Capital Gains Tax on Spanish Property Sales

What tax is payable when you sell your house in Spain?

General

In a sense the tax system in Spain is very similar to the UK when it comes to house sales: capital gains tax (CGT) is payable on the "profit" made but there is an exemption for people selling their main home (principal private residence or "PPR"). In Spain the PPR exemption is not as generous and there are special rules for non Spanish residents.

Basics

CGT is charged at 19% on the first €6,000 of a gain and 21% for the gain over €6,000.

The gain is calculated as being the sale price less the purchase price of the property, both amounts being adjusted by transaction costs: taxes, estate agents commissions, notary fees etc Also the gain can be reduced by the cost of any improvements made to the property during the period of ownership. Note that all costs, whether relating to fees or improvement costs, must be evidenced by VAT invoices to be claimed.

Properties bought prior to 1984 are CGT exempt. For houses bought prior to 1994 there are further reductions allowed to reduce the gain based on an inflation factor that has subsequently been abolished. For properties purchased after 1994 the gain is a straight comparison between sale price and cost price with no deduction for inflation or similar.

Reliefs

There are two main reliefs:

Over 65s: If you are over 65 at the time of sale, are Spanish tax residents and have owned the property as your main residence for three years or more, the sale is exempt from CGT. To claim this you will almost certainly have to show your tax returns to prove you are a Spanish taxpayer.

Rollover relief: if the property sold is your main residence and the sale proceeds are reinvested (within 2 years) in another main residence then the gain is deferred. There are several points to note about this rule:

- the gain is not exempt from tax forever; it is carried forward to the next property and if that is sold the gain becomes taxable at that point (unless another main residence is bought).

- if only some of the sale proceeds are invested in your next property, only the relevant proportion of the gain can be rolled over. EG sell a house of 200,000 and buy another for 150,000 - 25% of the gain is taxable now and 75% is rolled over (150/200).

- only resident taxpayers can claim this relief (by definition non resident taxpayers have their principal private residence in their home country). It will be necessary to have declared resident taxes in Spain before claiming this relief.

Non residents

Foreign owners of Spanish property, e.g. holiday home owners, also pay CGT in Spain when they sell their house. The tax rate and rules for the calculation of the gain are the same but the timing and mechanics of payment differ. Residents simply declare the gain in their annual tax return ("La Renta") the year following the year of disposal.

Non residents have to pay a 3% advance against their CGT liability at point of sale and have to use special forms to declare as follows:

Modelo (form) 211: Declaration of retention on purchase of property from non-residents

Form download: Modelo 211 pdf

Explanation: Spain has a law designed to help prevent non residents selling property and then skipping the country without paying the capital gains tax due. It is a requirement that buyers of property from non residents retain 3% of the agreed price and pay it to the AT instead of the vendor using this modelo. Needs to be filed and paid within 1 month of sale. You will not be able to complete a sale at the Notary without this tax being paid.

Modelo (form) 212: Non-resident declaration of CGT payable on house sale and possible reclaim of 3% retention.

Form download: Modelo 212 pdf

Explanation: Non resident property vendors have three months in which to use this form to lodge a claim for repayment of the 3% retention taken against the sale of their property (see modelo 211 above). If the non resident has not made a gain on the sale, or has made on smaller than the 3% retention, the tax office will refund the difference provided they are in agreement with the calculation and are satisfied with the paperwork. If the non resident's CGT liablity exceeds the 3% retention they will have to pay the difference to the tax office.

NOTE: you are almost certainly going to be required to provide copies of recent years' Spanish non resident income tax forms. If you have not paid this tax (see our guide here - Spanish tax form 210 ) you will not get your refund.