Capital gains tax in Spain (Impuesto sobre las Ganancias Patrimoniales) is calculated on the difference between the net sales value and the revalued purchase price. A flat rate of 19% applies to non-residents, while residents pay a progressive rate that varies between the 19% and 28%. You can significantly reduce this tax burden by deducting legally recognised expenses or using specific exemptions for over-65s and reinvestments.
Read more about capital gains tax in Spain.
1. Reduce taxable base via expense deduction
The most effective method to directly reduce capital gains tax is to maximise deductible expenses. The Spanish tax authorities allow all costs inherent in the purchase and sale of the property to be deducted from profits.
Deductible expense items are:
- Honours: Fees for lawyers, solicitors and notaries.
- Public records: Fees for entry in the Property Register (Registro de la Propiedad).
- Taxes: Transfer tax paid (ITP) or VAT (IVA) on purchase, as well as municipal plusvalia muncipal.on sale.
- Cost of sales: Brokerage commissions (if supported by an official invoice including VAT).
2. Property investment: renovations and refurbishments
Costs for structural improvements and renovations to your Spanish property are deductible, provided they meet strict administrative requirements. Unlike regular maintenance, these investments increase the taxable purchase value of the property.
To successfully deduct renovation costs, you must meet two criteria:
- Billing: You must have official invoices that comply with Spanish law, including your NIE number.
- Legalisation: Structural changes or extensions must have been notified to the land registry and ideally ratified through a Escritura de Obra Nueva.
Examples of deductible improvements: Installing air conditioning, a new roof, renewing the floor or a complete kitchen renovation. However, costs for a mortgage or loan are non-deductible.
Read more about capital gains tax when self-building in Spain.
3. Full exemption for residents aged 65 and over
Are you over 65 and tax resident in Spain? Then you may qualify for a full exemption from capital gains tax on the sale of your main residence (vivienda habitual).
- Main residence: You must have occupied the property continuously for the past three years.
- Exceptions: The three-year period can be shortened in case of death, marriage, divorce or forced relocation due to working conditions.
- Annuity option: For properties that are not the main residence (e.g. a holiday home), over-65s can also get exemption provided the sale proceeds (up to a maximum of €240,000) are used within six months to establish an annuity insurance policy (renta vitalicia).
4. Reinvestment exemption for residents under 65
Residents under 65 can avoid capital gains tax altogether by reinvesting the entire proceeds of the sale of their main residence in a new family home.
The key conditions for this exemption:
- Time frame: The reinvestment must take place within two years (before or after) selling the old home.
- Location: The new family home may be located anywhere in the EU or EEA, including Belgium or the Netherlands.
- Partial reinvestment: If only part of the proceeds are reinvested, the exemption applies proportionally.
Frequently asked questions about capital gains tax in Spain (FAQ)
How much capital gains tax do I pay as a non-resident in Spain? As a non-resident, you pay a flat rate of 19% on the net capital gain. In addition, the buyer deducts a standard 3% from the sale price as an advance payment to the tax authorities (the retención).
Are costs for a Spanish mortgage deductible from capital gains? No, costs related to financing, such as closing commissions, valuation costs for the bank or notary fees for the mortgage deed, are not deductible from capital gains under current Spanish legislation.
When is a property in Spain considered a 'vivienda habitual'? A property counts as a principal residence if you have effectively and permanently lived there for a continuous period of at least three years and are a tax resident.
Can I deduct renovation costs without an official invoice? No, the Spanish tax authorities (Hacienda) are very strict. Without an official invoice stating the correct details (NIF/NIE of both parties and VAT specification), the deduction will be irrevocably refused.
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.
