Author: Javier Martín

Source: Noticias Trabajo

Selling a property involves paying several taxes related to the transaction costs. However, there are exceptions that might exempt you from paying certain amounts to the tax authorities.

Taxes to Pay When Selling a Property

1. Municipal Capital Gains Tax: This tax is levied on the increase in value of the property from the time of acquisition to the time of sale, if such an increase has occurred.

2. Property Tax (IBI): Although not specific to the sale, this annual tax (usually due on January 1) must be paid as it pertains to property ownership rights. Generally, the seller is responsible for this tax, though it can be a contentious issue.

3. Income Tax on Individuals (IRPF): This tax is based on the capital gains realized from the sale. According to the Tax Agency, it must be paid the year following the sale during the annual income tax return.

When You Don’t Have to Pay IRPF

The amount of IRPF to be paid is calculated based on the capital gains realized, multiplied by the applicable tax rate. If there is a loss, no tax is due. There are additional exemptions for this tax, as highlighted by the financial comparison platform ‘HelpMyCash’.

Exemption for Property Given in Payment of Debt

This exemption applies when the property is given as part of the payment for a mortgage debt that cannot be settled. The only requirement is not owning another property with sufficient value to cover the debt. To calculate the debt resolved through this transfer, one must determine the capital gain or loss.

Exemption for Reinvestment in a Primary Residence

If the proceeds from the sale of a primary residence are reinvested in purchasing a new primary residence, IRPF does not need to be paid. However, certain conditions must be met:

• The sold property must have been the primary residence, lived in continuously for at least three years. This requirement is waived if the move is for justified reasons.
• The new property must be the primary residence. This exemption does not apply if the proceeds are reinvested in a vacation home, unless the new property is lived in continuously for at least one year within the subsequent months following the purchase or completion of construction.
• The reinvestment must occur within a maximum of two years, either before or after the sale. The entire amount from the sale, including expenses, must be reinvested. Any leftover funds will only qualify for partial exemption.

Exemption for Individuals Over 65

Individuals over 65 are exempt from paying this tax, regardless of the amount obtained or whether capital gains are reinvested in another property. There is one exception to this rule. If the sold property is a second residence, tax must be paid, unless the proceeds are used to establish a lifetime annuity under the following conditions:

• The lifetime annuity must be contracted within six months of the sale.
• The maximum amount eligible for exemption is €240,000.
• The annuity must be paid at least once a year and begin within one year from its establishment.
• Notify the insurance company or bank that the funds are from a property sale and that you intend to apply for the exemption.