Capital Gains Tax on Real Estate in Spain

The money from the sale of a property is part of capital gains (or capital income) and losses, and as such, it is taxed under the Personal Income Tax (I.R.P.F) with a progressive rate that ranges from 19% to 26% depending on the profit made.

How is the income tax on the sale of my property calculated?

The general rule states that the capital gain is determined by the difference between the real transmission value and the acquisition value. In other words, you need to subtract the purchase price from the sale price.

• Sale Value: This is the actual amount for which the sale took place, considering the sale price of the property and subtracting the expenses and taxes related to the sale, such as municipal capital gains tax (Plusvalía Municipal), real estate agency commission, etc. In the case where the taxpayer has signed a mortgage to purchase a new home, the total amount obtained from the sale will be considered as the sale value minus the principal of the loan, awaiting depreciation.

• Acquisition Value: This consists of the real amount for which the property was acquired, which can include expenses and taxes related to the purchase such as VAT (I.V.A) or the Property Transfer Tax (I.T.P), as well as the cost of investments and improvements made to the property. Depreciation should be subtracted, such as if you rented out the property, in which case the total income received from the rent must be deducted.

Based on the amount obtained:

• From €0 to €6,000: Will be taxed at a fixed rate of 19%.

• From €6,000 to €50,000: Will have an income tax of 21%.

• Between €50,000 and €200,000: Will be taxed at a fixed rate of 23%.

• Revenue obtained above €200,000: Will be taxed at 26%. (New in 2021)

However, certain tax reliefs are available:

Reinvestment of the primary residence: If you sell your primary residence to buy another, you will be exempt from tax. The key to this tax exemption is that it only applies to the primary residence, not secondary residences. Additionally, you have a two-year period to reinvest. If the reinvested amount is less than the total amount received from the sale, only the proportional part of the capital gain corresponding to the reinvested amount will be excluded from tax.

People over 65 years old who sell their primary residence: In this case, there are no additional requirements to apply the exemption.

People over 65 years old who use the profits to purchase a lifetime annuity: If the sold property is not the primary residence, it is possible to avoid paying taxes if the money is used to purchase a lifetime annuity, with a maximum of 240.000 €

Don't forget the MUNICIPAL CAPITAL GAINS TAX when selling a property.

To calculate it, only the cadastral value of the land of the property is used as the base. This value can be found in the most recent I.B.I receipt (property tax), and depending on the number of years you’ve owned the property, the municipality will apply its annual revaluation rate to determine the capital gain, on which the municipal tax (specific to each municipality) will be applied. There are also possible deductions. If you’ve owned the property for 20 years or more, the ratio applied will be the maximum amount set by the municipality.

Note: In other words, the purchase and sale prices are not considered in the calculation of this tax. Whether you bought your property 40 years ago or 20 years ago, you will pay the same amount. It’s easy to inquire with your municipality to find out the amount you would have to pay if your property were sold in the current year.

DONATION OF A PROPERTY is also subject to personal income tax.

If, instead of selling your house, you choose to donate it, it’s easy to forget about the personal income tax. However, the person receiving the property must declare it in the inheritance and donation tax. The person making the donation will also have to pay income tax on the capital gain.