When you want to sell a house in Spain, you may be required to pay capital gains tax in certain cases. Specifically, this means that as an individual, you pay capital gains tax on the actual increase in value of your property. For non-residents, there is a fixed rate of 19%. For residents, there is a progressive rate up to 23%.
Firstly, there is the municipal capital gains tax or Plusvalía. When selling your property in Spain, you, as the seller, will be taxed on any potential capital gains. In the case of the inheritance of real estate, it is the heirs who must pay this capital gains tax. The calculation of the municipal capital gains tax is based on the difference between the initial and current cadastral value of the property. The percentage is autonomously determined by the municipality and may vary.
Additionally, there is the national capital gains tax. Here, you are taxed on the actual realized capital gains. If you haven't realized any capital gains at the time of the sale or transfer of your property, you obviously don't pay national capital gains tax.
As a non-resident, you pay a fixed rate of 19% tax on the difference between the purchase price and the selling price of your property. If you are a resident in Spain, there is a progressive rate. You pay 19% tax if your profit is less than 6,000 euros, 21% tax if your profit is between 6,000 and 24,000 euros, and 23% tax when your profit is higher than 24,000 euros. Of course, certain buying and selling costs can be taken into account.
When it comes to the purchase price of your real estate in Spain, you can include costs such as notary fees, fees for lawyers and legal advisors, registration fees, paid taxes, registration rights, and costs of certain renovations. These may include renovation works such as a new kitchen, laying a new floor, renewing the roof, installing air conditioning, etc.
Various costs can also be deducted from the selling price of your property. These include the paid Plusvalía and the services of the real estate agency. Note: all costs you charge must be proven with official invoices stating your name, the relevant address in Spain, and your NIE number.
If you, as the seller, are a non-resident at the time of signing the notarial deed, 3% will be withheld from the selling price by the buyer. The buyer must return this amount to the Spanish Treasury within one month. This amount is an advance on the potential capital gains tax owed by the seller. As a seller, you must file the settlement of the capital gains tax within 4 months after the sale of your property. If you have little or no capital gains, you can fully or partially reclaim that 3%. If you have realized a significant capital gain, you must pay additional taxes. If you, as the seller, are a resident at the time of signing the notarial deed, there is no 3% withholding, but this tax will be settled with the next personal income tax return.
There are some exceptions to capital gains tax. For example, if you are 65 or older and a resident in Spain, you don't pay capital gains tax, provided that you sell your primary residence, namely the property where you have lived for the past three years. In some cases, the three-year period can be waived, such as in exceptional circumstances like divorce or accident. If you are younger than 65, you may still be exempt from capital gains tax. If, as a resident, you reinvest the money within two years in another property serving as your legal residence, you won't pay capital gains tax. Additionally, there are exemptions for homes purchased in the '70s and '80s.