Taxes are famously complex and unavoidable, and capital gains tax on selling property is yet another type you may be liable for. In Spain, this type of tax will affect people who have sold real estate differently depending on their residency status. To avoid any hassles or penalties from unpaid or overdue taxes, we recommend seeking advice from a legal or tax professional in Spain.
Real estate sales capital gains tax in Spain
As in most countries, if you sell real estate property in Spain at a profit, those profits are considered capital gains and are subject to capital gains tax. Of course, if you do not make a profit on the sale, you have no tax obligation because there were no capital gains made. However, depending on whether or not you are a resident in Spain, the tax authority or Agencia Tributaria may still withhold a portion of the sale as a sort of preemptive tax.
This is basically how it works: when you are nonresident, the tax agency wants to ensure you don’t just run off with the profits without having paid the capital gains tax on the sale of your property. To guarantee they get at least some of their due, they will withhold 3% of the sale as the money passes from the buyer to you, so that you only get 97% of the sale price. If that 3% wasn’t enough to cover the full amount of capital gains tax that you owe, you’ll need to pay the difference. If the 3% exceeded your taxes due, you are entitled to a refund. You can get a refund for the excess capital gains taxes paid by submitting Form 210H (Modelo 210H) to the Spanish tax authority no later than 3 months after the sale.
Spanish capital gains tax rates on property
The amount of tax you pay will also depend on your residency status, and, of course, the amount of profit you made on the sale of the property. Spanish capital gains tax rates on property are set at a fixed, flat rate of 19% for nonresidents (compared to 24% for nonresident personal income tax). For residents, capital gains tax on selling property is included in the annual tax return, and the rate depends on your total annual income on a progressive scale. Residents should also note that they are liable for capital gains tax in Spain if they sell property in another EU country.
Regardless of the tax rate, the tax base for capital gains is calculated in the same way for residents and nonresidents: the final sale price of the property, minus costs and legal fees incurred during the sale, and minus the purchase price (title deed price plus VAT, land registry fees, notary and legal fees, and transmission tax). Importantly, as of 2015 inflation is no longer taken into account when calculating capital gains tax on selling property in Spain.
Exemptions to capital gains tax on selling property
If you are resident in Spain, there are a few ways you may be able to get an exemption from capital gains tax.
Capital gains tax is not applicable to people age 65 and older who are fiscal residents and have been living in the same home in Spain for over 3 years. For younger people, you are exempt from this tax when selling your primary residence and using the profits from the sale to buy your next primary residence, which may be in any EU country. To be eligible for this, you must have been tax resident in Spain for at least 3 years and you will need to stay in the new residence for at least 3 years. Any money from the sale that is not invested in buying the new home is subject to Spanish capital gains tax.