Spanish Tax Office rules house price is valid for seller’s capital gains tax

two women selling house

Good news arrived for sellers of properties in Spain in the form of the established value valid for calculating capital gains tax. As of 1 July this year, the Spanish tax authorities have ruled that the value should be the selling price rather than the cadastral reference used previously. 

This shift in the figure used for capital gains tax brings good news to sellers who should now find that their tax bill is lower. In this article, we explain why. 

Read our guide to selling a property in Spain

New ruling from the Spanish Tax Office 

In their ruling V1601-22 from 1 July, the tax authorities established that the property price be the base for calculating capital gains for income tax purposes. Previously, the calculation had used the value stated in the cadastral registry. 

As a result, most sellers will pay fewer capital gains tax on profit made from the property transaction. At Costaluz Lawyers, we believe this is undoubtedly good news. 

“Capital gains tax is levied at rates ranging from 19 to 26%, which are already high,” said Maria Luisa de Castro, CEO and founder of the legal practice. “Anything that helps reduce the tax burden on sellers is very welcome,” she added.

One exception to the new ruling 

The use of the selling price for capital gains has one exception: the seller may not use the transaction price if it is lower than the market value. In this case, the seller must take the market value as the base for calculating capital gains from the sale. 

Buyers continue with cadastral reference 

However, although sellers may now use the selling price at the base for their capital gains tax calculations, buyers may not. They must continue to use the cadastral reference as the base for transfer tax (impuesto de transmisiones patrimoniales/ITP).  

ITP constitutes the largest cost of buying property in Spain and can be as high as 11% of the value depending on the region of Spain. In Andalucia, for example, it’s levied at a flat rate of 7%. 

Get expert tax advice 

Capital gains tax ranks as one of the most complicated in many countries and Spain is no exception. If you’re selling a property, take expert advice on this tax, how to reduce it as much as possible and how to file it. 

The fiscal team at Costaluz Lawyers provides such advice and will be happy to assist you in all matters concerning capital tax gains. Get in touch for a consultation.

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