Spain’s Capital Gains Tax and Plusvalia Tax
Is there Capital Gains Tax in Spain?
Yes. Like most countries, Spain has a Capital Gains Tax (CGT) applied to company shares, buildings, lands, flats and houses, government bonds and precious metals, among other assets and investments.
How much is Capital Gains Tax in Spain?
For tax residents of Spain, Capital Gains Tax (CGT) starts at 19% on the first €6,000 Euros obtained as profit, 21% from €6,000 - €50,000 Euros profit, and 23% CGT for above €50,000 in profit. Non-residents of Spain pay a flat 19% if they are residents of an EU country or 24% from outside the EU.
How is Capital Gains Tax calculated?
Capital gains tax is based on the purchase price as written on the Title Deed including VAT, Land Registry fees, notary fees, transmission tax, and legal fees. These amounts are deducted from the final sale price, less costs incurred during the sale including legal fees to arrive at the net profit and amount liable for capital gains tax.
Are there exemptions to Spain’s Capital Gains Tax?
Yes, there are a few legal exceptions and investment strategies you can employ to avoid paying capital gains tax in Spain:
- Main Residence Exemption
If you purchase - from the proceeds of the sale of your first home - another home as your sole, main residence that you will live in, you are legally exempt from paying capital gains tax. The key factor to benefit from this exemption is the home you sold was your one and only habitual residence (known as “vivienda habitual”) and the home you are buying (from the proceeds of the first home) are being reinvested into your new habitual residence. This exemption applies to tax residents of Spain and non-tax residents provided the non-tax resident is a resident of any European Union country that has a tax agreement with Spain. Note: there is a two-year deadline to reinvest the proceeds from the sale of your first home into your next home to qualify for main residence exemption and you must have lived exclusively in the main home for three continuous years.
- Over Sixty-Five Years of Age
If you are sixty-five years of age or older, Spain’s capital gains tax is not applicable to you. To qualify for zero capital gains tax liability, you must have lived in your sole habitual residence for a minimum of three years prior to the sale of your property. If you don’t meet the three-year threshold and you can prove a compelling reason why you have to sell your property, the Spanish Tax Authority will take this into account. Examples such as becoming disabled and can no longer manage to live in a high-rise property, or if you have to relocate due to work-related reasons. You might also be exempt from paying CGT on the second property in Spain if you are over 65 years of age and have been a tax resident for more than three years and invest all the money from the sale of your property into an annuity.
What is the Plusvalia Tax in Spain?
The plusvalía is a local (municipal) tax payable to your local town hall upon the sale of your property. The tax was born out of the concept that the local town hall initiatives and investments into infrastructure, services, and general maintenance contribute to the appreciation of the land value on which your home is built. It’s important to distinguish that the plusvalía tax is calculated and charged on land value only, not the property on the land.
How Much is Spain’s Plusvalia Tax?
The rate of plusvalía tax is set by each town hall municipality and can vary between neighboring municipalities. The tax is based on the increase in the official “Cadastral” value of the land on which a property is built. This is the same value that is used to set your local property tax or “IBI” and can be found on the bill for your “IBI” issued by your local town hall (ayuntamiento) each year. It is shown as the “valor del suelo”. It is calculated on the rateable value of the property and the number of years that have passed since the property last changed ownership. The base for this tax is the valor cadastral (an administrative value that is usually lower than the market value) of the property. The amount due in tax will depend on how long the seller has owned the property: the longer the period, the higher the amount of tax.
Who Pays the Plusvalia Tax in Spain?
The seller, by law; though technically, both buyer and seller are free to negotiate.
When Do You Pay the Plusvalia Tax in Spain?
Plusvalía is due to the town hall thirty days from the date of sale or six months from the date of death in the case of inheritance.
Disclaimer: Please note the material contained on this site is for informational purposes only and does not constitute or imply a substitute for professional financial, legal or taxation advice. This information is general in nature and has not taken into consideration your specific personal circumstances. Always seek professional advice from regulated and/or registered qualified professions: financial advisors, accountants, lawyers.