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If you are selling a property in Spain, two taxes will almost certainly apply: capital gains tax (on the profit from the sale) and the plusvalía municipal (a local land value tax). Understanding both is essential for calculating your net proceeds and avoiding surprises at the notaría.

Capital Gains Tax (Impuesto sobre Ganancias Patrimoniales)

Capital gains tax in Spain is levied on the profit you make when you sell a property — the difference between what you paid (including purchase costs) and what you sell for (minus selling costs).

How the Gain Is Calculated

The taxable gain is not simply sale price minus purchase price. You can deduct legitimate costs from both sides:

Important: Keep all invoices and receipts from both the purchase and any improvements. Without documentation, the tax office will not allow deductions.

Tax Rates for Residents

If you are a Spanish tax resident, capital gains from property sales are taxed at progressive rates on the savings tax base:

Tax Rate for Non-Residents

If you are a non-resident selling property in Spain, the capital gains tax rate is a flat 19% for EU/EEA residents and 24% for non-EU residents.

The 3% retention: When a non-resident sells, the buyer is legally required to withhold 3% of the sale price and pay it directly to the Spanish tax office (Hacienda) as an advance payment towards the seller's capital gains tax. The seller then files a tax return to either claim a refund (if the 3% exceeds the actual tax due) or pay the difference.

Exemptions and Reductions

• Principal residence exemption (residents over 65): If you are over 65 and sell your habitual residence, the capital gain is fully exempt from tax.
• Reinvestment exemption: If you sell your principal residence and reinvest the full proceeds in a new principal residence within 2 years, the gain can be exempt.
• Properties purchased before 1995: A reduction coefficient may apply to gains on properties acquired before 31 December 1994, potentially reducing the taxable gain significantly.

Plusvalía Municipal (Impuesto sobre el Incremento de Valor de los Terrenos)

The plusvalía is a municipal tax on the increase in land value during the time you owned the property. It is separate from capital gains tax and is paid to the local town hall (ayuntamiento).

How It Is Calculated

Since 2021, there are two methods of calculation, and you can choose whichever produces the lower tax bill:

1. Objective method: Based on the cadastral land value multiplied by a coefficient set by the municipality, depending on how many years you owned the property.
2. Real method: Based on the actual increase in land value (the difference between the purchase and sale prices, applied proportionally to the land value component).

Key Points

• If there is no increase in land value (you sell at a loss), you do not have to pay plusvalía — but you must still file a declaration to prove the loss.
• The tax must be paid within 30 working days of the sale.
• The amount varies significantly between municipalities. In some towns on the Costa Blanca, it may be a few hundred euros; in others, it can be several thousand.
• Traditionally the seller pays the plusvalía, though this is sometimes negotiated as part of the sale.

Practical Example

Consider a non-resident EU citizen who bought an apartment on the Costa Blanca in 2018 for €180,000 (with €18,000 in purchase costs) and sells it in 2026 for €260,000 (with €15,000 in selling costs):

Double Taxation Agreements

Spain has double taxation agreements with most European countries, the UK, the US, Canada, and many others. These agreements ensure you are not taxed twice on the same gain. Typically, the gain is taxed in Spain (where the property is located), and you receive a credit in your home country for the tax paid in Spain.

However, the specific rules vary by country. Always consult a tax adviser in both Spain and your home country before selling.

Tips for Reducing Your Tax Bill

1. Keep every receipt — purchase invoices, improvement works, agent fees, legal bills. Every documented cost reduces your taxable gain.
2. Declare improvements, not repairs — a new bathroom or extension is deductible; painting and minor repairs are not.
3. Time your sale carefully — if you are close to turning 65 and selling your principal residence, waiting can eliminate the tax entirely.
4. Consider residency implications — the tax rate differs between residents and non-residents, and exemptions are only available to residents.
5. Claim the 3% retention refund promptly — non-residents should file within the tax year following the sale to recover any overpayment.
6. Compare plusvalía calculation methods — always check both the objective and real methods and use the one that produces the lower amount.