Capital gains tax in Spain

Non-resident taxes include Capital Gains Tax. This tax is of great importance, especially in relation to the purchase and sale of real estate in Spanish territory.

What is capital gains tax

The capital gains tax is a tax that must be paid when profits are obtained from the sale of an asset, such as a property or investment in Spanish territory. Therefore, when the value of the sale of said good is greater than the purchase price of the same, it will be necessary to pay this tax for the difference, that is, the profit.

This tax is one of the most important when selling a home in Spain.

Although in other countries this tax works independently, in Spain it is included within the Personal Income Tax (IRPF). In addition, we found some differences between the application of the Capital Gains Tax for non-residents and residents in Spain.

Capital gains tax for residents in Spain

For a person to be considered a tax resident in Spain, they must remain in the country for a minimum of 183 days, approximately 6 months.

The tax will be applied to people who meet this requirement as follows:

19% for the first 6,000 euros of profit.
21% when the benefit is between 6,000 and 50,000 euros.
23% from 50,000 to 200.000 euros
26% onwards.

The corresponding percentage will be applied to the difference between the purchase price and the sale price of the asset.

Bonuses

Although the tax rate of this tax is high, there are some bonuses that allow you not to pay or reduce the tax significantly.

Exemption for habitual residence

If the profits obtained from the sale of an asset are going to be invested in the purchase of a house that will be the habitual residence, it will not be necessary to pay the capital gains tax. The so-called habitual residence exemption applies.

Therefore, two fundamental requirements must be met: that the property being sold is the habitual residence and that the profits be invested in the new habitual residence. It is also necessary that the property is located within the European Union.

Selling a property for people over 65 years of age

If a person 65 years of age or older sells a property, they will not have to pay this tax, regardless of where the profits are invested. Therefore, it is advisable to wait until reaching this age, if it is close, to make the sale.

The only requirement that must be met in order to benefit from the exemption for those over 65 is that the property being sold is the habitual residence and that it has been lived in for a minimum of 3 years.

Reduction of asset purchases before 1995

For sales of assets acquired before 1995 there is a significant tax reduction. Therefore, for assets purchased up to December 1994 it may be applied. For this it is necessary to take into account:

The bonus will be applied to earnings generated up to January 2006. Subsequent increases are taxed at the normal rate.
The property or asset had to have a purchase value of less than 400,000 euros for it to be subsidized.

If the requirements are met, the reductions consist of 11% in properties, 25% in shares and 14% in other assets.

Capital gains tax for non-residents

For people who remain in Spanish territory for less than 183 days and, therefore, are considered non-residents, this tax is somewhat different:

Those who habitually reside in a country of the European Union, Norway or Iceland, the rate to pay will be 19%.
In case of residence outside the European Union and the mentioned countries, the fixed rate will be also 19%.

Bonuses and reductions

Non-residents in Spain may apply the bonus for habitual residence in the capital gains tax in a similar way as residents do as long as they have their residence in a European Union country that has a tax agreement with Spain.

The capital gains tax is a tax on non-residents and residents that is applied when benefits are obtained from the sale of an asset, that is, when the sale value exceeds the purchase value. In the case of residents, they will pay between 19% and 26% depending on the benefit obtained and some of the existing bonuses may be applied. For non-residents the rate will be 19%.

Further information

This article is part of our service Taxes in Spain for foreigners. Visit this section where you will find all the useful information on this topic, including a complete guide Taxes in Spain for non-residents and foreigners.

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