At Agote Diez & Asociados we receive many queries about the fiscal consequences of conveying property. From the seller’s viewpoint there are two types of tax in play: municipal wealth tax and capital gains, which is declared with Income Tax – IRPF for residents, IRNR in the case of non-residents.
Regarding capital gains tax, several scenarios must be considered:
- Seller over 65 years of age who has sold their main residence:
The seller will not be taxed for the profit declared in the conveyance. They must prove that the property which was sold was their primary residence – and has been for at least the last three years – based on what was declared in previous income tax returns.
- Seller under 65 years of age who has sold their main residence:
They will be taxed according to the current scale (19%-28%), based on the sale profit. However, article 38 of the personal income tax act provides for a tax break in those cases where the proceeds of the sale are reinvested in a new property if this constitutes a primary residence. This property could within Spain, but could also be in any other country where the seller establishes their place of residence.
To qualify for this tax break, must you invest 100% of the sale proceeds? No. You can request a partial exemption on the sum you have reinvested and pay tax on the remainder. Moreover, if the property were to be mortgaged, the amount to be reinvested shall be deducted from the balance outstanding upon the date the property is sold.
- A fiscal resident in Spain selling a property which is not their main residence
They will be taxed according to the current scale (19&-28%) based on the sale profit.
- Non-fiscal resident in Spain selling a property which is not their main residence
They will be taxed at a flat rate of 19% based on the sale profit.
In future articles we will discuss the most relevant aspects of another tax to be taken into account when selling property: municipal wealth tax.