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Taxes when you sale a property Plusvalia & Capital Gains Tax for Non Residents in Spain

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When you sell a property in Spain, you have to pay two different taxes: Plusvalia (in Spanish “Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana” or IIVTNU) and Capital Gains Tax (in Spanish “Impuesto sobre la Ganancia Patrimonial”).

PLUSVALIA. This is a municipal tax payable to the local council (“Ayuntamiento“), based on the increase of the official value of the land between the purchase and the sale dates.

The increase in the value of the land is calculated by taking the catastral value of the property at the time of selling (this is a value stated on the Rates bill issued by the local Town Hall). You then multiply this by the annual rate that has been set by the local municipal council, taking into account the number of years you have had the property. Therefore, the factor that most affects the value of the Plusvalia is the number of years that you have owned the property.

After several Spanish Court Decisions ruled that the way this tax is calculated in not legal, the Spanish Government finally passed a decree on the 8th of November 2021, making substantial changes in the way this tax is calculated. The three most important changes are:

1. If the sale price declared in the title deed is lower than the purchase price declared in the purchase deed, there will be no Plusvalia to pay at all. Please note that, for this purpose, the purchase costs and the sale costs are not considered, just the purchase price  and the sale price (not even the VAT).

2. In cases where the profit obtained is low, but the Plusvalia tax is high, the taxpayer can choose an alternative way to calculate the  tax, which will take into account the purchase and sale price.

3. If you sell within one year after the purchase, you have to pay Plusvalia.

Finally, please note that when the seller is a non resident, and although this is a tax of the selling party, the buyer is responsible of the payment of the Plusvalia, and therefore he/she would like to retain the amount calculated for this tax from the purchase price.

Capital Gains Tax (CGT). This tax is collected by the National Tax Office (Agencia Tributaria). Unlike the Plusvalia, this tax is fairer because it is based exclusively on the actual profit obtained. Currently, Non Residents in Spain have to pay a 19% flat rate on the profit obtained (in this case we can deduct both purchase and sale costs). However, it is important to know that even if you are making no profit at all, due to you being a Non Resident, the buyer of your property will always be obliged to retain 3% of the sale price, and pay that amount to the Tax Office on account of your possible tax liability. Of course, if you have no tax liability at all because you are losing money with the sale, or your liability is less than the 3% retained, later on, you will be entitled to a total or partial tax rebate, depending on the case. Please note that: 1) The Tax Office will take between 6 to 10 months to pay the refund, and 2) Before paying the refund, the Tax Office will check that you have been paying your Non Resident Income Tax

If you are making a substantial profit with the sale of the property in Spain, this 3% may not be enough to cover your tax liability. In this case you will have 4 months to pay the balance to the tax Office.
Please note that the tax is not 3% of the sale price + 19% on the profit. The tax is only the latter; the 3% retention is a payment on account of the tax, to put it bluntly, it is a way to avoid non residents selling and going back to their country without paying