Understanding Capital Gains Tax in Spain

Understanding the capital gains tax in Spain is essential for Americans living abroad. In this guide, we’ll look at how the capital gains tax works, who it applies to, and how to file.
What Is the Capital Gains Tax in Spain?
In Spain, the capital gains tax is levied on the profit realized from the sale or transfer of assets, such as real estate, stocks, or other investments. Individuals who are considered tax residents in Spain are taxed on their worldwide asset sales, while non-residents are taxed only on the sale of assets located in Spain.
Capital Gains Tax Rates in Spain
Spain employs a progressive tax system for residents, with rates varying based on the amount of gain:
Gain | Capital Gains Rate |
€0 – €6,000 | 19% |
€6,001 to €50,000 | 21% |
€50,001 to €200,000 | 23% |
€200,001 to €300,000 | 27% |
€300,000 + | 28% |
For non-residents located inside the European Union (EU) or European Economic Area (EEA), capital gains are taxed at a flat rate of 19%, regardless of the amount. Non-residents from outside the EU and EEA are subject to a higher flat rate of 24%.
How Capital Gains Are Calculated
Calculating capital gains in Spain involves determining the difference between the sale price and the acquisition cost of the asset, adjusted for allowable deductions and improvements.
- Determine the sale price: This is the amount for which the asset was sold.
- Establish the acquisition cost: This includes the original purchase price plus associated expenses such as notary fees, registration fees, and taxes paid at the time of purchase.
- Account for improvements: Expenses incurred for improvements or enhancements to the property can be added to the acquisition cost, provided they can be substantiated with invoices.
- Calculate the net gain: Subtract the adjusted acquisition cost from the sale price to determine the capital gain.
Calculation Example
Let’s say you purchased a property for €150,000 and incurred €10,000 in purchase-related expenses. Over the years, you invested €20,000 in documented improvements. If you sell the property for €250,000, the capital gain would be calculated as follows:
- Acquisition cost: €150,000 (purchase price) + €10,000 (expenses) + €20,000 (improvements) = €180,000
- Capital gain: €250,000 (sale price) – €180,000 (adjusted acquisition cost) = €70,000
Therefore, the taxable capital gain is €70,000.
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Exemptions and Reductions
Spain offers certain exemptions and reductions on capital gains tax under specific conditions:
- Reinvestment in main residence: If the proceeds from the sale of your primary residence are reinvested into purchasing or rehabilitating another main residence within two years, the capital gain may be exempt from tax. This exemption does not apply to non-residents.
- Residents aged 65 and over: Tax residents aged 65 or older are exempt from capital gains tax on the sale of their primary residence, provided they have lived in the property for at least three years. Again, this exemption does not apply to non-residents.
- Life annuity for seniors: Individuals over 65 who reinvest gains from the sale of any asset (up to €240,000) into a life annuity within six months are exempt from the capital gains tax. This exemption is only available to residents.
Capital Gains Tax for Non-Residents
In addition to the 19% flat tax, non-residents selling property in Spain are subject to certain regulations.
- Withholding tax (3% retention): At the point of sale, the buyer is mandated to withhold 3% of the purchase price and remit it to the Spanish tax authorities as an advance on the seller’s capital gains tax liability.
- Reclaiming excess withholding: If the actual capital gains tax due is less than the 3% withheld, or if a loss is incurred, the seller can apply for a refund of the excess amount by submitting Form 210 within four months of the sale.
- Double taxation treaty: The US-Spain tax treaty aims to prevent double taxation. Generally, taxes paid in Spain can be credited against US tax liabilities on the same income. Consultation with a tax professional is recommended to navigate treaty benefits effectively.
Filing and Paying the Capital Gains Tax
To declare and pay the capital gains tax in Spain, follow these steps:
- Obtain necessary forms: Residents report capital gains in their annual income tax return (Form 100), while non-residents use Form 210.
- Calculate the gain: Determine the difference between the sale price and the acquisition cost, adjusting for deductible expenses such as legal fees, notary costs, and improvements.
- Submit the form: Residents include the information in their annual tax return, typically filed between April and June of the following year. Non-residents must file Form 210 within four months after the sale.
- Pay the tax: Ensure timely payment to avoid penalties. Non-residents should be aware of the 3% withholding at the time of sale, which serves as an advance payment.
Common Mistakes and How to Avoid Them
- Incorrect gain calculation: Failing to account for deductible expenses can lead to overpayment. Maintain thorough records of all related costs to ensure accurate calculations.
- Missed deadlines: Late filing or payment can result in penalties. Adhere strictly to the stipulated timelines for submitting forms and payments.
- Overlooking double taxation relief: Not utilizing tax treaties can cause unnecessary double taxation. Seek professional advice to maximize treaty benefits.
To learn more, check out our free guide: What Americans Living in Spain Need to Know About Expat Taxes.
Have Questions? Get Help from Greenback!
Navigating capital gains tax in Spain requires careful attention to detail and plenty of know-how — especially for non-residents and expats. Given the complexities involved, it’s always best to get a little help from the pros.
At Greenback Expat Tax Services, we give Americans around the globe the support they need to file their taxes accurately and on time. Have questions about the process or next steps? Contact us, and one of our Customer Champions will happily address all your concerns.
When you live in the US, tax day is simple: April 15th! When you move abroad, it’s not so straightforward! Learn about all the expat deadlines and extensions you need to know to file.