tax) or Corporation Tax (article 14.2.a). A seller who says he pays his taxes in Switzerland is stating exactly the opposite.
The arguments you hear and what lies behind them
| What the seller says | What you need to know |
|---|---|
| "I pay my taxes in my own country" | That is precisely why he is non-resident in Spain and the withholding applies |
| "The treaty exempts me" | The withholding is a payment on account; if the final tax is lower, it is adjusted in his Modelo 210 |
| "I sold at a loss, I owe nothing" | The withholding applies all the same; he recovers the excess by applying for a refund |
| "The notary has not put it in the draft" | The obligation arises from the law, not from the draft deed |
| "My lawyer will withhold and pay it in" | That can be done, but the person obliged is still the buyer |
| "I need the full amount for another purchase" | That is his cash-flow problem, which is solved through the price, not by skipping the withholding |
The treaty argument deserves one more line. Treaties for the avoidance of double taxation share out the right to tax between the states, but the Modelo 211 withholding is not the final tax: it is an advance that the seller deducts in his return. If Urs believes his tax in Spain should be zero or lower, his route is Modelo 210, where article 14.4 of the Regulations allows him to set off what was withheld and obtain a refund of the excess. How Switzerland then treats that sale is a matter his adviser there must confirm.
What Raquel risks if she gives in
Suppose Raquel pays the full 295,000 €:
- Withholding she should have made: 295,000 × 3 % = 8,850 €.
- She will have to pay it in herself, out of her own pocket, because she is the withholder.
- The house will be charged with payment of the lower of that withholding and Urs's tax, with a marginal note at the land registry (article 14.5 of the Regulations).
- If Hacienda, as the Spanish tax office is commonly called, detects it, the offence cannot be minor: article 191.3.c of the General Taxation Law (Ley General Tributaria) classes it as serious when amounts that should have been withheld were not paid in, with a fine of 50 to 100 %. At the minimum, 4,425 €, before reductions.
- To recover the 8,850 €, she would have to claim them from Urs in Switzerland.
The whole cost of giving in falls on the buyer. Nothing happens to the seller, on the other hand, if there is no withholding. That is why his refusal is understandable from his side and unacceptable from Raquel's. The full consequences are set out in what can happen if I do not pay it in.
A clause in which the seller releases the buyer from the withholding, or undertakes to pay his tax himself, may be valid between them, but not against the Agencia Tributaria, the Spanish tax agency. The buyer would still be the person obliged. And an agreement like that, with a seller who is leaving the country, can rarely be enforced afterwards.
If what he wants is to receive a net figure
Sometimes the refusal hides a legitimate concern: the seller needs to receive a specific amount. There is a solution that does not involve breaking the law: adjust the price so that, once the 3 % has been withheld, the net amount is the one he needs.
- Net amount Urs wants to receive: 295,000 €.
- Price required: 295,000 ÷ 0.97 = 304,123.71 €.
- Withholding: 304,123.71 × 3 % = 9,123.71 €.
- Net for Urs: 304,123.71 − 9,123.71 = 295,000 €.
This makes the purchase more expensive for Raquel by a little over 9,000 €, and it also raises the base of the taxes and costs of her acquisition. It is a commercial decision, not a tax one. But it has one advantage: the negotiation is about the price, which is the only thing that can really be negotiated. And for Urs, those 9,123.71 € are not lost: he will deduct them in his Modelo 210 and, if there is money left over, ask for it back, as we explain in when the excess 3 % comes back.
How to raise it before signing the arras
The moment to talk about the withholding is before the deposit is paid. Once penitential arras have been signed (a deposit that lets either party walk away at a price), article 1454 of the Civil Code allows the buyer to withdraw by forfeiting them, and the seller by returning them doubled. If the contract does not mention the withholding and the seller refuses at the notary's office, the buyer is left in an awkward position: either sign without withholding, or not sign and argue about whether the breach is hers.
To avoid that, the arras contract should state:
- That the seller declares his tax residence and that, if before the deed he does not provide a certificate from the Agencia Tributaria proving that he is subject to IRPF, the buyer will withhold 3 % of the total price.
- That this withholding forms part of the price paid.
- That the seller's refusal to execute the deed with the withholding will be regarded as a breach on his part.
- When and how the seller will receive his copy of Modelo 211.
The guide on the 3 % in the arras contract includes a more detailed model clause. If you already have a draft or a seller who is resisting, you can send us the documents through the Modelo 211 form.
If the refusal comes at the notary's office
If the seller digs his heels in on the day of signing, Raquel's options are few. She can sign while withholding, recording in the deed that the withholding is made because the law requires it; she can put off the signing in order to negotiate; or she can give up the purchase, with the consequences the arras contract provides for. What she should not do is pay the full price intending to "sort it out later". That later, with a seller abroad, is exactly the scenario the law wanted to avoid by placing the obligation on the buyer.
And if the seller really is resident?
It may be that Urs, despite his Swiss passport, lives in Calpe and files his returns here. Then he is right not to want the withholding, but the way to prove it is the tax residence certificate from the Agencia Tributaria, as we explain in how do I know whether the seller is non-resident. With that paper, the buyer does not withhold and both can rest easy.
The situations surrounding the 3 % withholding, seen from the buyer's side, are set out on the Salama Tax page devoted to Modelo 211.