Taxation in Spain for real estate sales by residents in France

The Directorate General of Taxation (DGT) has issued a relevant ruling for tax residents in France who own real estate assets in Spanish territory. The inquiry addresses the possibility of applying the reinvestment exemption to the capital gain derived from the sale of a property.

What the DGT has ruled

According to the Convention between Spain and France, the gain obtained from the alienation of real estate located in Spain may be subject to taxation in Spain. The administration has specified that the exemption for reinvestment in a primary residence, provided for in the seventh additional provision of the TRLIRNR, is conditional upon the destination of the funds.

For this exemption to be applicable, the amount obtained from the sale must be reinvested in the acquisition of a new primary residence. If the taxpayer declares that they will not carry out said reinvestment, the capital gain cannot be excluded from taxation and must be taxed in accordance with current regulations.

What it means for you

If you are a tax resident in France and sell a property in Spain, you should consider the following points:

• Taxing power: Spain has the right to tax the capital gain generated by the sale of real estate located within its territory.
• Condition for the exemption: Simply owning the home is not enough; the reinvestment exemption requires that the sale proceeds be used to purchase a new primary residence.
• Consequence of non-reinvestment: If you decide not to reinvest the capital in a new primary residence, the resulting gain will be subject to the corresponding taxation.

What you should do

In the event of such an operation, it is necessary to analyze the specific tax situation under the framework of the Convention between Spain and France and the regulations of Personal Income Tax (IRPF) or Non-Resident Income Tax (IRNR), as applicable. It is fundamental to determine whether the sold property meets the requirements of a primary residence and whether the destination of the funds will allow for the application of the exemption provided in the TRLIRNR. It is recommended to assess each case individually to determine the exact tax impact of the operation.