Short answer
You cannot simply avoid capital gains tax in Spain, but you can legally reduce it or bring it down to zero using the exemptions in Spanish law. The main ones are reinvesting the proceeds from selling your main home in a new main home, the exemption for people over 65 who sell their main home, and offsetting gains against losses.
Spanish residents pay tax on capital gains as part of the savings income base, at rates of 19% on the first €6,000, 21% up to €50,000, 23% up to €200,000, 27% up to €300,000 and 30% above that. Non-residents pay non-resident income tax (IRNR) at a flat 19% on gains from Spanish assets.
Legal ways to reduce or eliminate the tax
- Reinvest in a new main home. The gain from selling your main home (habitual residence) is exempt if you reinvest the proceeds in a new main home within two years (article 38 of the Personal Income Tax (IRPF) Law). The new home can be in Spain or elsewhere in the EU. If you reinvest only part of the proceeds, the exemption is proportional. Residents of other EU or EEA countries can also claim it when the home sold was their main residence.
- Be over 65. If you are 65 or older and sell your main home, the gain is fully exempt (article 33.4 of the IRPF Law). People over 65 can also exempt gains on other assets if they reinvest up to €240,000 in a life annuity within six months.
- Offset losses. Capital losses from shares, funds or other assets can be set against gains in the same year. Any losses left over can be carried forward for four years.
- Deduct every allowable cost. The gain is calculated as the sale price minus the purchase price. Purchase and sale costs (notary, land registry, transfer tax, agency fees) reduce the gain, as do documented improvement works and the municipal capital gains tax (plusvalía municipal) you paid.
- Use the transfer rule for investment funds. Switching between investment funds (IIC) does not trigger tax until you finally redeem your holding (article 94 of the IRPF Law).
- Time the sale. Spreading sales over several tax years keeps more of the gain in the lower brackets.
Two things to keep in mind. Municipal capital gains tax (IIVTNU) is a separate local tax on the increase in land value, and it is charged on top of the state tax. In addition, non-resident sellers have 3% of the sale price withheld by the buyer (Modelo 211). They must then file Modelo 210 to settle the final tax or claim a refund.
At Taxmind we calculate the tax due on your sale in advance and apply every exemption available, whether you are resident or non-resident in Spain.
Updated on .
This answer is general information and does not replace advice on your particular case.