Selling Property in Spain? Know Your Taxes

Selling a property in Spain as a foreign investor involves several tax obligations that can significantly impact your net profit. Understanding how much tax you pay when selling a property in Spain is crucial for proper financial planning and avoiding unexpected costs. From capital gains tax to municipal levies and retention requirements, knowing the exact figures and applicable deductions can help you optimize your sale.

This comprehensive guide details all the taxes and costs associated with selling real estate in Spain for non-resident property owners, providing clear examples and strategies to minimize your tax bill.

1. Capital Gains Tax (CGT) in Spain for Non-Residents

Capital Gains Tax (Impuesto sobre la Renta de No Residentes – Ganancias Patrimoniales) is the primary tax you will pay on the profit derived from selling your Spanish property. This tax applies to the difference between the property’s acquisition value and its selling price.

1.1 Understanding the Capital Gain

The capital gain is calculated as the difference between:

Sale Price: The actual price at which you sell the property.
Acquisition Value: The original purchase price of the property, plus certain associated costs and investments.

What you can add to the Acquisition Value (to reduce the gain):

Purchase Costs: Notary fees, Land Registry fees, legal fees, Property Transfer Tax (ITP) or VAT paid at the time of purchase. These costs must be properly documented.
Improvement Costs: Expenses incurred for significant renovations or improvements to the property (not maintenance or repairs). These must be evidenced with official invoices.

What you can deduct from the Sale Price (to reduce the gain):

Selling Costs: Real estate agent commissions, legal fees, and other expenses directly related to the sale.

1.2 Capital Gains Tax Rates for Non-Residents

The tax rate for capital gains depends on your tax residency status and country of origin within the EU/EEA:

EU/EEA Residents: If you are a tax resident of a European Union or European Economic Area country, the capital gains tax rate is 19% of the net capital gain.
Non-EU/EEA Residents: For individuals or entities from outside the EU/EEA, the capital gains tax rate is 24% of the net capital gain.

Example Calculation of Capital Gains Tax (CGT):

Let’s consider a non-resident investor from the UK (an EU/EEA country before Brexit, now non-EU) selling a property in Spain.

Transaction	Amount (€)	Details
Original Purchase Price	250,000	Price paid when acquiring the property.
Purchase Costs	20,000	Includes ITP (7%), notary fees, legal fees, etc., increasing the acquisition value.
Improvement Costs	10,000	Documented expenses for significant renovations (e.g., new kitchen, bathroom remodel).
Total Acquisition Value	280,000	Sum of Purchase Price + Purchase Costs + Improvement Costs. This is your adjusted cost base for tax purposes.
Sale Price	350,000	The price at which the property is sold.
Selling Expenses	15,000	Real estate agent commission (often 3-5% + VAT), legal fees, energy certificate, etc.
Net Sale Price	335,000	Sale Price – Selling Expenses.
Capital Gain (Profit)	55,000	Net Sale Price – Total Acquisition Value (335,000 – 280,000). This is the amount subject to CGT.
CGT Due (EU Resident @ 19%)	10,450	55,000 x 19%.
CGT Due (Non-EU Resident @ 24%)	13,200	55,000 x 24%.

As you can see, properly documenting all acquisition and improvement costs is essential to reduce your taxable capital gain and, consequently, your tax bill.

2. The 3% Withholding Tax on Property Sales by Non-Residents

Spain implements a mandatory 3% withholding tax on the sale price of properties owned by non-residents. This measure is designed to ensure that non-resident sellers meet their capital gains tax obligations before leaving the country.

2.1 How the 3% Withholding Works

When a non-resident sells a property:

The Buyer Withholds: The buyer of the property is legally obliged to withhold 3% of the agreed sale price (not the profit) from the payment to the seller.
Payment to Tax Authorities: This 3% must then be paid directly to the Spanish Tax Agency (Agencia Tributaria) by the buyer within one month of the sale date.
Advance Payment: This 3% acts as an advance payment towards the seller’s Capital Gains Tax liability.

2.2 Reclaiming the Withholding Tax

After the sale, the non-resident seller must file a Capital Gains Tax return (Modelo 210) within four months. This return reconciles the actual CGT owed with the 3% withheld by the buyer.

If Actual CGT is Less than 3% Withheld: The seller can request a refund for the difference. For example, if your CGT liability is €10,450, but €10,500 was withheld (3% on a €350,000 sale), you can claim back €50. This is often the case when the profit margin is low or a loss is made.
If Actual CGT is More than 3% Withheld: The seller must pay the remaining balance to the Spanish Tax Agency. In our example above, if the CGT due is €10,450 and €9,000 was withheld (assuming a lower sale price for simplicity), you would still owe €1,450.
If a Loss is Made: If the seller makes no profit or incurs a loss on the sale, they can claim a full refund of the 3% withheld.

Important Note: The refund process for the 3% withholding tax can take several months, sometimes up to a year, so it’s essential to have realistic expectations and maintain proper records.

3. Municipal Capital Gains Tax (Plusvalía Municipal)

In addition to the national Capital Gains Tax, sellers are also liable for a local tax known as Plusvalía Municipal (Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana). This tax is levied by the local Town Hall and is based on the increase in the official cadastral value of the land from the time of acquisition to the time of sale.

3.1 How Plusvalía Municipal is Calculated

The Plusvalía Municipal is calculated based on:

Cadastral Land Value: The official value of the land (not the building) as determined by the local authorities.
Number of Years Owned: The period for which the property has been held.
Coefficient Rate: A percentage set by each municipality, applied to the cadastral value increase.

Key Features of Plusvalía Municipal:

Taxable Event: It is triggered by the transfer of ownership (sale, inheritance, donation).
Who Pays: Traditionally, the seller is liable for this tax. However, parties can agree otherwise in the sale contract. In practice, it is usually paid by the seller.
No Profit Needed: You are liable for this tax even if you sell the property at a loss, as it’s based on the theoretical increase in land value, not actual profit. However, recent Supreme Court rulings allow sellers to challenge this if they can prove no actual economic gain was made.

3.2 Recent Changes and Challenges

Recent legal developments have impacted the Plusvalía Municipal. The Supreme Court has ruled that this tax cannot be charged if the property has been sold at a loss. If you sell at a loss, you can appeal the tax assessment and seek a refund if it was paid. This is a complex area, and professional advice is highly recommended.

4. Other Costs Associated with Selling Property in Spain

Beyond the direct taxes, sellers should also budget for additional expenses that arise during the sale process.

4.1 Real Estate Agent Fees

Most sellers engage a real estate agent to market their property.

Cost: Agent fees in Spain typically range from 3% to 5% of the sale price, plus 21% VAT (IVA). This is usually paid by the seller.
Services: Agents handle marketing, viewings, negotiations, and often assist with documentation.

4.2 Legal Fees

Hiring a lawyer is highly recommended for selling property in Spain, especially for non-residents.

Cost: Legal fees are usually around 0.5% to 1% of the sale price, plus 21% VAT.
Services: Your lawyer will review the sale contract, ensure all legal requirements are met, handle power of attorney if you’re not present for the sale, calculate and manage your tax obligations, and oversee the transfer of funds.

4.3 Energy Performance Certificate (EPC)

An Energy Performance Certificate (Certificado de Eficiencia Energética) is mandatory for selling or renting out a property in Spain.

Cost: Approximately €100 – €300, depending on the property size and location.
Purpose: It assesses the property’s energy efficiency and must be presented to the buyer.

4.4 Mortgage Cancellation Fees (if applicable)

If you have an outstanding mortgage on the property, you will need to cancel it formally before or at the time of sale.

Fees: This involves notary fees, Land Registry fees for cancellation, and potentially bank commissions for early repayment. These can amount to a few hundred to over a thousand euros.

5. Strategies to Minimize Your Tax Bill When Selling

With proper planning and expert advice, foreign investors can reduce their tax liabilities when selling a property in Spain.

5.1 Maximize Deductible Expenses

Keep Meticulous Records: Retain all invoices and receipts for acquisition costs, major improvements, and selling expenses. These are crucial for reducing your capital gain.
Eligible Expenses: Remember to include legal fees, notary fees, agency commissions from the purchase, and any capital improvements like extensions or significant renovations.

5.2 Understand Double Taxation Agreements (DTAs)

Avoid Being Taxed Twice: Spain has Double Taxation Agreements (DTAs) with many countries. These agreements prevent you from paying tax on the same income (including capital gains) in both Spain and your home country.
Claim Tax Credits: Depending on the DTA, you may be able to claim a tax credit in your home country for the taxes paid in Spain, reducing your overall tax burden. Consult a tax advisor in both countries.

5.3 Consider the Timing of Your Sale

Tax Year End: If possible, consider the timing of your sale in relation to the tax year end in both Spain and your country of residence. This might allow for more favorable tax planning.
Market Conditions: While taxes are important, market conditions should also heavily influence your sale timing to maximize the selling price itself.

5.4 Seek Professional Tax Advice

Specialized Guidance: The Spanish tax system for non-residents can be complex, and laws are subject to change. Engaging a specialized tax advisor or a firm like Buy-to-Let Spain can ensure you comply with all regulations and benefit from all available deductions and strategies.
Ownership Structure: A professional can advise you on whether owning the property as an individual or through a Spanish company could offer tax advantages, particularly for large portfolios.

Avoid Costly Mistakes – Get Expert Investment Advice

Selling Property in Spain? Plan Your Taxes First!

Selling a property in Spain as a non-resident involves complex tax obligations. Without proper planning, investors often overpay capital gains tax or fail to claim available deductions, leading to unnecessary costs and reduced profits. That’s why we created the Investment Strategy Session—a 1-hour, high-impact consultation designed to help non-residents selling property in Spain avoid costly mistakes and optimize their tax position.

What You’ll Get in the Investment Strategy Session

In this personalized session, our experts will provide a high-level overview and discuss the specific implications for your situation:

Personalized Tax & Legal Guidance: Learn how Spanish CGT applies to your specific sale.
Deductions & Exemptions: Find out which deductible costs and potential exemptions you may qualify for.
3% Withholding Tax Recovery: Understand the process to ensure you recover any excess tax withheld by the buyer.
Legal & Tax Filing Guidance: Get clear steps on how to correctly declare and pay CGT and other related taxes.

Cost: €500 – A fraction of what an unnecessary tax bill or missed refund could cost you.

Limited spots available each week – Book your session now!

Let Buy-to-Let Spain guide your next investment. Book a one-hour Investment Strategy Session with our expert team. We’ll walk you through everything: tax structure, legal setup, locations, rental demand, property types, and more.

Session cost: €500

Limited spots available each week

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