So… you are thinking about selling your Spanish property? Then keep reading, because in this article you will find all the information that you need about the taxes you are required to pay in relation to selling a property in Spain.
There are two main taxes that are related to selling a property in Spain and below we will explore what exactly these taxes are about and how they originated, when and how should you pay them, how much they will actually cost you, and the most important: how to avoid paying them.
The plusvalía or land value tax is the tax applied to the increase of the value of the urban land once a property is transferred, sold, inherited, or received after a donation; paid by the seller in the vast majority of cases.
Hence, this tax does not apply to the property itself, but to the value of the ground it occupies as we will now explore. Analyzing its name provides more clues. Plus (which means extra or more), and valía (which in Spanish means value). Hence this tax refers to the added or plus value of the property’s land. Why does it even exist? The rationale behind it is really simple. When you acquired the property you are planning to sell, the land in which it was located had a value X. After years have passed (until now that you want to sell it), this value has increased (X + increase of value). And that increase is in part due to all the improvements the town hall has made to the area and its surroundings.
There are more supermarkets nearby, better infrastructures, perhaps more public transport connections, etc.
So the plusvalía tax is the way the town hall has to capture that increase in value that is correlated to their public investments and improvements. As we will see below, this obviously poses the problem of properties or lands that decrease in value (and can’t be sold at a price higher than the initial purchasing one).
It is important to stress that it just captures the increase in urban land value. That means that if the property is located in the countryside, this tax won’t exist.
The obligation to pay this percentage (below we will explore how to compute it) appears at the very moment in which the transfer of the property is made.
If any changes were made, you will need to understand whether the property is urban or not at that moment (there are some cases in which over the years that status differs).
Then, you will have 30 days after selling the property to pay it to the local town hall. And it is very important to meet this deadline in order to avoid penalties and legal trouble.
The exact amount will vary according to the particular case. Let’s see how it is computed.
In the council tax receipt, you will see a difference between land value and construction value. For this tax, you just want to look at the land value.
In order to define this value, you can go to your local town hall and ask for it, you can check on your IBI receipt, or you can ask a tax specialist.
That land value on the receipt increases every year, and you need to multiply it by the rate specified by your local town hall, which takes into account the years you’ve been the owner.
But, more specifically, the exact percentage to be applied depends on the following factors:
The plusvalía tax is typically paid by the seller (that who transfers the property) or owner of the property, and he will pay at the same moment the property is sold.
Nevertheless, there is also the possibility to negotiate between buyer and seller and decided which one of the two will end up paying it, but this can pose different problems as we will now see.
As always, there is an exception. If you inherit the property or receive it as a donation, then you’ll have to pay it as a receiver. Why? In the first case, because the theoretical responsible of the payment is deceased, and in the second one there is no selling price, hence no “source” to get the money from by the donator.
Also, it is important to mention that when the seller is a non-tax resident in Spain, usually the purchaser will be liable for this tax (or the one agreed to pay).
Why? Because if the vendor is in charge of paying it but fails to do so (because he is not in Spain) the Spanish tax authorities will go after the new owner.
That’s is why usually the purchaser of the property will retain the money of property price to pay it on behalf of the seller, to guarantee this tax will be actually paid.
There is a possibility to avoid paying this tax.
As we mentioned, the reason the town hall’s ability to collect this tax lies behind the fact the land has increased in value.
But what if it actually hasn’t? Then this tax can be non- payable: you can request a refund or avoid paying.
That is, if you can demonstrate that the market hasn’t grown during the years you have been the owner, that the value of the land has gone down, or that you made a loss when selling the property, you can avoid paying this tax.
So if the justification to charge this tax has to do with the income and profit you generate from the sale, but.. you end up not making any profit, or in fact lose money, how can you have the monetary capacity to pay this tax?
Nevertheless, each particular case must be analysed carefully, and that is why we strongly suggest you contact a property Lawyer,
Dont have a Property Lawyer ? Dont worry.. We have a dedicated network of tax and property Lawyers on the coast who help and advice our clients.
The capital gains tax is the tax that is paid on the profits that you obtain once you sell any kind of asset like a property or land, or from an investment in the Spanish territory. Whenever the sale value is greater than the price you paid for the investment/asset for its acquisition, capital gains tax will be paid on that difference, the profit.
Unlike some countries like in the UK in which this tax works independently, in Spain we find it integrated within the personal income tax (IRPF). The Spanish tax system is really complex and different from the rest, so we will try to be as clear as possible.
Let’s use an example in order to better explain how does this tax work.
Imagine that you bought a property in Spain for 500.000€. Now, after several years, you are planning to sell it. You find a buyer, and after some negotiations, you both accept that the sale price will be 700.000€, as the Spanish Real Estate market has grown and properties are more expensive now. The resulting 200.000€ that you earn is the taxable amount to which you will apply the capital gains tax percentage.
But, how much will you pay precisely in this situation?
As always, the answer depends whether if you are a resident in Spain or not.
Capital Gains Tax for Spanish residents
Just as a reminder, you will be considered a tax resident in Spain if you stay in the country for more than 183 days per year (6 months).
In that sense, if you considered a resident, the capital gains tax to be paid will be:
Let’s start now with the information you are more interested with. There are two different situations in which you won’t need to pay this tax, and one in which you will need to pay just a reduced percentage. Let’s go over them briefly.
If the amount of money that you earn from the sale of the property will be reinvested into the purchase of a new one, and you will use this new house or flat as your new home, you don’t need to pay capital gains tax.
That simple. This is what we call the main home exemption. Hence, what you need to consider here is that the property you are selling was your habitual residence, and the one you are acquiring will be too.
Nevertheless, there are some requirements here. It is crucial that this property is located inside Spain and not outside for the exemption to be applicable.
There is an even better situation than the one in the prior section for those wanting to save taxes.
If you are 65 years old or over, it does not matter if the amount of money you get from selling the property will be reinvested into your new home or not. You won’t need to pay this tax.
There is no denying then that if you are close to that age, it is much better to wait until you are 65 in order to conduct any asset sale.
Nevertheless, you must bear in mind that there is a crucial condition you must meet in order to benefit from the 65-year-old exemption. And that is that the property you are selling must be your habitual residence. In other words, a minimum of 3 years lived in the property before selling it is required in order to avoid paying capital gains tax.
If you bought the property you now want to sell before 1995, lucky you. You can enjoy a slight tax reduction.
This means that all the properties that were acquired until December of 1994 will be eligible for this bonification. Nevertheless, there are two things to consider:
Capital gains tax in Spain for non-residents
So far we have seen the situation for those staying in the country for more than 183 days per year, including the bonifications and reductions.
But what happens to the non-resident taxpayers in Spain in regards to this tax?
Well, they are not that lucky.
Non-residents in Spain from outside the European Union will pay a fixed 24% rate for their capital gains tax. Nevertheless, if they are from any other European country, from Norway or Island, that rate is reduced to just 19%.
The answer is yes. But unlike the resident case, here there is only one possible way.
Non-residents can enjoy a capital gains tax exemption as long as they are legally living in any other EU country that has a tax agreement with Spain. If that condition is met, they can also enjoy the various exemptions that are available to residents in Spain.
As we have previously mentioned, properties are not the only assets liable for the capital gains tax.
This tax applies mainly to company shares, buildings, lands, flats and houses, government bonds, and precious metals, among other assets and investments.
Capital gains tax calculator Spain
Would you like to easily compute your capital gains tax in Spain?
Then you need to follow the following formula as a basic capital gains calculator:
(Sales price – purchase price) x 19%
Where the sales price will include the value of the property + furniture in case you have the corresponding invoice and proof that demonstrates its value.
Example: This example highlights the financial and tax differences between selling a property with and without furniture in Spain. The calculations show how the absence of valid documentation for furniture can impact the capital gains tax, making it essential for sellers to retain all relevant paperwork to potentially reduce their tax liabilities.