A Guide To Capital Gains Tax In Spain
They say that there are only two things guaranteed in life; death and taxes. If you are living in Spain, it's no different, although you could also add sunshine to that list.
When it comes to personal taxes, capital gains is one that you should be aware of, especially if you are a property owner, resident or non-resident.
What is Capital Gains Tax?
Capital Gains Tax (CGT) is the tax you pay on the sale of a property, investment or asset when it has increased in value since your first acquired it.
Capital gains tax in Spain is classed as 'savings income' or Rental del Ahorro.
How is it Calculated?
Capital gains is currently based on the difference between the original purchase price (less expenses, taxes and other costs) and the transfer/sale price (less taxes, expenses and other costs).
At present, capital gains tax is calculated using two rates of correction, which are Abatement or Reduction Coefficient (Coeficientes de Abatimiento) and an Updating Coefficient (Coeficientes de Actualización).
The abatement coefficient discount means that any property purchased prior to 1995 would be discounted for capital gains tax purposes by 11.11% for each year owned up until 1995 (not including the first three years of ownership). The rate for shares is 25% and 14.28% for all other assets.
To benefit from the discounts, the asset must have been sold for less than 400,000 Euros and only affects the accumulated gain until 20 January, 2006.
There is an updating or inflationary coefficient where the original purchase price is multiplied by a predetermined figure. So for example, if you purchased in 1988, the updating coefficient would be 1.3299. This is used to calculate the real value of the property taking into account of rise in the cost of living. So the original value that you purchased at would be increased, reducing the amount of tax you would pay.
Who Has To Pay Spanish Capital Gains Tax?
Non-residents are taxed at the standard rate of 19% on any Spanish sourced gains or the transfer of assets located in Spain.
When property is sold by a non-resident of Spain, the purchaser must withhold 3% of the purchase price (not the gain) and pay it over to the Spanish tax authorities within 30 days as an advance payment of capital gains tax on behalf of the vendor (Using form Modelo 211). If this is not paid, the purchaser can be fined and the unpaid tax becomes a charge over the property itself. If this 3% exceeds the tax due on the gain, a repayment will be made of the excess; however, if the tax due is more than the retained amount, further tax will be due in Spain. The vendor must file a Spanish tax return on the transaction within three months of the sale (Form Modelo 212) before any repayment can be made.
If a person is not resident in Spain, tax may also be due in the country where they are resident, subject to any Double Taxation Treaty Relief.
If you are permanent resident in Spain you will need to declare your capital gains as a part of your annual tax declaration and the rate you are charged will be based on your overall income.
If you are under 65 and resident in Spain, you will not have to pay capital gains tax if:-
If you do not invest all of the proceeds into another property, you will be taxed on the amount that has not been reinvested.
Anyone over 65 will not be liable for capital gains tax on the sale of their main property, even if they do not plan on reinvesting the proceeds into another property. However, you have to have lived in the property for more than three years and are able to show that you have been tax resident during this time.
You may also be exempt from capital gains tax if you sell any other property or asset as long as the full amount is invested into a pension annuity (Renta Vitalicia). The maximum that can be re-invested is currently €240,000.
Capital Gains Tax Rates In Spain For 2019/2020
|€6,000 - €50,000||21%|
Property Rental Income
For all EU citizens, the tax rate for rental income is 19% with deductions permitted for rental expenditure and any mortgage interest payments.
Disclaimer: Please note that the above does not constitute any form of financial advice and you are encouraged to speak with a fully qualified tax specialist who will be able to advise you based on your own personal circumstances.
Updated: December 06, 2022 CET