Spanish capitals gains taxes are applied to certain types of income known as “savings income”. One common situation in which you may be held liable for capital gains tax in Spain is when you sell a property and make a profit from the real estate transaction. In this article, we’ll go over the tax rates, procedure and main exemptions that apply to both residents and nonresidents when it comes to capital gains tax in Spain.
Paying capital gains tax in Spain on a property sale
The first thing to understand is that you are only going to pay Spanish capital gains on a real estate sale if you profit from it. In other words, if you take a loss on the property, you don’t have any CGT tax obligation. Back in the early years of Spain’s economic crisis, it wasn’t uncommon for people to lose money when selling their homes. Fortunately, the real estate and housing markets are much more stable now, and with property values increasing steadily, you are likely to come away with at least a small net gain, which will be subject to Spanish capital gains tax.
If you sell other types of investments for a profit, such as shares in a company, those types of transactions are also going to incur a capital gains tax liability.
Spanish capital gains for nonresidents
For people owning and selling property in Spain who are not resident in the country, your sale price is going to be taxed upfront by the tax authority to avoid losses from nonresidents “disappearing” before paying their Spanish capital gains tax obligations. Just like with some other types of taxes, you will then file a form with the tax authority, and one of two things will happen: if you owe more tax than what they withheld upfront, you will need to pay that difference; on the other hand, if your tax liability was less than what they took out, you will be entitled to a refund for what you overpaid.
The capital gains tax in Spain for nonresidents is 19% of the profit made on the sale, which is calculated as the final sale figure less the purchase price (and less administrative and other costs, like VAT tax, notary fees, legal fees, etc.). When you make the sale, 3% of the sale price will automatically be withheld by the tax authority. If you believe you are entitled to a refund of some of this capital gains tax in Spain, you will need to fill out a tax form 210H and submit it no more than three months after the sale of the property, plus any required documentation. To ensure that this process goes quickly and smoothly, we recommend consulting a legal and tax professional with expertise in Spanish tax law.
Capital gains tax in Spain for residents
Spanish CGT for residents is on a progressive scale based on total savings income: 19% for €0 to €6000; 21% for €6000 to €50,000; and 23% for incomes over €50,000. You will declare any capital gains on your annual tax return. Some exemptions are available for primary residences and elderly residents who have been living in the home for at least three years. There are also some circumstances which the tax authority considers compelling reasons to sell a primary residence early, and you may be able to get reduced Spanish capital gains liability if you can provide documentation of these circumstances.