How much is capital gains tax in Spain, for residents and for non-residents? Can you benefit from allowances?
What capital gains tax will you have to pay if you are resident in Spain or own assets in Spain?
When you move to Spain or buy property there, you need to familiarise yourself with the Spanish tax regime and plan to mitigate your liabilities where possible. One levy you need to consider is capital gains tax (CGT). What tax will you have to pay on capital gains when selling property in Spain? What about when you sell shares and other investments? Can you benefit from any capital gains tax allowances or take steps to avoid it?
Need personalised advice? Contact our advisers.
Residents of Spain
Income in Spain is split into general (‘renta general’) and savings (‘renta del ahorro’) income. Capital gains (on both investments and property) are treated as savings income.
In 2017, residents pay tax on savings income progressively at 19% (€0-€6,000), 21% (€6,000-€50,000) and 23% (over €50,000).
For real estate assets, the gain is calculated as follows:
- Disposal price (real sell price less disposal expenses – i.e. ‘plusvalía municipal’ tax)
- Acquisition price (real acquisition price plus acquisition expenses – i.e. notary, registry, etc. plus improvements less depreciation).
There are some reductions available for Spanish residents for assets you acquired on or before 31st December 1994 under certain conditions. If you bought an asset before this date and sold it after 1st January 2015, you may get a reduction on the gain you accrued up until 20th January 2006, provided that the asset is sold for €400,000 or less.
These reductions (again only for gains up to 20th January 2006) are 11.11% for real estate; 25% for shares and 14.28% for all other assets.
You can offset capital losses against other capital gains or savings income of the current year, but there are some limitations applicable. Net losses for a year can be carried forward for the next four years.
Holding shares directly in Spain is not very tax-efficient but there are compliant arrangements available in Spain that enable you to hold your investments in a very tax efficient manner and help you avoid capital gains tax on future investments.
Note that special rules apply for investments in tax havens – the Spanish tax office treats these gains as part of your general income (not savings income) and you pay tax at your marginal progressive income tax rate – so you could pay considerably more tax.
Download our Guide to Taxes in Spain
Main home exemption
You do not pay capital gains tax in Spain when you sell your main residence if you reinvest the money in another property to be your main home (both properties must meet certain conditions to qualify).
The property does not need to be in Spain to qualify for this relief, but it must be in an EU or European Economic Area (EEA) country. Likewise, the new home needs to be in the EU/EEA. If the UK ends up outside the EEA after Brexit, UK residents could therefore lose this main home relief in Spain.
You would pay full capital gains tax on a second home, whether it is in Spain or elsewhere.
Note that as a Spanish resident, you do pay tax on the sale of any other property worldwide at the above rates – and you may have to pay tax in that country as well. The Spain-UK double tax treaty was created to help in these cases but you should seek advice about your individual situation.
CGT exemptions for taxpayers over 65
If you are over 65 and resident in Spain you have certain advantages for capital gains tax purposes. If you sell a property that has been your main home for more than three years, you do not have to pay tax on the gain even if you do not re-invest the proceeds in another property, though you must meet certain conditions.
Also, you are exempt from tax on gains from the sale of any other assets (not just your main home) if you use some or all of the money from the sale to set up a whole of life pension annuity (‘renta vitalicia’) within six months, but only the amount you use is exempt. The maximum you can re-invest in the whole of life annuity for this purpose is €240,000, the rest (if any) would be subject to capital gains tax. Please note that some requirements apply.
Any questions? Ask our advisers for help
Changing tax residency – ‘exit tax’
If you intend to leave Spain, having lived there for at least 10 years in the prior 15 years, you may face what is commonly known as the ‘exit tax’, which is applied to unrealised gains on certain assets wherever they are in the world. However, this only applies if your shares are worth more than €4 million or your total shareholdings exceed 25% and the market value of the shares exceeds €1,000,000, and under certain circumstances. The unrealised gains will be taxed at the standard rates of 19%, 21% and 23%.
This tax liability can be deferred in certain circumstances, such as for temporary work assignments or if you move to a country with a double tax treaty and information exchange agreement with Spain. If the taxpayer moves to another EU/EEA country the gain will only need to be declared and taxed if the shares are sold within the next 10 years or they move outside the EU/EEA.
So Brexit could be an issue for those affected, in which case seek advice on how to hold your investments so that exit tax will not apply.
Capital gains tax for non-residents of Spain
If you are buying real estate in Spain but not planning to live there, you still need to be aware of Spanish property taxes for non-residents.
Any Spanish sourced capital gains on the sale or transfer of assets located in Spain, is taxed at a fixed rate of 19% for non-residents.
However, since 2015 anyone resident in another EU country or an EEA country that has signed up to the tax information exchange agreement with Spain can now claim the main home re-investment exemption (as above). The new main home you are buying does not need to be in Spain. You do have to meet a number of conditions to qualify though, so you should seek professional advice before you take any action.
Take specialist advice to ensure that you hold your assets, particularly your investment assets, in the most tax efficient way for Spain. A good adviser will help you manage your assets so that you do not pay more tax than you need to. Always seek professional advice before making any changes to your investments and tax planning.
Download our Guide to Taxes in Spain
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.