The capital gains generated on the transmission of goods acquired at a lower price than the obtained in their sale are subject to taxation on most of the nowadays tax systems. The most common are those derived from the alienation of shares, bonds, precious metals and properties.
What is a Capital Gains Tax?
The capital gains tax is an administration fee on the benefit made from selling specific kinds of resources. These include corporate shares or land property. A capital gain is determined as the total sale price minus the original cost of an asset.
In some countries, there exist taxes that charge this taxable event independently for example the Capital Gains Tax from the United Kingdom, while in Spain, this operation is taxed within the Personal Income Tax (IRPF), the Personal Income Tax for Non-Residents (IRNR) or the Corporate Tax (IS) depending on who is the taxpayer and its residency.
Next, we are going to explain the consequences of selling properties and shares in Spain and if you can take advantage of tax benefits being a natural person. Whether if you are a Resident or a Non-Resident, you will find the information you need.
Capital gains tax for Spanish Residents
The natural person’s incomes are classified as general income and savings income. Capital gains on investments and properties are considered savings income.
The tax rate that must pay Spanish residents for these gains depends on the obtained benefit, that must be applied to the next table:
the tax rate is 19%
the tax rate is 21%
the tax rate is 23%
The value of the capital gain is obtained from the difference between the value of the transfer and the acquisition value, which are not more than the sale and purchase price, and may be entitled to the consideration of certain expenses inherent to said operations.
Reductions for goods acquired before 1995
There are some reductions available for Spanish residents who acquired assets on December 31st, 1994 or before that date. To benefit from them, the asset must have been sold for less than 400,000 Euros.
The reduction only affects the accumulated gain until January 20, 2006, and represents these percentages:
11,11% in real estate.
25% in shares.
14,28% in the rest of the capital gains.
Exemption for reinvestment in habitual residence
If you transmit your habitual residence and reinvest the money in buying another habitual residence, you will not have to pay for the capital gains. There are certain requirements to make effective the income tax exemption for reinvestment in habitual residence, for example, that the property must be in a country of the European Union or the European Economic Area.
Exemption for sale of habitual residence in people over 65
Spanish legislation also includes an exemption for capital gain for people over 65 who sell their habitual residence, regardless of whether they reinvest the profit obtained or not. So, if you’re thinking of selling your house and you’re close to that age, you’d better wait until you turn 65.
Capital gains tax for Non-residents in Spain
Any capital gain from the sale or transfer of assets located in Spain has a fixed tax of 19% for Non-Residents and Residents.
In addition, since 2015, any person residing in a country of the European Union or the European Economic Area that has an agreement for the exchange of tax information with Spain may benefit from the exemption for reinvestment of a habitual residence. This new habitual residence does not need to be in Spain.
To buy or sell assets such as properties and shares in Spain, we recommend that you consult with a tax advisor such as GM Tax, which is the best way to do it. We analyze each case in a personalized way and find the best solution. Contact us and leave in your hands your taxes on capital gains.