This note is important for people who sell a property in their home country when they have become a resident in Spain before selling the property.
Where you have owned a property for at least three years and it has been your habitual residence for that period, the property can be considered to be your habitual residence. Under certain circumstances, you will be exempt from Spanish Capital Gains Tax if you sell your habitual residence while you are a tax resident in Spain.
You will not pay any Capital Gains Tax in Spain if:
i) you sell the property within two years of the property ceasing to be your habitual residence.
ii) you re-invest all of the gain you made on the sale within two years of the date of the sale.
You can also choose to re-invest the gain that you plan to make on the sale of a property before the property has been sold, provided you sell the property within two years of purchasing the new property, which you then live in as your habitual residence. If you only re-invest in a new habitual residence a percentage of the gain you make on the sale of a previous habitual residence, you will be liable to Capital Gains Tax on the portion of the gain that you chose not to re-invest. In Spain, Capital Gains Tax is payable at the rate at which you pay tax on capital gains, which will depend upon whether you are resident in Spain or not. If not resident in Spain then the gain will be taxed at 19%. If you are resident in Spain then the gain will be taxed at the rate determined by your gross earnings.
This note is designed to draw your attention to the potential considerations for when you are selling a property as a tax resident in Spain. If you would like individualised advice in relation to your Capital Gains Tax liability in Spain, please contact us today and we will be happy to advise and assist you.
