Taxes on Spanish property are notorious high – those when you buy can be as much as 12% of the purchase price and capital gains tax can send them soaring when you sell. It’s therefore useful to know how to save money on real estate transactions. In this article, we look at how to save taxes when selling your property in Spain.
What Taxes Do You Pay When You Sell Property in Spain?
But before we turn to ways to save taxes, lets start by listing the main taxes and fees incurred when you sell property in Spain.
Plus Valía Tax
Plus Valía tax (meaning ‘extra value’) is levied by the local council on the change in value of the property since you bought it. It is calculated based on the cadastral value of the property and takes several factors into consideration including:
The length of time you have owned a property – the longer your ownership, the higher the tax.
The size of the property – large properties pay more than smaller ones.
The property’s location within the municipality – properties in areas with more municipal services and facilities attract higher levels of plus valía tax.
Plus valía tax is calculated up to the day you sell. Enquire at the council or ask your lawyer to find out how much the tax will be. If the property is large and you’ve owned it for several years, the bill could be several thousand euros.
Capital Gains Tax
As is the case in most countries, Spain levies capital gains tax (CGT) on the profit made from the sale of assets including real estate. Its rate ranges from 19% for Spanish and EEA residents to 24% for non-EEA residents.
Find out about buying and selling property in Spain.
Real Estate Agency Fees
If you choose to use the services of a real estate agency to sell your property, you will have to pay their fees. These are usually 5% of the purchase price.
Legal and Other Fees
It’s always advisable to use a lawyer experienced in real estate when you sell a property in Spain. Fees are usually 1% of the purchase price.
As the vendor, you are not liable for notary or land registry fees.
Selling your home in Spain now? Find out how to avoid these mistakes.
How to Save Taxes When Selling Your Property in Spain
Unfortunately, the taxes listed above are unavoidable so it’s impossible not to pay taxes when you sell your property. In fact, there are no ways of saving on plus valía tax. However, take professional advice when your council levies the tax to find out if it has been applied fairly and using the right criteria.
Saving on capital gains tax on Spain
The good news is that there are ways of saving on CGT or at the very least, bringing down the cost of the tax.
Exemptions from CGT
The best saving of all is, obviously, paying no tax. You are exempt from CGT in the following circumstances:
- If you are 65 or over, tax resident in Spain and selling your home that you have lived in for at least the last three years.
- If you are tax resident in Spain, selling your home that you have lived in for at least the last three years and reinvest all the profit in your next home (in Spain or the EEA). You must reinvest the profit within two years of selling the property.
Did you know? You are only Spanish tax resident if you are registered with the Spanish tax authorities and have a certificate to prove it. A Spanish residence permit is not proof of your tax residency. Find out about tax representation in Spain
Savings on CGT
If you don’t qualify for exemption from CGT, it’s worth doing all you can to bring down the bill. One of the best ways to do this is to include expenses you have incurred during ownership, for example:
- All fees and taxes associated with the purchase, e.g. legal, notary and land registry fees; property taxes.
- All fees and taxes associated with the sale, e.g. real estate and legal fees, the costs of documentation such as the energy efficiency certificate or Community of Owners certificate.
- All home refurbishments and improvements you carried out while you owned the property such as an extension, new kitchen, swimming pool etc. Note that maintenance costs do not count.
Did you know? The above expenses are only valid if you have an official invoice (including VAT) for the service.
Get Expert Help
The only guaranteed way to ensure that you make all possible savings on taxes when selling your property in Spain is to use professional services for conveyancing and taxes. The expert team at Costaluz Lawyers provides both and we’d be only too happy to help you pay less. Get in touch for a free consultation now.
Maria Luisa Castro
