Spanish Capital Gains Tax

by Lucy Peacock from Home Espana

Spanish tax laws are often confusing for Spaniards and non-Spaniards alike. Capital Gains Tax (CGT) – the tax which you must pay on the profits from selling your home in Spain – is no exception. The following is a brief overview of the rules, which we hope will allow you to work out very roughly how much you would have to pay if you sold your property. You should consult a lawyer for complete advice.

CGT is payable on the profits you make from any property sale. That is, it is payable on the difference between the purchase price (as stated on the original “escritura”) and the sale price, less the buying and selling costs. The CGT tax rate for Spanish residents is 15%, calculated as part of income tax. Non-residents pay a flat rate of 35%. If you purchase a property from a non-resident, you are required to withhold 5% of the total purchase price and pay it directly to the tax authorities.Exemptions

Residents over 65 selling their principal residence of over 3 years are exempt from CGT
Property bought prior to 1986 is exempt for residents and non-residents, due to legislation ending in 1996. Property bought between 1986 and 1996 is partially exempt.
People over 65 who use the ‘inherit from yourself scheme’, in which you sell your house but retain the right to live in it until death, are exempt.

Reductions for Residents

Residents who reinvest all of the sale proceeds to purchase another principal residence can get capital gains tax relief, provided that they have lived in the property for 3 or more years. If they only use a portion of the property sale proceeds, they will get a percentage relief up to the amount reinvested (rollover Credit).

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Example

If someone bought a house for 120k and sold it for 180k (i.e. 60k profit)

If the new house is 180k = no capital gains

If the new house is 90k = capital gains tax is payable on 30k (i.e. half of the original profit, because half of the proceeds of the sale have been re-invested).

Reductions for Non-Resident Sellers

People who have bought since 1994 can apply an inflation factor to their capital gains tax liability to reduce for inflation.
All official expenses in acquiring a property can be used to offset against CGT – taxes and fees, i.e, transfer tax for resale property or IVA for new property, expenses for notary, property registration, the “plus valia” tax and lawyer’s fees. You must have the official receipts to be able to claim them.

Example

If the price stated on the original escritura is 90,000 Euro (E) and the official expenses (tax, fees, notary etc.) are 10,000E, that means that the original purchase price for CGT purposes is 100,000E

Add all the official expenses, tax and fees etc.
Apply the inflation corrector, for example, if the purchase was in 2001, the property has an inflation factor of approximately 1.0404 (accurate figures can be obtained in relation to each sale.)
Multiply original purchase price by inflation factor.

100,000E x 1.0404 = 104,040E.

So 104,040E is the original purchase price at today’s prices.
Calculate your profit. If you were selling on Paper for 150,000E, your profit would be 45,960E.

150,000E-104,040E = 45,960E profit

Residents pay CGT on this as part of their income tax (15% is the limit) which equates to 6,894E tax.

15% of 45,960E = 6,894 E

Non-residents would pay CGT at 35% which equates to 16,086E

35% of 45,960E= 16,086E

In conclusion, while capital gains tax may be a rather nasty surprise for many Spanish property owners, it is not as high as many people think. At least, it won’t be as high as you might think if you make sure you keep all receipts relating to the purchase of your property and get professional advice when you sell it.


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