Capital Gains tax in Spain

Buying a home in Spain is usually a moment full of excitement and expectations. However, sooner or later, many owners face another reality: selling that same property. At that point, a recurring question arises: what taxes do I have to pay when selling my house or apartment?

One of the most important levies is the capital gains tax in Spain. This tax directly affects the positive difference between the price you paid for your property and the price you finally sell it for, after deducting certain expenses and associated costs.

In this article, we will go deeper into how this tax works, what expenses you can deduct, what the tax obligations are, and which practical tips can help you optimize your taxation.

What is the capital gains tax in Spain?

The capital gains tax in Spain is a levy that taxes the economic profit obtained when selling a property. In other words, if you buy a property for €500,000 and later sell it for €700,000, the €200,000 profit constitutes your capital gain.

Currently, non-residents must pay 19% on that profit, while residents are taxed according to progressive rates under the Personal Income Tax (IRPF).

This tax is unavoidable if there is a profit, although the law allows the deduction of numerous costs related to the purchase and the sale, reducing the taxable base and therefore the final amount payable.

How is the capital gain calculated?

The calculation of the capital gains tax in Spain may seem complex, but it actually comes down to a relatively simple formula:

Capital gain = Sale price – (Purchase price + purchase and sale expenses + accredited renovations and improvements)

Let’s break it down step by step:

1. Purchase price
   This is the amount you paid when acquiring the property. Here you can add taxes such as VAT, Transfer Tax or Stamp Duty, depending on the case.

2. Purchase expenses
   These include notary fees, registration at the Land Registry, legal or management fees, among others.

3. Investments and improvements
   If you have carried out major renovations (for example, a new kitchen, an extension, or updated installations), you can add them to the acquisition cost. They must be supported by invoices.

4. Sale price
   This is the actual amount you receive when selling the property.

5. Sale expenses
   This includes real estate agency commissions, legal fees related to the transaction, and taxes such as the “plusvalía municipal.”

The difference between these two blocks will be the capital gain, on which the corresponding percentage will be applied (19% for non-residents).

Practical calculation example

Let’s imagine you bought an apartment in Marbella for €400,000.

• Purchase expenses: €40,000 (taxes, notary, registry, lawyers).

• Accredited renovations: €20,000.

• Total acquisition price: €460,000.

Years later you decide to sell it for €600,000.

• Sale expenses: €25,000 (agency commission and municipal plusvalía tax).

• Net sale price: €575,000.

The capital gain would be:

€575,000 – €460,000 = €115,000

On that profit, you would pay 19%, that is, €21,850 as capital gains tax in Spain.

The importance of invoices and documents

A key aspect is that all expenses and investments must be backed by official invoices. It is not enough to have carried out a renovation; you must prove it with valid documentation.

This can make the difference between paying a high tax or reducing it significantly. Keeping contracts, invoices and payment receipts is essential to protect your finances in the future.

Differences between residents and non-residents

The tax treatment is not exactly the same for residents and non-residents:

• Non-residents in Spain
  They pay a fixed 19% on the capital gain. In addition, the buyer is obliged to withhold 3% of the sale price as an advance payment to the Tax Agency, which is later regularized.

• Residents in Spain
  The capital gain is included in the Personal Income Tax (IRPF) with progressive rates (from 19% to 28%, depending on the amount). There are exemptions, such as reinvestment in a primary residence.

This difference is crucial for those planning to establish tax residency in Spain, as it can influence long-term financial planning.

The role of the municipal plusvalía tax

The municipal plusvalía tax is a levy different from the capital gains tax in Spain. While the latter taxes the real profit, the plusvalía focuses on the increase in the value of the land on which the property stands.

Both taxes are applied independently, which means you may have to pay both if you make a profit from the sale.

Strategies to reduce the tax burden

Although you cannot avoid the capital gains tax in Spain, there are legal ways to minimize it:

1. Document all renovations
   From window changes to extensions, every improvement supported by an invoice can be added to the acquisition price.

2. Include all deductible expenses
   Do not forget to add taxes, notary fees, registration, lawyers, and agency commissions.

3. Plan the sale with a tax advisor
   A specialist can help you design a tax strategy suited to your situation (resident or non-resident, nationality, double taxation agreements).

4. Take advantage of tax exemptions
   For example, residents over 65 years old selling their primary residence may be exempt.

5. Reinvest in a primary residence
   Residents who reinvest their profits into the purchase of another primary residence in Spain may benefit from reductions or exemptions.

Emotional aspects of selling a property

Selling a home is not just a financial transaction; it is also an emotionally charged process. That house may have been the setting for family memories, personal growth, or important milestones.

The capital gains tax in Spain adds a practical layer to a decision that is already complex. That is why it is important to be prepared and fully understand the economic implications, avoiding unpleasant surprises in an emotionally intense moment.

Professional support: a necessity, not a luxury

Many homeowners underestimate the importance of legal and tax advice. However, when we are talking about operations that usually involve hundreds of thousands of euros, the potential savings can be substantial.

A lawyer specialized in real estate law not only ensures that the calculation of the capital gains tax in Spain is correct, but also reviews other key aspects, such as the legality of the transaction, payment deadlines, and possible applicable allowances.

Conclusion

The capital gains tax in Spain is a key aspect every seller must take into account. While it may seem like a complex procedure, understanding how it is calculated, what expenses can be deducted, and which strategies exist to optimize its impact will allow you to sell with confidence and foresight.

Beyond the numbers, selling a property also means closing a personal chapter and opening new opportunities. With proper planning and the guidance of qualified professionals, it is possible to turn this process into a smooth experience, avoiding fiscal and emotional complications.

Frequently Asked Questions (FAQ)

1. What is the percentage of the capital gains tax in Spain?
The general rate is 19% for non-residents. Residents are taxed at progressive rates, from 19% to 28%, depending on the profit obtained.

2. What expenses can I deduct when selling a property?
You can include purchase taxes, notary, registry, legal fees, agency commissions, and accredited renovations with invoices.

3. What about the municipal plusvalía tax?
It is an additional tax to the capital gains tax. It is calculated on the increase in land value, regardless of the real profit from the sale.

4. If I reinvest the money in another home, do I still pay the tax?
Residents who reinvest in a primary residence may benefit from exemptions, provided they meet the legal requirements.

5. What happens if I am over 65 and sell my primary residence?
In many cases, residents over 65 can be exempt from paying the capital gains tax in Spain.