When a Spanish tax resident sells his/her main residence and the proceeds of the sale are reinvested in another property to become also his/her main residence the capital gain – taxed at a rate of 19% for both resident and non resident taxpayers – is tax deferred or exempted: so, if the total amount is reinvested in the new property the capital gain would be tax exempted if not only proportionally. Therefore, the taxpayer must have lived in the property at last for the last 2 years or had to sell due to labour questions,
But, what about tax non-residents? What happens if a UK citizen decides to leave Spain by selling his property in Spain and reinvest in another property in his/her homeland? Is he/she liable or not for the capital gain obtained?
There have been several discussions in the past on these questions. Mainly, because in principle this rollover relief – or in Spanish terms “exención por reinversion” – in the sale of main properties reinvested in new ones are only applicable for tax residents (as far as from the moment that the taxpayer declared his main residence for the last two years in Spain the Spanish legislation automatically declared him Spanish tax resident).
However, due to comparison with other European legislations and by means of the EU non-discrimination principles it has been finally admitted by the tax authorities that when selling this UK citizen his/her Spanish property he/she can declare themselves non-resident for tax purposes: this would mean being the buyer obliged to withhold 3% of the price of the sale on account of the non resident capital gain tax (tax model 211) but having the right to claim it back through (tax model 210) if he/she can show evidence of the reinvest in another main residence in any of the EU member states.
Although this acceptance the tax models 210 and 211 are not adapted to said possibility so if this is your case we strongly recommend you to inform you previously with the notary, the tax authorities and with your tax and legal adviser.
Carlos Espinosa- Solicitor & Tax Adviser
+34 627 41 32 01 – firstname.lastname@example.org