Moving abroad doesn’t necessarily mean that Spanish residents have to pay capital gains tax on the sale of their house. There are specific exemptions and conditions that apply, particularly if the proceeds from the sale are reinvested in a new main residence. Here’s a detailed breakdown of how the process works:
Exemption for Main Residence Sale:
When a Spanish resident sells their main residence, any capital gains made on the sale are exempt from tax if the proceeds are used to finance the purchase of a new main residence. If only a portion of the profit is used for the new home purchase, that part is tax-free, while the remainder is taxable.
Applicability Abroad:
This exemption extends to Spanish taxpayers who are selling their property in Spain, considered their main residence, to purchase a new main residence abroad in the EU, including Iceland and Norway.
Considerations for Non-Residents:
Even if you are moving abroad to an EU country, including Iceland and Norway, you can still benefit from this exemption. However, if you become a non-resident in Spain, you must declare (and exempt) the tax on the Non-Resident Income Tax (IRNR) form instead of the resident’s income tax form (IRPF).
Timely Declaration:
To qualify for the exemption, you must use it within two years of the house sale, whether declaring on IRPF or IRNR. Additionally, less than two calendar years should pass between leaving your old home and taking up residence in your new property, or else the exemption lapses.
Buying Before Selling:
It’s advisable to purchase your new home before selling the old one when becoming a non-resident. This allows you to declare the capital gains as exempt at the point of sale. If the purchase of the new home is completed within three months of the sale of the old one, you have a window to submit tax model 210 to declare the exemption.
3% Retention:
When selling as a non-resident, the purchaser typically retains 3% of the sale price and submits it to the tax authorities on your behalf. You can request a refund for this amount through the 210 form.
Selling Before Buying:
If you sell your old home before purchasing a new one (with more than three months between each operation), you must pay all the tax due on capital gains. However, you can offset the 3% retention against the capital gains due and then request a refund once the purchase of your new home is completed.
Example Scenario:
For instance, if a Spanish taxpayer moved abroad to Germany in early 2016 and sold their primary residence in September 2017, they would need to submit tax form 210 before the end of the year. If they’ve purchased a new home in Germany, they can apply for exemption and request a refund of the 3%. If not, they must pay the applicable capital gains tax on form 210 but must purchase a new home within two years of leaving their old one to qualify for the exemption.