Capital Gains Tax Spain
- 😊 How to calculate the capital gains tax in Spain?
- ☎️ capital gains tax in Spain for non residents
- 🔥 Capital gains tax in spain for residents
- ❤️ How to evade capital gains tax?
- ⛔ Capital gains tax rate in Spain
- ⚖️ CGT mitigation on selling or gifting property in Spain
- ✅ Who pays the plusvalia tax during the auction of the property?
- 🔍 Difference between capital gains tax and plusvalia tax
- ❤️ Effects of capital gains taxes in Spain
- 📣 Important things you need to know about the capital gains tax
The residents in Spain as well as the non-residents are supposed to pay the capital gains tax in Spain at least once in their lifetime. Unlike other forms of taxes such as wages, capital gains are more complex to calculate, and therefore harder to tax.
Once you make a profit from an economic transaction such as when you sell a property, real estate, stock, and precious metals, one of the main taxes you will be obliged to pay is the capital gains tax. Keep reading to find out about the tax liability of capital gains tax in Spain, and how much is the gains taxed in Spain.
As we mentioned earlier, capital gains tax is the tax that you pay on the profits that you obtain from selling an asset such as land or property. The tax is also charged on the profits you make on an investment especially within the Spanish territory.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
In simpler terms, any time the sale value of the asset or investment is greater than the price you initially paid for its acquisition, then the capital gains tax will be charged on the difference (profit).
This means that capital gains tax is one of the main taxes you will be charged if you sell your property (e.g. your house) in Spain. In countries like the UK, the CGT works independently. However, in Spain capital gains is integrated with the IRPF (personal income tax) in accordance with the Spanish tax system.
Additionally, the Spanish tax system requires that you pay the capital gains tax on the profit you make from the sale of a property, whether you are a Spanish resident or not. We highly recommend that you seek fiscal advice from a tax expert since taxation in Spain tends to be complex at times and you could end up with fines or penalties, if you are not careful.
How to calculate the capital gains tax in Spain?
capital gains tax in Spain for non residents
As you recall, we mentioned that even though you are not a resident of Spain, you will still be subjected to the capital gains tax in Spain. Luckily, the capital gains tax for the non-residents is simpler and easier to calculate compared to that of the residents. The capital gains flat rate for non-residents in Spain is a rate of 19 percent charged on the profits gained from the auction of a home. Although the calculation more seems easy, it is more complicated than just working out 19 percent of the sale. This is how you calculate capital gains tax for non-residents in Spain.
Step 1: Calculate the true purchase price
The true purchase price is calculated by adding the initial price of purchase of the property (the price is in the Title Deed), with the additional costs that were likely incurred during the purchase. The costs may include:
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
- Transmission tax
- Legal fees
- VAT (value added tax)
- Notary fees
- Land registry fees
Step 2: Calculate the final sale figure
The final sale figure is calculated by subtracting the costs incurred during the sale from the current selling price. For example, if structural alterations were made to the property to prepare it for sale, the costs of such changes should be subtracted from the current selling price of the property. Additionally, any legal fees incurred should also be subtracted from the selling price.
However, in order for you to subtract the above costs from the selling price, you will need to provide proof of official receipts for the work involved and the materials provided.
In case you made some structural alterations on the property and forgot to include the changes in the Title Deed, we highly recommend that you rectify the changes at the point of sale.
Step 3: Calculate the net profit
After calculating the true purchase price and the final sale figure, you can now calculate the net profit easily. The formula for calculating the net profit is:
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
Final sale figure – the true purchase price= Net Profit
Note: The capital gains tax will be charged from your net profit. We had mentioned that the flat rate for non-Spanish residents is 19 percent. Therefore, the capital gains tax that you owe will be:
19% of Net Profit.
Spanish nonresidents from outside the EU (European union) are expected to pay a fixed capital gains tax rate of 24 percent. However, if the nonresidents are from a European country, Norway or Island, the capital gains tax is reduced to just 19 percent.
Do the nonresidents enjoy any reductions or exemptions? Yes.
The non-residents can enjoy an exemption from the tax if they are living legally in a European country which has a tax treaty with Spain.
Capital gains tax in spain for residents
On the other hand, if you are a resident in Spain, the capital gains tax that you will be expected to pay is incremental. Did you know that the government considers you one of its Spanish tax residents if you reside in Spain for more than 183 days each year?
Therefore, as a tax resident of Spain, your capital gains liability will be as follows:
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
- 19 percent for the first €6,000 profit
- 21 percent for profit between €6,000 and €50,000
- 23 percent for any profit above €50,000
If you are uncertain about your capital gains liability, we highly recommend that you consult with a fiscal expert. Due to the complex bureaucratic systems of Spain, avoid following online routes which involve a tax calculator to calculate your capital gains tax. Furthermore, the capital gains tax is an additional levy applied on the regular income tax, therefore, and online income tax calculator may be misleading.
Which assets are liable for CPT?
The following capital assets and investments are liable for capital gains tax.
- Stocks
- Collectibles
- Bonds
- Jewelry
- Buildings
- Precious metals
- Lands
- Houses and flats
Spanish residents selling their home in UK
Are you a Spanish tax resident planning to sell your home in the UK? In many European countries including Spain, your global income is liable to taxation. This means that if you are resident with a property in the UK, if you sell the property, you will be liable to capital gains tax in Spain.
Additionally, you will also be required to declare your income from the sale on your annual resident tax declaration. The declaration covers the previous year as well. This means that if you sold your house in 2019 May, you are required to declare it in June 2020, instead of 2019.
How to evade capital gains tax?
In case you are wondering, “How can I avoid capital gains tax in Spain?”, then we have excellent news for you.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
There are two main situations where you will not be liable to pay the capital gains tax, and one situation where you will be charged a reduced percentage of the tax. Let us have a look at some of them.
Main home exemption
You will not need to pay the capital gains tax in Spain if the money that you earn from vending your property will be used to purchase a new property, which you intend to use as your house. This is called the main home exemption.
The main thing to be considered in this situation is that the property you are selling used to be your home, and so will the new property which you are about to purchase with the profit from the sale.
However, in order for the main home exemption to be applicable, the property needs to be located within the European union, rather than outside it.
Selling property when you are older than 65 years
Do seniors have to pay capital gains? This exemption works best for those who want to save on taxes. If you are above 65 years old, you will not be liable to pay the capital gains tax once you sell your property. Even if you do not intent to use the proceeds from the auction of the property to purchase your new home, you are completely exempt from the capital gains tax.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
We recommend that if you are planning to sell your property in your early 60’s, consider waiting until you are above 65 to sell your property so that you can avoid paying the capital gains tax.
However, there is a specific condition that you must meet in order to be exempt from capital gains tax at old age. The stipulated condition is that the property you are selling needs to be your habitual residence. In simpler terms, you need to provide proof that you have lived for a minimum of the past 3 years on the property, before you sell it, in order to be completely exempt from the capital gains tax.
Assets bought before 1995
Did you buy the property that you currently want to sell before 1995? We have excellent news for you. Although you will not be completely exempt from paying the capital gains tax, you can enjoy tax reduction on the capital gains.
All the properties that were acquired in Spain up until 31st December 1994 are eligible for this bonification (tax reduction).
Nevertheless, there are two conditions that must be met:
- The bonification is only applicable to the capital gains produced until January 2006. Any rise in the worth of the asset after January 2006 will not include the tax reduction and will be taxed at the normal capital gains tax rate.
- In order for your property to enjoy the bonification, it must have been initially purchased for more than €400,000.
If your property or asset meets the above two requirements, you will enjoy the following tax reductions:
- Properties will enjoy 11 percent tax reduction
- Company shares will enjoy 25 percent tax reduction
- Any other assets will enjoy 14 percent tax reduction
Capital gains tax rate in Spain
How much is capital gains tax in Spain? How does capital gains tax work in Spain?Over the years, the capital gains tax rates in Spain have changed. In the table below, we have illustrated the previous capital gains rates as well as the present rate in order to clarify any confusion about gains tax rates in Spain.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
The table show the capital gain rates for Spanish real estate and is only applicable to European residents and residents within the (EEA) European Economic Area. The residents outside the European union pay 24 percent capital gain rate in general, but there are some exceptions.
| PERIOD | TAX RATE % |
| Up to 31ST December 2006 | 35 |
| Up to 31st December 2007 | 25 |
| 2008 | 18 |
| 2009-2011 | 19 |
| 2012-2014 | 21 |
| 2015 | 20 up to 11th July and 19.5 from 12th July |
| 2016 | 19 |
As we mentioned earlier, 19 percent is the current rate. The European and European Economic Area vendors who are nonresidents of Spain are required to pay the 19 percent rate during the sale. On the other hand, European and European Economic Area vendors who are Spain residents are expected to pay a sliding scale staring at 19 percent during the sale.
The 3 percent withholding tax
If the vendor does not reside in Spain, the buyer is expected to pay 3 percent of the price to tax authorities in Spain as a capital gains withholding tax retention in order to cover the capital gains liability of the vendor. Therefore, if you are a vendor who is a nonresident, you will not get your hands on all the money from the sales until the Spanish tax authorities are satisfied that all the taxes have been paid.
When selling property in Spain, we highly recommend that you keep both hard and soft copies of all the invoices related to the purchase such as:
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
- Property register fees
- Legal fees
- Notary fees
Additionally, if you do any building work on the property after you purchase it, ensure that you keep the copies of all the licenses and invoices. The copies will help you offset the expenses against the capital gains when you decide to sell the property in future, thereby reducing your capital gains tax on the vending of the property.
CGT mitigation on selling or gifting property in Spain
If you intend to sell your property in Spain, you need to know about the two main taxes that you are liable for. They include capital gains tax as well as Plusvalia.
What is Plusvalia tax?
The Plusvalia tax is a municipal tax, which is charged by the town hall on sold properties in Spain. The tax is calculated based on the rateable value of the asset, and the number of year that have passed since it was bought by the current owner. The major goal of the plusvalia tax is to increase the worth price of the land where the property stands. Some of the increased value of the land is usually attributed to the activities of the local government and community to improve the land.
Who pays the plusvalia tax during the auction of the property?
The Spanish law requires the vendor to pay the plusvalia tax. However, the law is not binding and therefore the purchaser and the vendor can agree who gets to pay the tax. During economic boom years in Spain such as the period between 2000 and 2007, the vendors had the higher bargaining power and many buyers had no choice but to pay the plusvalia tax. However, in current economic times, the buyer has the bargaining power and the vendor almost always pays the plusvalia tax.
Difference between capital gains tax and plusvalia tax
The main difference between the capital gains tax and the plusvalia tax is that the capital gains tax is fairer to the seller because it is based on the proceeds realized from the transaction of the property or asset. On the other hand, plusvalia tax does not reflect the real loss or profit gained during the sale.
Now that we know the distinction between capital gains tax and plusvalia tax in Spain, let us look at some of the strategies to mitigate your capital gains tax liability as a seller.
Absolute relief
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
As we explained earlier, all tax residents in Spain who are over the age of 65 years are exempt from paying the capital gains tax. Especially if the property they are selling is their main home.
Roll over relief
If you are under the age of 65 years, you can also be exempt from paying the capital gains tax on selling your home if you meet the following requirements:
- The seller is below 65 years of age
- The seller is a Spanish tax resident
- The property is your main home and you have dwelled in it for the past three years permanently. However, the period may be less than 3 years if you have experienced separation, marriage, or job change.
- The proceeds from the sale are to be reinvested in a buying a new home. Any amount of the profit from the sale that will not be reinvested in the new home will be liable to capital gains tax.
- If the seller meets a two-year deadline to reinvest the profits from the sale in a new home.
Pension annuities
This tax relief applies to residents only. The relief can be applied in addition to the above two tax relief strategies.
The capital gains made by the resident taxpayers who are over the age of 65 will be exempt from taxation if they meet the following requirements:
- The profit from the sale of property or asset is reinvested in pension annuities
- The seller meets the six-month deadline of reinvesting the profits into the pension annuities
- The capital gains are capped at €240,000
Traditional method
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
With the help of your lawyer, you can offset from your capital gains tax liability from the sale, all the expenses that you incurred when you bought the property plus any extra costs of refurbishment.
As long as you have VAT invoices to back up your claims, getting this tax relief will be very easy for you. The best part about the traditional method strategy is that is includes both residents and nonresidents.
Some of the expenses and VAT invoices that can offset the capital gains liability include:
- Lawyer’s fees during buying house
- Taxes
- Notary fees
- Land registry fees
- Improvements to the property e.g. refitted kitchen, wood flooring, glass curtains, A/C installation, rood retiling, and house alarm
- Estate agent’s commission during selling the house
- Lawyer’s fees during selling the house
Effects of capital gains taxes in Spain
Economists who support lower rates of capital gains taxes argue that low capital gain rates result into the following:
- Economic growth in the region
- It mitigates double taxation of the corporate income
- The lower rates increase the lock in effect, which discourages investors from selling their assets to avoid taxes
- Inflation decreases the real value of capital gains and the lower rates help to offset the cost
Another research showed that the tax breaks of capital gains tax have no significant effect on the growth of the economy. Instead, the tax breaks create economic distortions, which end up hurting the economic efficiency of the country.
One thing that is certain is that the capital gains tax policy makes the tax system of a country to become more regressive. The capital gains tax breaks benefit the wealthy in the society because the capital gains are usually generated by high income tax payers.
Tax deferment
One of the main benefits associated with capital gains tax is the deferment of tax payments until an asset is sold. For example, an investor in does not pay taxes on the equity they gain on an investment property, until the year they finally sell the property for profit.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
Additionally, a securities investor does not pay any capital gains tax on the profits they earn on stocks and bonds until they sell the asset.
Investors pay taxes in the year where they realize the gain on their investment.
Profit reduction
Do you know that almost everything you own for investment purposes or personal uses is a capital asset? The main disadvantage about this is if you sell any of your capital assets for profit, the tax authorities in Spain will require you to pay the capital gains tax. The disadvantage of capital gains tax in Spain is that it reduces the overall profit gained from the sale of property or asset.
Tax rates
The amount of tax that you pay in capital gains depends on the length of time you possessed the asset before you sold it. This can be a benefit or detriment to you as the tax payer depending on the period of ownership. If you were the owner of the asset for more than 12 months and made a profit from it, then you have a long term capital gain liability, which is usually taxed at a lower rate.
On the other and, if you owned an asset for less than 12 months then sell it for profit, you will have a short term capital gain liability, which is usually taxed at a higher rate.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
As you can see, long term capital gain taxes are beneficial compared to short term capital gain taxes, because the rates generate savings.
Double taxation
As a taxpayer, you are responsible for paying federal and state capital gain in form of taxes. Apart from reporting the profits realized from the sale of an asset or property, investors and property owners are also required to pay additional taxes such as income tax, which may put a financial burden on a tax payer.
Tax for expats in Spain
Do expats pay capital gains tax in Spain? Given that Spain is now one of the most popular destinations in the world for expats, the expats living in Spain need to understand more about the tax system in Spain.
The Spanish government is known for changing its taxation rules frequently, and thus makes it complicated to keep up with the tax changes. However, anyone who fails to pay vital taxes such as capital gains tax in Spain will face severe fines and penalties.
As we stated earlier, the Spanish tax residents are required by the tax authorities to pay the capital gains tax during the disposal of an asset. As for the tax for non residents, they are required to pay the capital gains tax in Spain on the profit made from the vending of a property or an asset.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
As an expat, we highly recommend that you seek tax advice from a fiscal advisor before you sell any property within Spain.
How to know if you qualify to be classified as a tax resident of Spain?
As an expat who visits Spain frequently, you will be classified as a tax resident f you meet the following requirements:
- You live in Spain for more than 183 days each year. The number of days do not need to be consecutive. As long as the number of days you spend in Spain add up to 183 days each year, you are considered a Spanish tax resident.
- You have economic interests in Spain. This could mean that you work in Spain for a company or as self-employed. Additionally, if you carry out any professional activity in Spain, you will be considered a Spanish tax resident.
- You have a spouse or children who live in Spain.
Capital gains tax and living abroad
Many people manage to avoid paying capital gain tax by becoming a non UK resident. Although this strategy is quiet popular, it has some very strict requirements. One of the requirements is that you must complete five years of non-residency in the United Kingdom to be exempt from paying the capital gains tax. 5 years is a really long time especially if you are a UK citizen. The next time you wonder, “Do I have to pay capital gains if I live abroad?”, you should consider whether you have the means to live abroad for more than five years.
If you are prepared to live for five years abroad to be exempt from paying the capital gains tax when you sell your properties in the UK, you need to bear these few important points in mind.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
The tax exemption only applies if you are a non UK resident as well as a non UK ordinary resident, when you sell the asset or property. If you are still a UK resident during the tax year that you sell the property, you will be liable to the United Kingdom capital gains tax, irrespective of how long you plan to leave the UK for.
Is it possible to live in Spain and pay taxes in the UK?
Spain has a double taxation treaty with United Kingdom that ensures that you do not pay tax on the same income in both Spain and the UK. In order to protect yourself from paying double taxes, you are supposed to declare your worldwide income to Spanish authorities as a resident.
Additionally, if you are not a resident, yet you earn global income from other countries, the tax authorities will only require you to pay tax on income that came from Spain.
Do all assets qualify for capital gains tax?
Not every capital asset you own in Spain will qualify for the capital gains treatments. Some of the capital assets that are not liable to capital gains tax in Spain when you sell them include:
- Depreciable business property
- Business inventory
- Savings income
Also, items that you have produced or have had produced for your business or brand are subject to capital gains treatment. Such items include:
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
- A model, patent, invention, design, or a secret formula
- A copyright
- A musical, artistic, or literary composition
- A memorandum, letter, or similar items such as drafts of speeches, photographs, transcripts, manuscripts, drawings, or recordings
Important things you need to know about the capital gains tax
As a Spanish tax payer, there are several things you need to learn about the capital gains tax. They include:
Capital gains are not just for the rich
There is a huge misconception about capital gains that most people have, and that is; capital gains are just for the rich in society. This is untrue because even if you belong to the middle class or lower class in economy, if you sell a capital asset in Spain, the profit you make will be subject to capital gains tax. As we stated earlier, almost everything you own qualifies as a capital asset. Whether it is your car, big screen TV, laptop, stocks, or bonds, it is classified as a capital asset by tax authorities.
If you decide to sell your laptop for more than its original price, the profit you earn is a capital gain and is subject to taxation. This means that as a law abiding tax resident, you are required to report the profit from the sale of your laptop to Spanish authorities.
Your home is most likely exempt from capital gains tax
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
The biggest asset that most people have is their home. Since properties tend to appreciate in value over time, you might fetch a huge capital gain from the real estate market if you decide to sell your home today.
The Spanish tax authorities will exclude you from paying all or part of the capital gains tax in Spain if you meet the following requirements:
- You intend to use the gains from the auction of the property to purchase another home
- You have been a permanent resident for that home for three years and above
- The property has depreciated in value and you end up selling it for a lower price than what you paid when you initially bought the property, thereby making a loss.
Length of ownership matters
If you own an asset for more than 12 months then sell it later for profit, you earn a long term capital gain that is subject to a low capital gains tax.
On the other hand, if you own an asset or a property for less than 12 months then sell it later for profit, you will earn short term capital gains. As we saw earlier, short term gains are subject to escalated capital gains tax in Spain compared to long term capital gains.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
Capital gains can be offset by capital losses
If you have been an investor in Spain for a while, you have probably realized that not all assets or properties appreciate in value over time. Sometimes the asset or property may lose its worth over time. If you sell the item for less than its original price, then you get a capital loss instead of a capital gain. The capital loss from an investment (not from the sale of personal property or asset) can offset capital gains.
For example, if you sell a stock and earn €50,000 in form of long term gains, but you end up selling another stock at only €20,000 in form of long-term losses, then the Spanish tax authorities will tax you on the €30,000 long term capital gains.
€50,000 – €20,000= €30,000
In case the capital losses exceed the capital gains, you could use the loss to offset up to €3,000 of your other income. If the excess capital losses are more than €3,000, the amount that is above €3,000 can be carried forward to the future to offset any capital gains in the future.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
Income from your business is not a capital gain
Do you operate a business that buys and sells items? The profits you make from the sales in your business will be considered as business income instead of capital gains. For instance, if you buy items at garage sales and antique stores and then resell them at a higher price online in order to make a profit, the Spanish tax authorities will view it as a business and will not charge you any capital gains tax on the profits.
The following information will make it easier for you to understand the type of money in your business and whether it is liable for capital gains tax:
- The money you use to pay for items or buy items in your business is considered a business expense
- The money you receive in your business from the sale of items is business revenue and is not liable to capital gains tax
- The difference between the business expenses and business revenue is called business income and is also not liable to capital gains tax. However, the business income is subject to other employment taxes.
Estimated taxes will ease your tax burden
Estimated taxes are mostly associated with freelancers and people who are self-employed. If you have an entire year where you make a good amount of money in capital gains, we highly recommend that you pay estimated taxes on the capital gains quarterly, instead of waiting until you file your tax return.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
The reason why you should part with your tax money sooner is to avoid underpayment penalties with the Spanish tax authorities during the tax season. Additionally, paying the taxes quarterly will help you avoid unwanted surprises when filing your tax returns. Besides, you will not put yourself at risk of not having enough money to pay the tax bill in case it is larger than expected.
Remember the wash sales rule
Sometimes it makes more sense to sell an investment at a loss and reap the tax benefits that come with it. But what happens if you decide to buy back an investment e.g. shares shortly after you have sold it, because it has started to recover in the market? In such a scenario, you need to be careful about the wash sale rule.
The wash sale rule occurs when you sell an investment such as a stock, then buy back the same investment or an identical investment in a span of 30 days. Once this happens, you cannot write off any losses associated with the transaction of the investment the first time you sold it.
We highly recommend that you avoid a wash sales. Doing so is very easy because all you need to do is avoid buying back an investment you sold within less than 30 days apart.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
Pro tip: You can buy sell a stock at a loss, then buy a different stock within 30 days. After the 30 days are over, you can claim the loss of the initial stock that you sold.
The new tax regime that is applicable to capital gains in Spain
The latest reform of the Spanish PIT (personal income tax) law, introduced a significant change, which is the establishment of the exit tax.
The exit tax is levied on several unrealized capital gains on financial assets such as shares when a taxpayer transfers his residence to another country apart from Spain.
However, the exit tax is not necessarily new because it has existed before in EU nations and member countries of the OECD.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
If the tax payer relocates to another EU country or a country in the EEA (European Economic Area), they will not be subject to the exit tax as a result of changing residence outside Spain.
The tax payer will only be required to pay the tax if 10 years that follow after the tax payer quits being a resident, the following happens:
- The tax payer transfers their shares or units inter vivos.
- The tax payer forfeits their status as an EU or EEA resident
- The tax payer is found guilty of breaching regulatory reporting requirements
What happens if you transfer your property to your spouse in Spain?
Maybe you are a successful investor in Spain and instead of selling your property, you wish to transfer your property to your spouse. How does the inheritance process work? Will you be expected to pay any capital gains tax?
Below are some important details you need to be aware of when transferring your property to your spouse in Spain:
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
No transfer is automatic
In Spain, you cannot simply transfer your property to your spouse. If your partner passes on, it is your responsibility to change ownership of their property through the appropriate legal process.
First and foremost, a notary needs to sign the inheritance deed, which should then be registered at the office of Land Registry.
Secondly, you need to hold on to the property until the transfer process is complete. This means that you cannot sell of the property until the entire registration process is done. If you were planning to use the profits from the auction of the property to pay the inheritance tax, you need to wait until the inheritance deed is registered at the office of Land Registry.
The same principle applies when you are transferring your property to your spouse in Spain. You can only sell the property if you own the entire property legally. If you own just a small portion of the property, you cannot sell it.
Do you want to live in Spain?
Our law firm has more than 15 years of experience.
In case a third party is set to inherit some of the property of your spouse, the legal inheritance process needs to begin operation once your spouse passes away. We highly recommend that you start the inheritance process within the next six months of your spouse’s death. Failure to do this puts you at a high risk of being liable for the late payment of interest.
The amount of inheritance tax to be paid depends on the relationship between the deceased and the remaining owner, and the property’s location. If you were married, then you may not be liable to pay any inheritance tax in order to inherit the property of your late spouse in Spain.
There are four types of inheritors recognized in Spain. They include:
- Grandchildren and children
- below the age of 21
- Grandchildren and children above the age of 21, spouse, parents, and grandparents
- Sisters, brothers, aunts, uncles, cousins and in-laws
- Anyone else
In some communities, an unmarried partner may fall under the anyone else category, even if they were living together for many years with the late spouse. As a result, this may have some financial implications on the spouse.
Inheritance tax is not only payable against personal property. You will also be required to pay tax against vehicles, deposits, assets, and the transfer of money held in bank accounts.
Payment is upfront
All the payments related to the inheritance process need to be paid up front. This means that you cannot use the proceeds from the sale of the auction of the property to cover inheritance expenses, because you cannot sell the property unless you are its legal owner.
However, thanks to capital gains, the expenses that you incur can be deducted from the taxable amount because of the capital gains tax.
We highly recommend that you seek legal advice from a fiscal representative, in order to confirm how much, you will be expected to pay, to ensure that you have adequate money available when it is needed.
Capital gains tax in Spain isn’t charged on inherited property. However, if you inherit a property then decide to sell it later, then you will need to pay capital gains tax on the profit you gain.
So, have you learnt something new about capital gains tax in Spain? To recap briefly, capital gains tax is a tax that is charged on the growth of value of investment, when an individual or corporation sells the investment.
When the property or asset is sold, the capital gains (profit) are realized. The capital gains tax does not apply to unrealized capital gains or investments that are yet to be sold.
We have also concluded that there are two main types of capital gains, that is long term capital gain and short term capital gain. We highly recommend that you consider the long term capital gain because it has a lower rate compared to the short term capital gain. All you have to do is hold on to a property or asset for more than 12 months.
Do you have any questions about the capital gains tax in Spain? Send us an email or give us a call today for more clarification.
We bought a spanish property in 1994 which consists of a local (bar-restaurant) with an apartment above.The local is rented out(traspaso).The apartment is not. We are planning to sell this year to the tenants. What will be our capital gains tax situation ? I have heard that business premises could be exempt and also heard about abatement tax reduction for properties bought in or before 1994.We are now UK resident.
Our Tax Advisor should study your situation, if you want you can send us a contact form and we will help you.
My property was taken over by Okupas and entailed a lawyer…court fees….repairs to property…a battleship steel entrance door…cleaning…pest control and installation of a 24 hr alarm.
Question can I set all these costs against capital gains tax because now I am selling my property?
Jimmy,
One of our lawyers will contact you to answer your questions about capital gains tax spain
Regards,
I am a non-fiscal resident in Spain (less than 183 days per annum). I bought an apartment in 2014 which was my only property. When in the UK I lived with my partner. In 2016 I bought a property in the UK with my partner. This year I sold my apartment and made a capital gain. Can I claim main home exemption if I purchase another property in Spain?
David,
One of our lawyers will contact you to answer your questions about capital gains tax Spain.
Regards,
I purchased a property in Tenerife in September 2021. I am 68 years old. If I sell my main home (also my only home for 35 years) in the UK in 2022 and spend more than 183 days in Spain in 2022, will I be liable for Spanish CGT on the sale of my main home.
George,
One of our lawyers will contact you to answer your questions about the Capital gains tax in Spain
Regards,
I am a Spanish resident and hold ISAS in U,K, – if I cash them in is the gain taken from the day I took them out? Other S&Shares ISAS have lost money, can that be allowed against?
Jill,
One of our lawyers will contact you to answer your questions.
Regards,
My Spanish house is owned in a Spanish SL company with me as the only shareholder, I am a U.K. resident.
I have owned it this way since I built it in 2001. If I take up spanish residency before I sell it, I’m over 65, will the” minimum of 3 yrs of living in the house to qualify for No cgt” apply even though the house is owned in a company.
Mark,
One of our lawyers will contact you to answer your questions about capital gains taxs in Spain
Regards
I will have been a Spanish resident for 12 months and over 65. If I sell my Spanish residence after 2 years residency, will full CGT be payable ? Also I still have my U.K. house which I lived in for 6 years and may sell also – will I have to pay CGT on that and where? If in Spain is the rate on the sliding scale, and is any allowance applied for U.K.?
Jill,
One of our lawyers will contact you to answer your questions.
Regards,
Hi,
If i have stocks in the UK that i brought there and then become a Spanish resident. Can i offset past losses in the UK (over the last 3/4 years) if i realize gains in Spain now i am a resident?
Thanks
James
James,
One of our lawyers will contact you to answer your questions.
Regards,
Is there a cgt allowance on the sale of a Spanish property. We are non residents.
Cliff,
One of our lawyers will contact you to answer your questions.
Regards,
We have lived in Spain for thirteen years and are residents in Spain, we also own a house in Spain and a house in the UK and are now thinking of selling our house in the UK, how do we work out how much our CG would be? We would like to just keep the money in the UK and reinvest it at a later date.
Michaela,
One of our lawyers will contact you to answer all your questions.
Kind Regards,
I sold my house in Spain earlier this year and as a non resident homeowner the 3% Capital Gains Tax was deducted by the buyers attorney in accordance with legislation. My attorney at the time who handled the transfer then submitted my CGT returns and it was found that I owed revenue a sum of money which I paid them.
After a few issues and questions asked by the Agencia Tributaria they then referred back to confirm that an amount was due to be credited to my bank account that they had on record and given to them at the time that the CGT submission was made. Prior to receiving the credit notification from revenue my banking account was unfortunately closed.
I now need to get in touch with the Agencia Tributaria to redirect my payment to a new account, or for them to issue a cheque payment for my overpaid capital gains tax. Can you help? Regards Len
Len,
One of our lawyers will contact you to explain all the process.
Regards,
We have sold our main and only property in the UK in April 2021 (Post Brexit) but became resident in Spain in October 2020 (before the end of the Brexit transition period) and are looking at purchasing our main residence in Andalucia with the proceeds. Would we benefit from the main residence relief in this case, seeing as by the time we sold the house, the property was outside the EU? and if we are indeed liable for CGT (which I believe is due in April 2022), can we pay it in instalment? The reason is to use the cash towards the purchase of our house and avoid having to ask for a mortgage. Many thanks
Red,
One of our lawyers will contact you to explain about the capital gains in Spain.
Regards,
I have a property in Mallorca I am going to sell I’m over 65 had the house for 20 years I rented it out in 2020 for 2 months declared do I have to pay capital gains on the
Sale as a result ? s
Sheana,
One of our lawyers will contact you to explain about the capital gains in Spain.
Regards,
Can you explain in more detail the 3 year rule please. My wife and I are in our70s and have been Spanish residents for about 6 months now, we will be selling our UK property in the new year and have been iving in that property for over 20 years, will we have to pay capital gains tax on that house.
Thank you
David & Shirley.
David,
One of our lawyers will contact you to explain about the capital gains in Spain.
Regards,
Do you have this website information on capital gains tax and plusvailia tax based on the year 2021, for Spanish non-residents.
Frederick,
One of our lawyers will contact you to explain all the process.
Regards,
Does capital gains tax take into account annual inflation
Hi William,
one of our lawyers should be in contact with you shortly for your questions.
Greetings