Winkworth Spain makes it easy to find a home on the Costa del Sol, but what about the home you’re living in now? If you plan on selling it for any reason, you may be liable for capital gains tax in Spain. There are a number of exemptions though, including a very new Spanish property tax law, so understanding your financial obligations on your Spanish home’s sale could help significantly lower, or even eliminate entirely, the amount you have to pay.
What is Capital Gains Tax?
Simply put, capital gains tax is a tax levied by the Spanish government on any profit you make from the sale of your home. But in Spain, it’s not as straight forward as that. The amount you pay can vary greatly on a number of factors, the most significant being your personal tax residency status:
Tax residents of any country within the European Union (EU) or European Economic Area (EEA) are subject to a capital gains tax rate of 19% of the total net profit from the sale of their home in Spain.
Tax residents of Non-European countries, including the UK, are subject to a capital gains tax rate of 24% of the total net profit from their Spanish home’s sale.
Spanish tax residents, no matter where in the world they are selling their home, are subject to a variable capital gains tax rate of 19% of the first 6,000€ in net profit, 21% for any profit between 6000€ and 50,000€, and 23% for any profit above 50,000€.
Avoiding Capital Gains Taxes
There are a few ways to qualify for a Spanish capital gains tax exception and pay no capital gains taxes in Spain:
Any Spanish tax resident who is selling their main residence in order to purchase another is not liable for capital gains taxes. Holiday homes and investment properties then, are still subject to capital gains taxes unless the seller of the home (or inheritor of the home, if applicable) has an additional exception they can claim.
If you are an EU or EEA resident and have not lived in Spain for at least 183 days of the calendar year in which you are selling (or inheriting) the home, you are not considered a Spanish tax resident and are not required to pay any capital gains taxes to the Spanish government, even if the home you are selling is in Spain. Similarly, if you are non-European resident in a country with a tax exception treaty with Spain, you may not have to pay Spanish capital gains taxes on the sale of your Spanish home (but will be subject to capital gains taxes in your country of residency). This is the case for UK residents who are except from paying Spanish capital gains taxes.
Spanish tax residents who are 65 years and older and have lived in their Spanish home for at least 3 years are except from paying any capital gains taxes to the Spanish government.
Lowering Your Capital Gains Taxes in Spain
If you are don’t qualify for an exception to the Spanish capital gains taxes law, there are still ways you can lower the amount due to the government upon the sale or inheritance of your home in Spain.
Capital gains taxes are based on the net profit of the sale of your home, meaning you can deduct any costs associated with the selling of your home from the final selling price in order to lower the net profit amount and pay less in capital gains taxes. Typical costs associated with the selling of your home that can be deducted include transmission tax, land registry fees, VAT, notary fees and legal fees. Any repairs, including labour costs or materials made to the home in order to prepare it for sale are also deductible from the selling price, which can make for a substantial reduction in capital gains taxes to be paid. Remember that any deductions you claim must be justified with official documentation and receipts, so don’t throw anything away!
Finally, just last month, the Spanish government passed a new tax law that allows you to choose a new method of calculating taxes owned on a home sale or inheritance in Spain. Effective only for homes sold on or after November 10, 2021, the new law allows you pick the lower of two tax options: traditional capital gains taxes as described above or a newly-created tax rate based on the cadastral value at the time of sale (which itself is based on the size and location of the home). As these cadastral values are determined by location, each municipality (such as Marbella or Estepona) will have different rates so it’s always recommended that you work with a professional estate agent, accountant or property lawyer when buying or selling a home in Spain to ensure the best property advice and choose the best tax option for you.
If you’re thinking of buying or selling a home on the Costa del Sol, Winkworth Spain is ready to help with local professional real estate agents who know the area and understand the home buying and selling process in Spain. Our bi-lingual estate agents can explain the ins and outs of property sales and put you in touch with local professionals as needed to make Spanish home ownership as simple, straight forward, and affordable as possible. Get in touch today for a no-obligation chat or to request a valuation from the Winkworth Spain local real estate professionals!