Plusvalia & Capital Gains Tax for Non Residents in Spain
When you sell a property in Spain, you have to pay two different taxes: Plusvalia (in Spanish “Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana” or IIVTNU) and Capital Gains Tax (in Spanish “Impuesto sobre la Ganancia Patrimonial”).
PLUSVALIA. This is a municipal tax payable to the local council (“Ayuntamiento“), based on the increase of the official value of the land between the purchase and the sale dates.
The increase in the value of the land is calculated by taking the catastral value of the property at the time of selling (this is a value stated on the Rates bill issued by the local Town Hall). You then multiply this by the annual rate that has been set by the local municipal council, taking into account the number of years you have had the property. Therefore, the factor that most affects the value of the Plusvalia is the number of years that you have owned the property.
After several Spanish Court Decisions ruled that the way this tax is calculated in not legal, the Spanish Government finally passed a decree on the 8th of November 2021, making substantial changes in the way this tax is calculated. The three most important changes are:
- If the sale price declared in the title deed is lower than the purchase price declared in the purchase deed, there will be no Plusvalia to pay at all. Please note that, for this purpose, the purchase costs and the sale costs are not considered, just the purchase price and the sale price (not even the VAT).
- In cases where the profit obtained is low, but the Plusvalia tax is high, the taxpayer can choose an alternative way to calculate the tax, which will take into account the purchase and sale price.
- If you sell within one year after the purchase, you have to pay Plusvalia.
Finally, please note that when the seller is a non resident, and although this is a tax of the selling party, the buyer is responsible of the payment of the Plusvalia, and therefore he/she would like to retain the amount calculated for this tax from the purchase price.
Capital Gains Tax (CGT). This tax is collected by the National Tax Office (Agencia Tributaria). Unlike the Plusvalia, this tax is fairer because it is based exclusively on the actual profit obtained. Currently, Non Residents in Spain have to pay a 19% flat rate on the profit obtained (in this case we can deduct both purchase and sale costs). However, it is important to know that even if you are making no profit at all, due to you being a Non Resident, the buyer of your property will always be obliged to retain 3% of the sale price, and pay that amount to the Tax Office on account of your possible tax liability. Of course, if you have no tax liability at all because you are losing money with the sale, or your liability is less than the 3% retained, later on, you will be entitled to a total or partial tax rebate, depending on the case. Please note that: 1) The Tax Office will take between 6 to 10 months to pay the refund, and 2) Before paying the refund, the Tax Office will check that you have been paying your Non Resident Income Tax.
If you are making a substantial profit with the sale of the property in Spain, this 3% may not be enough to cover your tax liability. In this case you will have 4 months to pay the balance to the tax Office.
Please note that the tax is not 3% of the sale price + 19% on the profit. The tax is only the latter; the 3% retention is a payment on account of the tax, to put it bluntly, it is a way to avoid non residents selling and going back to their country without paying.
Let’s see how it works with an example:
You bought an apartment for 140.000 Euros and you sell it a few years later for 195.000 Euros.
The buyer will retain 5.850,00 Euros (3% of the sale price) and will pay this to the Tax Office.
Once we add the purchase costs to the purchase price and we deduct the sale costs from the sale price, the final profit is 22.000 Euros, so your Capital Gains tax would be 4.180 Euros (19% of the profit).
As 5.850 Euros (the 3%) were already paid to the Tax Office on account of this, you will be entitled to get a refund of 1.670,00 Euros, which the Tax Office will pay into your bank account (approximately 6-10 months after the sale.)
A typical mistake is to believe that you will always get the full 3% back, and, as you can see, in the example above, that is not true. In fact, if the profit is higher, you will not receive anything back, and you will still have to pay an additional amount, to complete your tax liability (19% of the profit).
Finally, please note the following:
- The age of the seller is not a factor for Capital Gains Tax purposes (for Non Residents).
- The possibility to reinvest the sale proceeds is for residents only.
- You can not deduct the cost of reparations, refurbishments, etc. You can only deduct the costs of the improvements in the energy performance (change of windows, cooling/heating system, etc,.) and major reforms declared before the Notary, with building license, etc.
If you would like to receive a no-obligation quotation for our services in relation to the sale of your property in Spain, please fill out the following form, providing us with some information about the sale you are planning (price, conditions, location of the property, resident/non-resident status, etc.) and we will get back to you immediately.
The responsible of the Conveyancing department of Bravo Legal is Miguel Angel Bravo, Lawyer, registered in the Illustrious Bar of Malaga (“Colegio de Abogados”) with number 8.410.
if you have made a loss on the sale of your property how do you claim the 3% retained back ?
Thanks for your question.
If you have made a loss on the sale of your property, and also if you have made a profit, you always have to file a Capital Gains Tax Declaration using form 210. You will need to provide copies of the purchase and sale deed and receipts of the expenses of both the purchase and the sale, and a receipt of the payment of the 3% which you should obtain form the buyer. Of course we can take care of all this for you. Please get in touch by email to email@example.com, and I will give you more information. Best regards