Seller’s Guide
Property sale
In the case of a property sale, it is necessary to declare the capital gains if the transfer value exceeds the acquisition value for personal income tax (IRPF) in the case of residents or through non-resident income tax (IRNR) if the individual is a non-resident. In both cases, the taxable base (i.e., the difference between the transfer value and the acquisition value) will be calculated in accordance with the Law on Personal Income Tax.
Acquisition Value
According to this law, the acquisition value (real value stated in deeds or the value determined for the purposes of inheritance and gift tax) includes expenses and taxes inherent to the acquisition paid by the transferor (e.g., notary fees, property registration fees, agency fees, lawyer fees, commissions, VAT, inheritance and gift tax, or transfer tax expenses) as well as investment and improvement costs. It is important to note that all these expenses must be documented with an invoice issued by the person or entity that carried out the works or provided the services.From this acquisition value, the fiscally deductible depreciation in the years in which the property was rented out should be subtracted.
Capital Gains Tax
The Spanish capital gains tax is a tax on the profits obtained from the sale of a property in Spain. The amount subject to tax is the gain, or the increase in the difference between the original purchase price and the selling price.The actual amount subject to tax is only the profits earned from the sale of the property after deducting purchase and sale costs. This tax is paid through annual tax declarations. When you file your self-assessed Spanish tax declarations, there is a designated section for the gain or loss from the sale of assets, which you should complete in the case of a sale.
A non-resident pays a 19% tax on the profit from sales. Non-residents in Spain from outside the European Union will pay a flat rate of 24% on their capital gains. If you sell a property in Spain as a non-resident, a standard 3% of the sale price is withheld as capital gains tax. How is capital gains tax calculated? The gain is the difference between the selling price and the purchase price. An inflation correction will be applied to the purchase price, and this correction is calculated using official tables from the Spanish government. All types of costs can be deducted, such as lawyer fees, real estate agent fees, and renovation or remodeling costs.
Resident Capital Gains Tax:
– 21% on the portion between €0 and €6,000
– 25% on the portion between €6,000 and €24,000
– 27% on the portion above €24,000
The tax is charged alongside income tax. You must pay the tax in the year in which the property is sold.
3% Tax Deduction
If the seller is not a resident in Spain, the buyer must withhold 3% of the purchase price and pay it to the tax authorities (via form 211). If this is not done, the tax authorities will consider the property as the asset backing the seller’s tax liability for the capital gains. This condition is highly unlikely to apply when buying from a developer.
Capital Gains Tax Exemption: You do not have to pay capital gains tax in the following cases:
1. If you purchase a new home using the proceeds from the sale, provided that you have lived continuously in your current home for at least three years, you are a resident, and your new home is your main residence.
2. If you are a resident, over 65 years old, and have lived continuously in your current home for at least three years.
Property Transfer Tax
Plusvalía, literally meaning “additional value,” is a municipal tax that applies to the sale of a property. It is calculated based on the cadastral value and the number of years the property has been owned. Therefore, it is advisable to find out in advance how much you have to pay in plusvalía. Your agent or lawyer can help you determine this by contacting the town hall.
It is important to consult with a lawyer or tax expert to ensure proper compliance with all tax obligations related to the sale of a property.