Investing in luxury houses in Spain offers unparalleled lifestyle benefits and strong returns. However, understanding how to avoid capital gains tax in Spain is essential to protect your profits when selling. Whether you’re a resident or non-resident, there are legal strategies to minimize or eliminate your capital gains tax (CGT) liability: avoid paying more than needed!
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What is capital gains tax in Spain?
Capital gains tax in Spain applies to the profit earned from selling an asset (purchase price), such as real estate. The tax rate depends on your residency status and the amount of gain:
- Residents: Progressive rates (19% to 28%), depending on the gain amount.
- Non-residents: Flat 19% for EU/EEA residents; 24% for others.
Additionally, non-resident sellers are subject to a 3% withholding tax retained by the buyer at the time of sale. When a non-resident sells property in Spain, a 3% withholding tax is automatically deducted from the sale price by the buyer, as a prepayment of the capital gains tax in Spain.
In 2024, Spain’s Tax Agency (Agencia Tributaria) collected a total of €294.7 billion in tax revenue, with the Personal Income Tax (IRPF) accounting for €129.4 billion, up 7.6% from 2023. While there’s no specific breakdown for capital gains from real estate sales, these gains are taxed under the savings base of IRPF, contributing significantly to the overall increase. Capital gains from property sales in Spain are taxed progressively from 19% to 30%, depending on the amount. This reflects the growing impact of real estate transactions on Spain’s tax revenue.
when selling luxury property in Spain.
5 legal ways to avoid or reduce capital gains tax in Spain
Looking to legally reduce or avoid capital gains tax when selling property in Spain? Whether you’re tax resident in Spain or a non-resident, Spanish tax law provides several exemptions and strategies to help you minimize your tax liability. From age-related exemptions and reinvestment rules to international tax treaties and smart ownership structures, here are five proven methods to reduce your capital gains tax in Spain—all fully compliant with Spanish tax regulations.
1. Exemption for residents over 65
If you’re over 65 years old and selling your primary residence in Spain, you may be fully exempt from capital gains tax, provided that you’ve owned and lived in the property for at least three years prior to the sale. This exemption applies only to residents and is one of the most generous tax reliefs available under Spanish law.
2. Reinvestment in a new primary residence
Spanish tax residents can defer or avoid CGT if they reinvest the entire sale proceeds from their current main home into another primary residence within two years. The reinvestment must be complete and within the EU or EEA. Partial reinvestments offer partial relief, making this a flexible and strategic option for property owners.
3. Offsetting expenses and improvements
Capital gains tax is calculated on the net profit from the sale, meaning you can reduce your taxable gain by deducting certain qualified expenses, such as:
- Purchase costs (e.g., notary fees, property transfer tax, and registration costs)
- Selling costs (e.g., real estate agent commissions, legal fees)
- Capital improvements (e.g., major renovations that increase property value). Routine maintenance does not qualify, so it’s important to distinguish between repairs and actual improvements.
4. Utilizing tax treaties
Spain has signed double taxation agreements (DTAs) with over 90 countries, including the United Kingdom, Germany, the United States, and Mexico. These treaties often allow non-residents to claim tax credits or exemptions in their country of residence, potentially avoiding being taxed twice on the same capital gain. To benefit from these benefits on capital gains in Spain for the tax paid, sellers must file the correct forms (e.g., Spain’s Form 210) and comply with both countries’ reporting requirements.
Understanding the relevant DTA is key, as it determines whether Spain has taxing rights over the capital gain. This process can help non-resident property owners in Spain avoid double taxation and recover excess tax withheld at the time of sale.
5. Strategic ownership structures
Using corporate entities, holding companies, or other investment vehicles to hold Spanish real estate may offer capital gains tax advantages, especially for high-value properties. This approach is more complex and requires proper international tax planning to ensure full compliance with Spanish and international regulations. Always seek advice from a tax advisor experienced in Spanish property law.
You could also benefit from a special tax regime before arriving to Spain (i.e., Beckham Law) so to be taxed at a flat rate of 24% and to benefit from other tax exemptions; or even once you are already tax resident in some regions as Madrid (i.e., Mbappé Law).
How Golden Partners can assist you
At Golden Partners, we specialize in guiding both national and international investors through the complexities of Spanish real estate transactions. Our services include:
- Property search: Identifying luxury properties that meet your investment goals.
- Legal assistance: Ensuring compliance with Spanish laws and regulations.
- Tax planning: Developing strategies to minimize tax liabilities.
Property management: Offering ongoing support to maximize your investment returns.
and tax-efficient property investments in Spain.
Frequently asked questions about capital gains tax in Spain
If you’re selling property in Spain, understanding how capital gains tax works is essential—especially when trying to reduce your tax bill legally.
Below are the most frequently asked questions by both residents and non-residents, covering exemptions, deductible expenses, age-related relief, and the difference between CGT and other Spanish property taxes like plusvalía. These answers will help you make informed decisions and potentially save thousands in taxes.
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What is the best way to avoid capital gains tax in Spain?
For Spanish tax residents, the best legal ways to avoid CGT include selling your primary residence after the age of 65 or reinvesting the proceeds into another main home within two years. Non-residents can reduce or avoid CGT by reviewing applicable double taxation treaties and deducting allowable expenses from the taxable gain.
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What expenses can I offset against capital gains tax in Spain?
You can offset several costs against the capital gain, including:
- Purchase-related expenses such as notary fees, registration taxes & property transfer tax
- Selling costs, including estate agent commissions and legal fees
- Capital improvements like structural renovations or upgrades that add value
It’s crucial to keep proper invoices and legal proof to validate each deduction in case of a tax audit. Also, to eb advised by a Spanish tax lawyer.
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Who is exempt from capital gains tax in Spain?
Residents over 65 years old who sell their main residence may be exempt from CGT, as long as they’ve lived in the property for at least three years. Additionally, residents of any age who reinvest 100% of the proceeds into a new primary home (within the EU/EEA) may also qualify for a full or partial exemption.
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Do you pay capital gains tax on property in Spain if you’re over 65?
If you are over 65 and selling your main residence, you may be completely exempt from capital gains tax, provided that the property has been your habitual residence for a minimum of three years. This exemption applies only to Spanish tax residents.
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Is plusvalía the same as capital gains tax?
No, plusvalía municipal is not the same as capital gains tax. Plusvalía is a local tax charged by the municipality on the increase in the value of urban land, whereas capital gains tax is a national tax applied to the profit from the sale of the property itself. In most cases, you may have to pay both, depending on your situation.
If you are looking to invest in luxury homes in Costa del Sol, Mallorca, Jávea, Marbella, Estepona, San Sebastián, or any other part of Spain, coastal or inland, contact Golden Partners.
