I’m Moving Abroad. Should I Sell My Home In Spain?
Tax Agency (Hacienda)
You have decided to go abroad, and you ask yourself: “Should I sell my home in Spain?” Well, it depends on whether or not you plan to buy a new house in the country you are going to.
- What is the “reinvestment exemption”?
- Scenario 1. You do not plan to buy a house in the country you are going to.
- Scenario 2. You move to an EU country, Iceland or Norway, and have decided to buy a house there.
- Scenario 3. You move to a country other than the EU, Iceland and Norway, and have decided to buy a house there.
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What is the “reinvestment exemption”?
But before delving into the subject, I would like you to be clear about the reinvestment exemption. That is a benefit for you when paying taxes. If the sale generates a profit for you, that is, the sale value is greater than the purchase value plus expenses, that will mean a capital gain subject to taxation (between 19% and 26%).
On the first 6,000 euros, a personal income tax of 19% is applied. Between 6,000 and 50,000 euros, the tax rises to 21%. From 50,000 to 200,000 euros, the operation represents 23% of personal income tax. And if the earnings exceed 200,000 euros, the percentage rises to 26%.
But, and here comes the operation of the exemption, if you invest the total amount of the sale of the primary residence in the new home, you do not have to pay anything. And if you only invest a part, you will pay taxes proportionally.
We are going to propose three different scenarios to explain the casuistry.
Scenario 1. You do not plan to buy a house in the country you are going to.
Suppose you intend to sell what has been your habitual residence, but you will not buy another one in the country to which you are going. In that case, you will not be able to take advantage of the reinvestment exemption.
In addition, what will determine in which year you will be compensated more for selling will be the country you go to, knowing that if you sell your home as a resident in Spain, you will pay taxes between 19 and 26%.
If your destination is a country of the EU, Iceland or Norway, the tax rate at which you will have to pay the IRNR (Non-Resident Income Tax) will be 19%.
If your destination is a different country, the tax rate you will have to pay for the sale in the IRNR will be 24%.
In both cases, you must consider the possibility that you will also be required to pay taxes on that profit in your new country of residence.
That is why you should investigate if there is an agreement between both countries where the deduction for international double taxation is allowed and avoid paying taxes twice.
Scenario 2. You move to an EU country, Iceland or Norway, and have decided to buy a house there.
In this case, you can take advantage of the reinvestment exemption. You can do it whether you sell while being a resident in Spain (in 2022 following the example) or if you sell it when you are a resident of another EU country.
Since 2015, the possibility of applying the exemption for reinvestment in the IRNR in these countries has been enabled. In this situation, you can benefit from the reinvestment exemption only if you sell your Spanish house within 2 years of leaving for another country and buy a new one in the country of destination between the year before the sale and the following two years.
Scenario 3. You move to a country other than the EU, Iceland and Norway, and have decided to buy a house there.
In this situation, you are interested in selling your house in Spain while you are a resident in Spain. And you can apply for the reinvestment exemption.
If you sold the following year as a non-resident, you would not be able to apply the exemption for reinvestment in the IRNR. Moreover, being a resident of another country, (possibly) you would have to pay taxes on the profit in that other country, increasing the tax cost.
In summary, except if you are going to live in an EU country, Iceland or Norway, where you can apply the exemption for reinvestment in any case, in the rest of the countries, you must first study the difference in taxation and choose the best option.