Capital Gains Tax (CGT) is a major tax consideration when selling property in Spain. For foreign investors and non-residents, failing to plan ahead can lead to unexpected tax liabilities, higher costs, and difficulties reclaiming withheld taxes.
This guide explains everything non-resident property owners need to know about CGT, including how it’s calculated, applicable tax rates, the 3% withholding tax, available deductions, and strategies to minimize tax burdens.
1. What Is Capital Gains Tax (CGT) in Spain?
Capital Gains Tax in Spain is a tax on the profit made from selling an asset, including real estate.
The tax is applied to the difference between the acquisition cost and the selling price. Spain treats capital gains as investment income, which is subject to flat tax rates for non-residents.
1.1 Who Needs to Pay CGT?
Capital Gains Tax applies in Spain when:
- A non-resident sells a property located in Spain.
- A foreign company sells Spanish real estate assets.
- A resident or non-resident individual sells property, land, or shares.
The tax is not applied in cases of inheritance or gifts, which are subject to Spain’s Inheritance and Gift Tax (Impuesto de Sucesiones y Donaciones, ISD) instead.
💡 Key Insight: You only pay tax on the profit (capital gain), not the total sale price.
2. Capital Gains Tax Rates for Non-Residents in Spain
The applicable CGT rate for non-residents depends on whether they are from the EU/EEA or from a third country:
- EU/EEA residents: 19% of the capital gain.
- Non-EU/EEA residents: 24% of the capital gain.
📌 Important: Unlike Spanish tax residents, who benefit from progressive CGT rates, non-residents pay a fixed rate.
2.1 Example of CGT Calculation
Consider a non-resident from the EU selling a Spanish property:
| Transaction | Amount (€) |
|---|---|
| Purchase price (original price paid) | 200,000 |
| Acquisition expenses (notary, legal, transfer tax) | 10,000 |
| Total acquisition cost | 210,000 |
| Sale price (selling price received) | 300,000 |
| Selling expenses (agent fees, legal fees, taxes) | 10,000 |
| Net sale value | 290,000 |
| Capital Gain (profit) | 80,000 |
| CGT Due (EU resident, 19%) | 15,200 |
| CGT Due (Non-EU resident, 24%) | 19,200 |
💡 Pro Tip: Keeping proper records of all property-related expenses can reduce your taxable capital gain.
3. The 3% Withholding Tax for Non-Residents
Spain enforces a mandatory 3% withholding tax on all property sales by non-residents.
3.1 How Does the 3% Withholding Work?
- The buyer must withhold 3% of the property’s sale price and transfer it to the Spanish Tax Agency (Agencia Tributaria).
- This prepayment ensures tax compliance before the seller leaves Spain.
- If the seller owes less than 3% CGT, they can claim a refund for the overpaid amount.
- If the actual CGT liability is more than the 3% withheld, the seller must pay the remaining amount.
3.2 Example of the Withholding Tax in Action
| Transaction | Amount (€) |
|---|---|
| Sale price | 300,000 |
| 3% withholding tax deducted by buyer | 9,000 |
| CGT due (19% on €80,000 gain) | 15,200 |
| Remaining CGT to pay | 6,200 |
💡 Refund Process: If the seller made no profit (or a loss), they can apply for a full refund of the 3% withholding tax.
4. Exemptions and Reductions for Capital Gains Tax
Certain exemptions and reductions can significantly lower CGT liability:
4.1 Reinvestment in a Primary Residence
- If a Spanish tax resident sells their primary residence and reinvests the proceeds in another home within 2 years, they may be fully exempt from CGT.
- This exemption does not apply to non-residents, unless they establish tax residency before selling.
4.2 Exemption for Over-65s
- Spanish residents aged 65 or older may be fully exempt from CGT if selling their primary residence.
- Again, this does not apply to non-residents.
4.3 Deductible Costs to Reduce Capital Gains
Foreign sellers can reduce CGT by deducting:
- Property acquisition costs (notary fees, transfer taxes).
- Major renovations or improvements (must be properly documented).
- Legal fees and real estate agent commissions.
📌 Tip: Keep detailed invoices and official records for tax deductions.
5. Strategies to Minimize Capital Gains Tax in Spain
5.1 Plan Your Sale Timing Wisely
- Avoid selling during peak tax years when total income is high.
- Consider waiting for favorable tax policy changes before selling.
5.2 Consider Using a Spanish Company
- Some foreign investors purchase property through a Spanish company to benefit from corporate tax rates (25%) instead of CGT (24%).
- This structure works best for multiple properties or long-term investments.
5.3 Utilize Double Taxation Agreements (DTAs)
- Spain has tax treaties with many countries to avoid double taxation.
- Some investors can offset Spanish CGT against taxes in their home country.
5.4 Offset Losses Against Future Gains
- If you previously sold a Spanish property at a loss, you might be able to use that loss to offset future capital gains in Spain.
6. Reporting and Paying Capital Gains Tax in Spain
6.1 How to File the CGT Return
- Sellers must file Form 210 to report the capital gain.
- If the CGT due is lower than the 3% withheld, a refund request must be submitted within 3 months.
6.2 What Happens If You Don’t Pay CGT?
- Heavy fines and penalties (starting at 50% of unpaid taxes).
- Legal enforcement by the Spanish government.
- Difficulties in future property transactions in Spain.
💡 To avoid complications, ensure you file on time and keep proper records.
Avoid Costly Tax Mistakes – Get Expert Investment Advice
Selling Property in Spain? Plan Your Taxes First!
Selling a property as a non-resident involves complex tax obligations. Without proper planning, investors overpay capital gains tax or miss deductions.
That’s why we created the Investment Strategy Session—a 1-hour consultation designed to help non-residents selling property in Spain avoid unnecessary tax costs.