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Capital Gains Tax on Spanish Property

Capital Gains Tax on Spanish Property

With changes in the Spanish tax laws as pertaining to foreign buyers imminent, make sure you are not paying more tax on your property then you should. Some useful advice from Graydon & Associates.

Property buyers could be in line to save very substantial sums in capital gains tax when they sell their family home or investment property in Spain,  after the European Commission ruled they were being discriminated against compared with Spanish-resident property owners.

The Spanish Government charges capital gains tax at a flat rate of 35% of the profit (difference of registered purchase price to selling price) from British and other ex-pat owners, but charges Spanish resident owners only 15% capital gains tax if they have owned the property for at least one year.

The European Commission has sent Spain a formal request to amend its discriminatory legislation. It considers that the “difference in the tax treatment of the two categories of taxpayers, in so far as it results in a higher tax burden on non-resident individuals in situations objectively similar to those of residents, constitutes indirect discrimination on the grounds of nationality prohibited by the Treaty”. 

European Commission officials claim the higher tax burden on non-residents may dissuade individuals from taking up employment or buying immovable property in Spain while remaining resident for tax purposes in another Member State. It also makes it less attractive for Spanish employers to recruit labour from other Member States rather than locally.


If the Spanish Government amends its tax rules following the EC ruling, British and other non-resident property owners would pay only 15% capital gains tax when selling after a year and enjoy the same progressive discounts on CGT as Spanish residents if they sold within the first year.

As part of its general strategy of addressing the cross-border tax problems facing individuals and businesses operating within the Internal Market, the European Commission is currently considering closely the possible conflicts between the EC Treaty and the bilateral double taxation treaties that Member States have concluded with each other and with third countries.

In relation to company taxation the Commission is in the process of assessing the various options for tackling the problems set out in the Commission’s 2001 study on company taxation. Issues include the question of equal treatment of EU residents and the application of bilateral treaties in situations where more than two countries are involved (triangular situations)

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spanish tax breaches ec tax TREATY?

It is puzzling to read how many articles have been written about this reduction from the basic maximum rate of up to 34% - which of course doubles if are a distant relative. What puzzles me is that no website appear to have broached the topic of inheritance tax which in spain discriminates in exactly the same way - if you are living in the house with your benefactor you get between 95-99% exemption but if you are a non-resident the socialist government has a different deal for you. well inforectly anyways - the rates are the same for both residents and non-residents but residents get an almost 100% exemption from the charges - not unsimilar to the the capital gains tax double charge for non-residents. and then if the inheritors have any money themselves the tax rate is multiplied even further by their net value. I suppose we will have much the same sheme in the Uk except in reverse, where only established residents pay any taxes. i wonder if anyone is enroute to the european court? any thoughts?

Rated: 5/5 (13th July 2008)

Editor's comments: Thanks for writing in. Yes, I shall make some enquiries about this and see what transpires. If my enquiries bring to surface any interesting points, we shall certainly publish an article on the matter.

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