When you get a valuation of your property, you should ask the following question:- How much will the Tax Agency take from my slice of the cake? We can help you to get a better idea of how this tax works in Spain.
You should know that Income tax and capital gain tax are attached to the same tax: IRPF, the income tax on individuals. Find here (The definitive guide for annual tax return) more information about the annual tax return campaign.
General rules of calculation
This is the diagram we use to obtain the capital gain:
(+) The value when you bought the property.
(+) Improvements and renovation on the property. Note: Repairs and maintenance are not included here. You should be careful because there is a thin line between both expenses.
(+) Expenses and taxes when you bought the property (Notary, lawyer, transmission tax, plusvalía, etc.)
(-) Depreciations (only for property rented)
= Purchase value
(+) The price you are selling the property
(-) Expenses and taxes when you sell the property (Notary, lawyer, transmission tax, etc.)
= Price value
Price value – Purchase value = Capital Gain
If the property was inherited or donated, the value will be the set on the deeds when you received the property. The expenses deductibles are the same.
How much will I pay for this?
The capital gain is in a different box from the income tax, so the taxation is a bit better. The tax rate for the first 6.000 € is 19%, from 6K to 50K is 21%, from 50K to 200k is 23% and more than 200K is 26%.
For example: If the capital gain on your property was 35.000 €, so you will pay 7.230 € which is 20,66%.
It is important to know that if you made a loss, you should declare that too. This will be advantageous if in the future you make a profit, because you will be able to compensate the losses.
If you paid capital gains in the UK, it will be deductible in Spain by a maximum limit of the amount to be paid in Spain for the same concept.
Can I get an exemption on my capital gains?
We have two possibilities here: On the first hand, when you sell your main property where you live and buy another one which will be your new main residency. On the other hand, if you are older than 65 years old and sell the property to get annuity.
For the first one, these are the requirements:
- You should have lived for at least 3 years on the property you are selling. It must be your main residency. This period can be lower if you had to move because of new job, divorce, and other reasons.
- The new property that you buy it must be your new main residency for at least 1 years since you bought it.
- You have 2 years to reinvest all or partially the capital gains. This is useful if you didn’t find yet your new property.
Last but not least, you should know when you are 65 years old and you sell your main property, the capital gain will be exempt of taxes automatically. Tax Agency understand a main property if you lived there at least 3 years.