Moving abroad doesn’t mean residents have to pay capital gains tax on their house sale
When a Spanish resident sells their main abode, any capital gains made on the house sale is exempt from tax when it is used to finance the purchase of your new main residence. If you only use part of the profit to purchase your new home, then that part is tax-free although the reminder is taxable.
Note: This article refers to Spanish tax-payers who are selling a property in Spain considered to be their main residence (permanent home) in order to purchase a new main residence abroad in the EU, including Iceland and Norway.
The exemption follows you even if you are moving abroad to an EU (including Iceland and Norway) country, and can be applied even if you become non-resident in Spain. Note that if you become non-resident, then the tax must still be declared (and exempted) on the Non Resident Income Tax (IRNR) form instead of your resident’s income tax form (IRPF).
Don’t hang around to declare the sale
- You must use the exemption within two years of the house sale, whether declaring on IRPF or IRNR.
- Also, less than two calendar years must pass between leaving your old home and you taking up residence in your new property. If a longer time period elapses, the old home is no longer considered to be your permanent abode and your right to the exemption elapses.
Buying before selling?
When becoming a non-resident, it is preferible to purchase your new abode before selling the old one. That way, at the moment of sale the reinvestment will have already ocurred and the tax payer can declare the capital gains to be exempt at the point of sale. You can also do this if the purchase of the new home is completed within three months of the sale of the old home.
This is because you have a period of three months to submit tax model 210, where the capital gains of the sale must be declared. If you cannot declare the capital gains to be exempt then you must pay the tax and later request a refund (see below).
The dreaded 3%.
The purchaser of your home will have retained 3% of the sale price and handed it over to the tax authorities on your behalf, if you have become a non-resident at this point. A refund request for the 3% can be submitted via the 210 form in these cases.
Selling before buying?
If you sell your old abode first and then purchase a new home (assuming more than three months have elapsed between each operation), then the seller must pay all the tax due on capital gains. However, in this case if a 3% retention is applied, you can offset that against the capital gains due via tax model 210.
You then have to submit a new request for refund once the purchase of your new abode has been completed, and wait for the money to be returned to you.
A Spanish tax-payer moved abroad to Germany in the first half of 2016. In September 2017 he sold the home that had been his primary residence – since less than two years had elapsed since he had left the home, this remained his permanent abode for tax purposes.
Tax form 210 has to be presented before the end of the year, as the tax payer has three months within which to file it.
If the tax payer has already purchased a new home in Germany, he can apply for the exemption of the part of the capital gains reinvested in the new home on tax form 210, and also request the return of the 3%.
If the tax payer has not purchased a new home, then he must pay the capital gains applicable on form 210. But he must purchase a new home within two years of having left his old home, as this is the second condition (as outline above).