Capital gains and withholding tax for non-residents
Over the last years, there have been two changes in the Spanish tax regulations that made buying property in Spain an even better investment for non-residents.
Since January 2010, the capital gains tax for non-residents on the sale of property in Spain is 19%, which is significantly lower than the highs of 35% in the past. In comparison, the capital gains tax for Spanish residents is 19% for the first 6,000 euros of gain, 21% for any gain between 6,000 euros and 50,000 euros, 23% for any gain between 50,000 and 200,000 euros, and finally 26% tax for any gain in excess of 200,000 euros. The last change was made in 2021.
The second change (made in January 2007) was a reduction in the withholding tax for non-residents from 5% to 3%. When a non-resident sells a property in Spain, the buyer must retain 3% of the purchase price. This 3% is then paid by the purchaser to the tax office on account of the potential capital gain’s tax liability of the non-resident seller. The seller then has a period of 4 months from the date of the sale to submit their capital gains declaration. If there was a loss or if the gain was less than the amount that was retained, the seller is eligible for a refund of the amount that was overpaid. Please note that the refund takes time, it isn’t instantaneous. If the gain is larger than the amount that was retained, then the seller must pay the additional tax due.
Please note that Spanish residents and companies aren’t subject to this 3% withholding tax. This only applies to non-residents.