Two Taxes When You Sell Property in Spain
When you sell a property in Spain, you face two distinct taxes: (1) capital gains tax on the profit you make — paid to the Spanish national tax authority — and (2) the municipal plusvalía (IIVTNU), a local tax based on the increase in the cadastral value of the land — paid to the local town hall (ayuntamiento). Understanding both is essential to plan your sale properly.
Capital Gains Tax: Residents vs Non-Residents
How capital gains are taxed depends on your tax residency status:
Tax Residents (IRPF)
If you are a Spanish tax resident, capital gains from property sales are declared in your annual IRPF return as ganancias patrimoniales. The gain is taxed at the savings tax rates:
- Up to €6,000 gain: 19%
- €6,001–€50,000: 21%
- €50,001–€200,000: 23%
- €200,001–€300,000: 27%
- Over €300,000: 28%
Non-Residents (IRNR)
If you are a non-resident, the capital gain is taxed at a flat rate: 19% for EU/EEA nationals and 24% for non-EU nationals (including UK nationals post-Brexit). The buyer is required to retain 3% of the purchase price and pay it directly to the Spanish Tax Agency on your behalf as a withholding (retención). You then file a non-resident tax return (Modelo 210) to settle the actual gain — if the 3% retention exceeds the actual tax due, you are entitled to a refund.
Calculating the Capital Gain
The taxable gain = sale price minus allowable costs. The acquisition cost (what you paid when buying) is adjusted for all costs paid at the time of purchase: ITP or IVA, notary fees, Land Registry fees, legal fees, and any major improvement works carried out since purchase (with invoices). The sale costs (estate agent commission, legal fees for the sale, cancellation of any mortgage) are deducted from the sale price. Keeping all original purchase invoices and improvement receipts is essential — they can significantly reduce the taxable gain.
Key Exemptions for Residents
Spanish tax residents benefit from important exemptions that non-residents do not:
- Primary residence reinvestment exemption: If you sell your principal residence and reinvest the proceeds in another principal residence within 2 years, the gain is exempt from IRPF.
- Over-65 exemption: If you are over 65 and sell your principal residence, the entire gain is exempt from IRPF — regardless of whether you reinvest.
- Over-65 lifetime annuity: If you are over 65 and sell any property (not just your home), investing the proceeds in a qualifying lifetime annuity (within 6 months) exempts gains up to €240,000.
The Municipal Plusvalía (IIVTNU)
The Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana (IIVTNU), commonly known as the plusvalía municipal, is a local tax charged by the town hall (Mijas Ayuntamiento in most Costa del Sol cases). It is calculated on the increase in the cadastral value of the land over the period of ownership — not the actual market gain. The rate and calculation method are set by each municipality.
Following a Constitutional Court ruling in 2021, sellers can now choose between two calculation methods — the objective method (based on cadastral value) or the real gain method — and pay whichever gives the lower result. If the property was sold at a loss, no plusvalía is payable. Your lawyer will calculate both methods to minimise your liability.