Capital Gains Tax When Selling Your Property

When you sell a property in Spain you will be liable to pay capital gains tax on the profit you make.

Calculating the tax

The profit on a property transaction is the difference between the purchase value and the sale value.

Purchase value

Is assessed by totalling the purchase price plus the amount of expenses and taxes paid when you originally purchased the property. Typically this figure is established by taking the price on the title deed and adding: IVA or Transfer Taxes, plus valia (if applicable), notary fees and land registry costs. This total value is then multiplied by an inflation correction factor corresponding to the year of purchase (established annually by the Spanish budget).

Sale value

Is assessed by totalling the declared sale price minus the amount of the expenses and taxes you pay to sell the property. Typically this figure is established by taking price on the title deed and deducting: the real estate commission, lawyers fees, plus valia and notary and registry fees (if applicable).

The difference between the ‘purchase value’ from the ‘sales value’ equals the profit; this final figure is what you will pay capital gains tax on.

Current tax rate for residents and non-residents

As a resident you will pay your capital gains tax as part of your income tax declaration in May or June of each year. The official rate of the tax for the profit made on selling your property is 15%.

As a non-resident you currently pay a flat rate of 18%.

Capital gains tax scenario for non-residents

If you are a non-resident the person who purchases the property from you is obliged to withhold 3% of the sales value and pay this amount directly to the Spanish tax office (Hacienda). The payment is considered as an advance on your pending capital gains tax bill. The purchaser (or his lawyer) should pay the taxes on the form 211 then send you a copy, you must then file a form 212 within 30 days and pay the rest of the tax. If the 3% deduction exceeds the tax due then you may request a refund.

Resident tax payment

As a resident with a modest income the rate begins at 15%.

Minimising capital gains

Here are some of the things you can do to minimise the impact of capital gains tax.

Become a Spanish resident three years prior to sale - There are quite a few advantages to becoming a resident in Spain both in terms of owning and selling property. Anyone thinking about reselling should seriously consider this option for the following reasons:

1. If you are resident and more than 65 years of age, and you have lived in your home for three years, you will not be subject to Spanish capital gains tax when you sell it, no matter how great your profit.

1. If you are a resident, your minimum capital gains tax liability is 15% and you also avoid the hassle of paying the withholding tax mentioned above. Also if the property is your principal residence and you have owned it for a minimum of three years you can claim part or all of the tax back if you buy another principal residence within two years.

Special exemptions

There are certain exemptions that are currently available to you if you have owned your property in Spain for a long time:

1. If you bought your property prior to December 31 1986 you will not have to pay capital gains.
2. If you bought your property prior December 31st 1994, the taxable amount will be reduced by 11.11% annually for each year of ownership prior to this date.