How Capital Gains Tax Works in Spain
When you sell a property in Spain for more than you paid, you owe capital gains tax (Impuesto sobre la Ganancia Patrimonial) on the profit. This applies to both residents and non-residents, though the rates and rules differ significantly.
The gain is calculated as the difference between the acquisition value and the sale value, adjusted for allowable costs.
Calculating Your Capital Gain
The formula is:
Capital Gain = Sale Price - (Purchase Price + Buying Costs + Improvements)
You can add the following costs to your purchase price to reduce the taxable gain:
- ITP or VAT paid at purchase
- Notary and registry fees
- Lawyer fees
- Estate agent commission (if paid by seller)
- Cost of permanent improvements (not repairs or maintenance)
- Plusvalia municipal tax (paid at sale)
Keep receipts and invoices for everything. Without documentation, the tax authority will not accept deductions.
Example Calculation
- Sale price: EUR 400,000
- Purchase price: EUR 300,000
- Buying costs (ITP, notary, lawyer): EUR 30,000
- Improvements (new kitchen, bathroom): EUR 15,000
- Taxable gain: EUR 400,000 - EUR 345,000 = EUR 55,000
Tax Rates for Residents
Spanish tax residents pay capital gains tax on a progressive scale:
- First EUR 6,000: 19%
- EUR 6,000 to EUR 50,000: 21%
- EUR 50,000 to EUR 200,000: 23%
- EUR 200,000 to EUR 300,000: 27%
- Over EUR 300,000: 28%
Using the example above, a resident would pay approximately EUR 11,400 in capital gains tax on a EUR 55,000 gain.
Tax Rates for Non-Residents
Non-residents pay a flat rate of 19% (EU/EEA residents) or 24% (non-EU residents) on the entire capital gain. No progressive scale applies.
Remember the 3% retention: the buyer withholds 3% of the total sale price (not the gain) and pays it to the tax authority on your behalf. If your actual tax liability is less than the 3% retained, you can claim a refund.
Exemptions and Reductions
Primary Residence Exemption (Residents Only)
If you are a Spanish tax resident over 65 years old and the property is your primary home, the gain is fully exempt. If you are under 65, you can reinvest the proceeds in a new primary residence within 2 years to defer the tax.
Inflation Adjustment (Pre-1995 Properties)
Properties purchased before December 31, 1994, benefit from transitional reduction coefficients that can significantly reduce or even eliminate the taxable gain. This only applies to the portion of the gain accrued before January 20, 2006.
Plusvalia Municipal Tax
In addition to capital gains tax, sellers pay the plusvalia municipal (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana). This local tax is based on the increase in land value during the ownership period. Your town hall calculates it using the cadastral land value and the number of years owned.
Plan Your Sale
Capital gains tax can take a significant bite from your profit. Use our free calculator to estimate your total costs when buying and selling, so you can model your net return accurately before listing your property.