Spanish capital gains tax is complex. It is paid by tax residents of Spain on their worldwide assets and by non-residents on property that they own in Spain.
Capital Gains Tax Rates on sale or transfer of assets (except property)
Gains made on the sale or transfer of assets (not including property), are taxed as “savings income” – so gains are added to your other savings income for the year and then taxed accordingly. The total savings income (including gains) tax rates for 2015 and 2016 are:
|Gain in euros||2015||2016|
|6,000 – 24,000||21,50%||21%|
|24,000 – 50,000||21,50%||21%|
Capital Gains on the Sale of Property
When calculating the gain, in addition to the cost of acquisition and any costs incurred when selling the property, expenditure on improving or enhancing the property is allowable as a deduction when calculating the net gain. However, it is important to ensure that you have the correct building licences for any changes that you have made, and that they have been registered at the Land Registry. When you register the changes there will be a revaluation of how much the property is worth that should bring it more in line with your selling price.
Costs incurred include:
• Lawyer’s fees
• Notary’s fees
• Land Registry’s fees
• VAT or Property Transfer Tax (depending on whether you purchased off-plan or resale property)
• Plusvalía Tax
• Estate Agent’s commission.
Until January 2015 inflation was taken in to account when calculating capital gains tax. However, this is no longer the case and means that some people are paying significantly more CGT. The net profit (capital gains) is currently taxed at 19%. A 50% reduction is applied if the property was purchased between the 12th May 2012 and 31st December 2012.
Reinvestment relief is available to Spanish residents when they sell their main home and invest in a new one. To qualify for this relief, the property must be your main residence and you must have lived in it continuously for at least three years (less if you had to sell because of a change of job, marriage etc.) from the date of sale or completion. You must then buy a new main residence within four years, starting two years before the sale.
The tax relief is based on the proportion of the sale proceeds reinvested into the new home. If the new home costs more than the sale price of the old home, then all of the gain is exempt. If only 50% of the sale proceeds are reinvested, then only half of the gain is exempt. If the property being sold has a mortgage on it, then it is the net sale proceeds that need to be fully reinvested to escape capital gains tax.
In order for the reinvestment relief to apply, the taxpayer must declare the gain on their Spanish tax return together with their intention to reinvest the proceeds into a new main home. If the required declarations are not made, the relief is likely to be denied by the Spanish tax authorities.
Note that reinvestment relief is only available to Spanish tax residents (you will need to have registered as a resident and be paying tax locally). However the main residence does not need to be in Spain to qualify for the relief, nor does the new home. If, as above, you have lived in the property as your main home for three years or more, and you are over 65 years of age when you sell it, the gains are exempt from capital gains tax even if you do not buy a new property.
When property is sold by a non-resident of Spain, purchasers must withhold 3% of the purchase price and pay it over to the Spanish tax authorities as an advance payment of capital gains tax on behalf of the vendor. 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 four months of the sale 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.
In order to present this return you would need to submit Purchase Deeds and invoices for costs incurred; Sales deeds and invoices for costs incurred; Invoices and Deeds relating to enhancement of the property along with building permits; Form 211 (receipt for the 3% retention); passports and NIE certificates of the vendor; Bank certificate indicating IBAN, if in Spain the certificate should show the titleholders name and NIF that should coincide with the vendors, if it is an account abroad then the Bank certificate should show the titleholders, their address, IBAN and swift/BIC. In addition, the last four years of non resident private use tax returns must be submitted.
In addition to any mainstream capital gains tax on the sale of property there is also a local tax in urban areas levied by Spanish town halls commonly known as the Plusvalia (which literally translates as “gain”) on the growth in the value of urban land (excluding the buildings). The tax rate varies depending upon the size of the local population and the length of ownership. Any Plusvalia tax paid is allowed as a deductible cost when calculating the capital gains tax.
The tax rates, scope and reliefs may change, the information has been summarised and it is recommended that an individual take personalised advice.
- Spanish government tax offices, Agencia Tributaria
Information by E.B.F Consulting S.L. E.B.F Consulting has been providing tax and accounting services to expatriates in Europe since 1999. Office is based in Lanzarote, Spain. Visit the www.ebfconsulting.com for more details. Copyright © E.B.F Consulting 2016 All Rights Reserved