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Do I have to pay capital gains tax on capital gained from the sale of my property in Spain?

It is widely known that Spain and particularly the Costa del Sol, is a very attractive tourist destination for residents from the EU. Moreover, it is also a favorite destination for those who decide to go into retirement.

It is therefore not surprising that many EU citizens have moved to Spain to enjoy the sun, the beach and the tranquility of this country. In majority of the cases, those who decide to come to Spain, should change their tax residence and purchase a property to live in.

However, there are many who decide to return to their home countries after having spent several years living in Spain. Quite often such decisions are accompanied by the sale of real estate in Spain, which leads us to the following query:

Circumstances that would exempt you from paying capital gains tax on the sale of a property in Spain

If you are resident in Spain or you have recently moved to any EU country, Iceland or Norway, you may find it useful to know that after the tax reform of 2015, you will be exempt from paying capital gains tax on capital gains arising from the transfer of your habitual residence in Spain if you acquire residence in any other EU country, Iceland or Norway. That is to say, In the case of taxpayers resident in any member state of the European Union, Iceland or Norway, the capital gains obtained from the transfer of what has been their habitual residence in Spain may be exempt from taxation, providing that the total amount obtained through the transfer is reinvested in the purchase of a new habitual residence within a two years period. Should, however, the reinvested amount be lower than the total amount received from the transfer, only the proportional part of the capital gains obtained corresponding to the reinvested amount will be excluded from taxation.

It is worth noting that the abovementioned exemption is conditional on compliance with the provisions of income tax law, and therefore, certain requirements will need to be met, such as: the reinvestment of proceeds from the sale of the habitual residence to be carried out within a period not exceeding two years from the date of transmission (i.e. from the date of sale of property).

If you were resident in Spain and wish to sell what has been your habitual residence in order to move to any of the countries previously mentioned, please do not hesitate to contact us. Here at Lexland Lawyers we will be more than happy to enlighten you on all of the requirements needed to be eligible for this exemption.