Capital gains tax on property in Spain is often the largest single cost of selling a home or investment property, and the amount depends heavily on how the gain is calculated and documented. Raso Investments advises resident and non-resident owners on the tax consequences of a sale before it is agreed, so that the net proceeds are known in advance and every legitimate deduction is used.
Spain does not have a separate capital gains tax as such. The gain is taxed within personal income tax for residents (IRPF) and within non-resident income tax for non-residents (IRNR). Companies are taxed through corporate income tax. In every case, the starting point is the same: the difference between the transfer value and the acquisition value.
How capital gains tax on property in Spain is calculated
The transfer value is the sale price stated in the deed, reduced by the costs and taxes paid by the seller in connection with the sale, such as agency fees borne by the seller and the municipal plusvalía tax.
The acquisition value is the original purchase price increased by the costs and taxes paid on the acquisition, such as transfer tax or VAT, stamp duty, notary and Land Registry fees, and by the cost of improvements carried out on the property. Ordinary repairs and maintenance do not count as improvements. Where the property has been let, the depreciation that was or should have been deducted against rental income reduces the acquisition value.
For property received by inheritance or gift, the acquisition value is generally the value declared for inheritance or gift tax purposes, plus related costs. This makes the valuation used at the time of the inheritance relevant years later when the property is sold. Our page on inheritance and gift tax for foreigners covers this link.
Residents and non-residents
For Spanish tax residents, property gains form part of the savings income base, which is taxed on a progressive scale. The final amount therefore depends on the size of the gain and the taxpayer’s other savings income in the same year, and gains can be offset against certain losses.
For non-residents without a permanent establishment, the gain is currently taxed at a flat rate of 19%. The buyer withholds 3% of the price as a payment on account, and the seller must file Modelo 210 to settle the final position. This process is explained in detail on our page on selling property in Spain as a non-resident.
Exemptions and reliefs
Several reliefs exist, but most are tied to the taxpayer’s main home and to specific requirements:
- Reinvestment in the main home. The gain on the sale of the taxpayer’s main home may be exempt if the proceeds are reinvested in a new main home within the legal period. The rules have detailed conditions on how long the home was occupied and on the timing of the reinvestment.
- Taxpayers over 65. Residents aged 65 or over selling their main home may benefit from an exemption.
- Older acquisitions. Assets acquired before 1995 may benefit from transitional reductions in limited circumstances, subject to overall caps.
Whether any of these reliefs is available depends on the taxpayer’s residence, the use of the property and the facts of each case. Non-residents should not assume that reliefs designed for residents will apply to them.
What we review before a sale
- The purchase deed and the taxes and costs paid on acquisition.
- Invoices for improvement works and evidence of payment.
- The rental history and the depreciation to be taken into account.
- The ownership structure: sole, joint, through a company, or acquired by inheritance.
- Your tax residence in the year of sale and any relevant double tax treaty.
- The municipal plusvalía tax and how it interacts with the income tax calculation.
Common mistakes
- Losing the invoices for improvements, which then cannot be added to the acquisition value.
- Confusing repairs with improvements.
- Ignoring the depreciation adjustment on a property that was let.
- Not planning the timing of a sale in relation to changes of tax residence.
- Assuming that the gain is taxed only in Spain, without checking the position in the country of residence.
Good records are the simplest way to reduce the tax on a sale. We recommend keeping, from the day of purchase, a file containing the purchase deed, the tax and fee receipts, the invoices for every improvement and proof of payment by bank transfer. Payments made in cash or without an invoice are difficult to prove and are frequently rejected by the Tax Agency. Where documents have been lost, copies can sometimes be obtained from the notary, the Land Registry or the builder, and we can help to reconstruct the file before the sale is agreed. Planning ahead also allows the seller to consider the timing of the sale, the treatment of any losses and the coordination with the tax position in the country of residence.
Frequently asked questions
Is the municipal plusvalía the same as capital gains tax?
No. The plusvalía municipal is a local tax on the increase in value of urban land. The gain on the sale is taxed separately through income tax. Both may apply to the same sale.
Can I deduct the agent’s commission?
Commission paid by the seller in connection with the sale generally reduces the transfer value, provided it is properly documented.
What if I sell at a loss?
A loss may be offset against certain gains, subject to the rules applicable to residents or non-residents. Non-residents should still file the Modelo 210, which also allows them to recover the 3% withheld.
Are the rates fixed?
The rates are set by law and may change. The figures on this page are those currently in force. Every case is reviewed individually with the regulations applicable at the date of the sale.
Next steps
To understand your capital gains tax position before selling, write to info@raso.law. Describe the transaction and the property: date and price of purchase, improvements made, intended sale price, ownership structure and your tax residence. We will reply in writing after reviewing your case. Further information is available on our tax law page.