Capital gains tax on building your own home in Spain: calculation and burden of proof

When selling a self-built property in Spain, as a non-resident, you pay 19% capital gains tax on the net profit. This profit is calculated by taking the difference between the total transfer value and the demonstrable purchase value. For those who build themselves, the biggest tax risk lies in not documenting the construction costs correctly, making the taxable base artificially high.

Here you will find detailed information on capital gains tax in Spain.

In this article, you will read exactly how to calculate taxable capital gains, why administration is crucial and how to avoid 'the horror scenario' of double taxation.

The Tax Risk: Why documentation is essential

The biggest stumbling block for self-builders is the burden of proof. If, when selling, you cannot prove the construction costs incurred with valid invoices, the Spanish tax authorities will not accept these costs as part of the purchase value.

Expert Insight: "In practice, we see sellers paying up to 40% more tax than necessary purely due to the lack of correct invoices with NIE entries from the construction phase. Without proof, the construction cost is zero for tax purposes."

The horror scenario in practice

Suppose your parents built a villa in the 1990s. The land was bought, but the contractor was partly paid in cash or invoices were lost (sometimes still in pesetas).

• The result: When sold, the sale price is seen almost entirely as 'profit', as the original investment in bricks and mortar cannot be proved.
• The sanction: You pay 19% tax on a profit you never actually made.

How is the Added Value Tax calculated? (3 Steps)

The Spanish capital gains tax for non-residents (Impuesto sobre la Renta de No Residentes) is calculated via a fixed formula.

Step 1: Determine the Acquisition Value

The purchase value is the basic investment. In the case of self-build, it consists of:

• The purchase price of the building land.
• The effective and demonstrable building costs (architect, contractor, materials).
• Purchase costs and taxes (Notary, Registration Office, VAT/IVA, AJD).
• Possible renovations that have increased the value or lifetime of the property (investments, no maintenance).
• Min: Any depreciation if the property has been rented out.

Step 2: Determine the Transfer Value

This is the effective sale price as stated in the notarial deed (Escritura).

• Minimum tax value: The selling price should not be lower than the reference value used by the tax authorities.
• Deductions: You may deduct costs directly related to the sale, such as brokerage commission and local capital gains tax (Plusvalía Municipal).

Step 3: The Formula

The taxable base is: Transfer value - Acquisition value = Net capital gain. On this amount, as a non-resident, you pay a flat rate of 19% as a non-resident.

Read more about the construction process in Spain (8 steps).

Crucial Documentation: Invoices and Obra Nueva

To prove the purchase value to the maximum, your records must meet strict requirements. A "receipt" will not suffice.

Requirements for valid invoices

For the Spanish tax authorities (Hacienda), an invoice is only valid as proof of investment if:

1. Your NIE number and full name clearly stated.
2. The invoice meets the legal VAT requirements.
3. Proof of payment (bank statement) can be linked to the invoice.

The role of the Declaración de Obra Nueva

In new construction, the Declaración de Obra Nueva (Statement of New Construction) the key document.

• In this, the value of the construction is officially registered with the notary.
• Strategic consideration: You pay 1.5% stamp duty (AJD) on the value you declare here. It is tempting to keep this value low to save tax now. However, too low a value in the Obra Nueva means lower purchase value later, and thus more capital gains tax (19%) when sold.
• Opinion: Always state the actual cost of construction to avoid being penalised later.

ow can you reduce capital gains tax? Some tips.

Conclusion and Advice for the Real Estate Investor

Self-building in Spain offers control over quality and costs, but requires rigorous administrative discipline. Retaining invoices is not an afterthought, but an essential part of your asset management.

Our recommendation:

• Digitise every invoice immediately upon receipt.
• Make sure your contractors correctly quote your NIE number.
• Make sure the Obra Nueva reflects the actual investment value.

Frequently asked questions (FAQ)

1. How much tax do I pay on the sale of my house in Spain as a non-resident? As a non-resident (resident of Belgium or the Netherlands), you pay 19% tax on the net profit (capital gain). This is the difference between the sale price (minus expenses) and the purchase price (plus expenses and conversions).

2. Can I deduct renovation costs from capital gains tax in Spain? Yes, but only if they are structural improvements or extensions that increase the value of the property (investments). Regular maintenance (painting, repairs) is usually not deductible. You must also have official invoices with your NIE number.

3. What is the difference between Plusvalía Municipal and the national capital gains tax? The Plusvalía Municipal is a municipal tax on the increase in value of the soil (not the property), payable on each transfer. The national capital gains tax (Ganancia Patrimonial) is a tax on the profit you make on the entire property (land + house). Both have to be paid upon sale.

4. What if I no longer have invoices from the construction of my property? Without invoices, you cannot prove the construction cost to the tax authorities. The tax authorities will then set the purchase value at just the value of the land (if the deed is there) or a very low estimate, making your taxable profit - and thus your tax bill - significantly higher.

About the author: Glenn Janssens is a lawyer specialising in Spanish real estate transactions and tax regulations. Since 2017, he has been helping Belgian and Dutch individuals and entrepreneurs to safely purchase and structure real estate in Spain. He guides files from A to Z: from due diligence, ownership and tax control to estate planning and optimisation for residents and non-residents. Thanks to his years of experience, hundreds of handled files and focus on transparent communication, Glenn makes complex Spanish legislation understandable and practically applicable for every property buyer.