Capital Gains Tax on Property in Spain: A Complete Guide

Selling property in Spain can be rewarding, but it’s important to understand how Capital Gains Tax (CGT) applies before completing a sale. Whether you are a resident or non-resident, Spanish tax law sets out specific rules on how gains are calculated, what rates apply, and which exemptions may reduce your tax bill.

What Is Capital Gains Tax in Spain?

Capital Gains Tax in Spain is applied to the profit you make when selling or transferring an asset, including property, shares or other investments.

• Residents are taxed on gains from worldwide assets.
• Non-residents are only taxed on gains from assets located in Spain.

Capital Gains Tax Rates in Spain

Spain uses a progressive scale for residents, with the following tax bands:

For non-residents:

• EU/EEA residents: flat rate of 19%
• Non-EU/EEA residents: flat rate of 24%

How Capital Gains Are Calculated

The taxable gain is the difference between the sale price and the acquisition cost, adjusted for allowable expenses and documented improvements.

1. Sale price: The price you received for the property.
2. Acquisition cost: The original purchase price plus purchase-related expenses (notary, registration, and taxes).
3. Improvements: Renovations or upgrades, provided they are supported by invoices.
4. Net gain: Sale price minus adjusted acquisition cost.

Example:

• Purchase price: €150,000
• Purchase costs: €10,000
• Improvements: €20,000
• Total acquisition cost: €180,000
• Sale price: €250,000
• Capital gain: €70,000

Exemptions and Reductions

Certain exemptions can significantly reduce or eliminate your tax liability:

• Reinvesting in your main home: If you reinvest the proceeds from selling your primary residence into another within two years, you may be exempt (residents only).
• Residents aged 65+: No CGT is due on the sale of a primary residence if you have lived there for at least three years.
• Life annuity: Residents over 65 can invest up to €240,000 of gains into a life annuity within six months and avoid CGT.

Capital Gains Tax for Non-Residents

In addition to the flat tax rate, non-residents face specific requirements:

• 3% withholding tax: The buyer must retain 3% of the purchase price and pay it directly to Spanish tax authorities.
• Refund of excess: If the actual CGT due is less than the withheld amount, or if you sold at a loss, you can claim a refund by filing Form 210 within four months.
• Double taxation treaties: Agreements (such as the US-Spain treaty) may allow you to offset Spanish taxes against those in your home country.

Filing and Paying Capital Gains Tax in Spain

• Residents: Declare gains in the annual income tax return (Form 100), filed between April and June.
• Non-residents: File Form 210 within four months of the sale.

Steps:

1. Calculate the gain and deduct eligible costs.
2. Complete the appropriate tax form.
3. Submit on time to avoid penalties.
4. Pay the tax owed (noting that non-residents already have 3% withheld).

Common Mistakes to Avoid

• Ignoring deductible costs: Keep invoices and receipts for improvements and purchase-related expenses.
• Missing deadlines: Late submissions may result in fines.
• Overlooking treaty benefits: Tax treaties can help avoid double taxation, but professional advice is key.

If you require further advice, please feel free to contact us and we will answer questions where we can, or put you in contact with professional tax advisors.