Selling a property in Spain can be a rewarding yet complex process, especially for expats. One critical aspect of any sale is understanding and complying with capital gains tax obligations. Whether you’re a resident or non-resident, this tax can significantly impact your financial outcome.
Non-residents also need to account for the 3% withholding tax (Impuesto sobre la Renta de No Residentes), which the buyer must pay directly to the Spanish tax authority, the Hacienda.
At 247 Expat Insurance, we understand the unique challenges faced by expats and provide guidance to ensure your journey is as smooth as possible. For real estate assistance, VIBE Real Estate can help, and for legal and tax matters, we recommend Platinum Legal Spain.
Capital gains tax is a tax levied on the profit made when selling a property in Spain. Both residents and non-residents are subject to this tax, though rates and rules differ depending on your residency status.
For expats, it’s essential to understand how this tax works and how it impacts your financial planning. Missteps can lead to unnecessary costs or penalties, but with expert guidance, you can optimize your tax outcomes.
The seller is generally responsible for paying capital gains tax. However, when the seller is a non-resident, the buyer must withhold 3% of the sale price and pay it directly to the Hacienda as an advance payment toward the seller’s tax liability.
Residents, on the other hand, are not subject to this withholding tax. However, they must calculate and pay their taxes based on the rules for Spanish residents.
Calculating capital gains tax involves determining the profit earned from the sale of your property, minus allowable deductions.
Formula:
Taxable Gain = Sale Price - (Purchase Price + Deductible Expenses)
Deductible Expenses:
1. Legal fees incurred during the purchase and sale.
2. Costs of property improvements (with valid invoices).
3. Notary and registry fees.
Tax Rates:
• Residents: Taxed progressively from 19% to 28% based on the profit amount.
• Non-residents (EU citizens): Flat rate of 19%.
• Non-residents (non-EU citizens): Flat rate of 24%.
For non-residents, the 3% withholding tax paid by the buyer is deducted from the final liability.
The 3% withholding tax is a mechanism designed to ensure non-resident sellers comply with Spanish tax laws. Here’s how it works:
1. The buyer withholds 3% of the sale price.
2. The amount is paid directly to the Hacienda using Modelo 211.
3. Non-resident sellers must file Modelo 210 to reconcile their final tax liability or request a refund if the 3% exceeds their total tax due.
This system helps prevent tax evasion but requires careful handling to avoid overpayment or penalties.
Residents:
• 19% for gains up to €6,000.
• 21% for gains between €6,001 and €50,000.
• 23% for gains between €50,001 and €200,000.
• 28% for gains exceeding €200,000.
Non-Residents:
• EU/EEA citizens: 19%.
• Non-EU citizens: 24%.
For non-residents, the 3% withholding tax is deducted from the final amount payable.
While paying tax on profits is mandatory, there are ways to minimize your liability:
1. Main Residence Exemption:
• Residents who reinvest proceeds into another primary residence may qualify for an exemption.
2. Over-65 Exemption:
• Residents over 65 who sell their primary residence are fully exempt from capital gains tax.
• Deducting allowable expenses like legal fees, property improvements, and notary costs.
• Ensuring all paperwork is accurate for reclaiming excess withholding tax.
For detailed tax strategies, consult Platinum Legal Spain, a trusted name for expat legal and tax advice.
Residents must include their capital gains tax payment in their income tax return, typically within 3 months of the property sale.
1. The buyer must pay the 3% withholding tax to the Hacienda within one month of the sale.
2. Sellers must file Modelo 210 within 4 years to reconcile tax liability or claim a refund.
Missing these deadlines can result in penalties or lost refunds, so timely action is essential.
1. Purchase Deed: To verify the original purchase price.
2. Sale Deed: To confirm the sale price and date.
3. Invoices for Improvements: To deduct eligible expenses.
4. Proof of 3% Withholding Payment: Provided by the buyer (Modelo 211).
5. Modelo 210: Required to declare final liability or claim a refund.
247 Expat Insurance:
We ensure expats are protected with comprehensive coverage for their property transactions, offering peace of mind throughout the process.
VIBE Real Estate:
Looking for assistance with selling your Spanish property? VIBE Real Estate provides expert guidance for expats, ensuring a seamless sale and compliance with Spanish regulations.
Platinum Legal Spain:
Need help with taxes or legal documentation? Platinum Legal Spain specializes in legal and tax advice for EU and non-EU expats, helping you minimize liabilities and claim refunds efficiently.
• Residents: Progressive rates (19%-28%).
• Non-residents: 19% for EU citizens, 24% for non-EU citizens.
The buyer withholds 3% of the sale price and pays it to the Hacienda. This is an advance payment for non-resident sellers, deducted from their final tax liability.
Non-residents generally cannot claim exemptions, but they can deduct certain expenses to reduce taxable gains.
Non-residents need the Modelo 211 (proof of withholding) and Modelo 210 to reconcile taxes or request refunds.
For real estate assistance, contact VIBE Real Estate. For tax and legal matters, consult Platinum Legal Spain for expert guidance.