CAPITAL GAINS TAX IN SPAIN

Holding shares directly in Spain is not necessarily the most tax efficient option, and there are compliant arrangements available in Spain that enable you to hold your investments in a very tax-efficient manner

When relocating to Spain or acquiring property here, you should familiarise yourself with the Spanish tax framework and proactively devise strategies to mitigate your tax obligations. One aspect to consider is how capital gains tax (CGT) is calculated, allowing you to assess the tax liability when selling property and investments in Spain.

In Spain, income is categorised into two classifications: general income (renta general) and savings income (renta del ahorro). Notably, capital gains arising from investments and property transactions fall under savings income.

The progressive savings tax rates are:

€0 – €6,000 -------------- 19%

€6,000 – €50,000 --------------- 21% €50,000 – €200,000 --------------- 23% €200,000 – €300,000 --------------27%

Over €300,000 --------------- 28%

Capital investments

Gains made on the sale or transfer of shares (equities) and other securities are added to any other savings income you made that year (dividends, interest, income from life assurance contracts and purchased annuities) and taxed at the rates above.

You can offset capital losses against other capital gains or savings income of the current year, but there are limitations. Net losses for a year can be carried forward for the next four years.

Holding shares directly in Spain is not necessarily the most tax efficient option, and there are compliant arrangements available in Spain that enable you to hold your investments in a very tax-efficient manner.

Property

When calculating the gain made on the sale of real estate, the disposal prince is based on the actual selling price, which must not fall below the prevailing market value, minus associated disposal expenses, notably the plusvalía municipal tax.

The acquisition price is the genuine cost of acquiring the property, including expenses and fees incurred during the acquisition process. Furthermore, the cost of improvements made to the property (but not standard repairs) is factored into the equation, and any applicable depreciation will be deducted from this amount.

Notary and land registry fees are typically borne by the property purchaser, and are considered against the acquisition price, not against the disposal price.

The main home can be exempt from capital gains tax in Spain if the proceeds are reinvested into your next home. I will look at this and other exemptions, as well as the rules for non-residents, in my next article.

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice.

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