Where taxpayers get caught out
Reinvesting only the net profit, not the full sale price, leads to a partial exemption. Mortgage repayments on the old home reduce what is available, and that must be calculated correctly.
The two exemptions
| Exemption | Requirements | Effect |
|---|---|---|
| Over 65 | Seller aged 65 or over, selling their main home | Gain fully exempt |
| Reinvestment | Reinvest in a new main home within two years | Exempt in proportion to the amount reinvested |
What is a main home
The home where you have lived continuously for at least three years, or less if you had to move for reasons such as marriage, separation, a new job or a similar circumstance. You must have lived there within the two years before the sale.
How much to reinvest
The full amount obtained on the sale counts, not just the gain. If you reinvest only part, only that proportion of the gain is exempt. The new home can be in another EU or EEA country.
Non-residents
EU and EEA residents who sell a home that was their main home in Spain can apply the reinvestment exemption under the same conditions. Otherwise non-residents pay 19% on the gain. See capital gains tax for non-residents.
Declaring it
The exemption is claimed in the annual return for the year of the sale, stating the intention to reinvest if the new purchase is after the sale. Gains not exempt are taxed on the savings scale. The town hall's plusvalía is not affected. See our income tax return service.
An illustrative example
Based on situations we commonly see; not a specific client. A retired Swiss couple, both over 65 and resident in Mallorca for ten years, sold their home in Santa Ponsa with a large gain to move to a smaller flat. The gain was fully exempt from income tax; they only paid the town hall's plusvalía.
How Castell.tax can help
We prepare the annual income tax return of foreign residents in the Balearic Islands, including foreign pensions, investments, rental income and the foreign tax credit, and we compare joint and individual filing every year. We explain the result in English or German before filing. See our income tax return service or contact us to review your situation before the next campaign.
This page is published by Castell.tax, the tax practice of Castell.law in Palma de Mallorca. It is general information; tax rules and rates change, so check your case with us before filing.
Not sure what you owe? Ask before the deadline
Send us your situation or the letter you received. A tax adviser will tell you what applies, what it could cost and what to file.
Frequently asked questions
Do I pay tax on selling my main home in Spain?
Not if you are over 65 or reinvest in a new main home, subject to conditions.
How long must I have lived there?
Generally three years continuously.
Can I reinvest abroad?
Yes, in another main home in the EU or EEA.
Is the plusvalía exempt too?
No, the municipal plusvalía is a separate tax.